What does the “North-South” corridor mean to the Eurasian Union?

Written by Dmitri Evstafeev; Originally appeared at Eurasia.expert, translated by AlexD exclusively for SouthFront

Professor Dmitri Evstafeev of the NRU HSE (National Research University, Higher School of Economics) – how the bet on the development of the “North-South” corridor for cooperation with Iran and Azerbaijan will influence the relations with China and partners of the Eurasian Union. Why is the project “industrial belt” along the “North-South” corridor implemented outside of context of the EEU?

The meeting of the “twenty” in Hangzhou on September 4-5 is an important event, as it happens at a time when the global economy, continuing to be on the edge of a pre-crisis state, enters a real restructuring phase of global economic systems in key regions of the world.

Russia came to the important “interim finish”, having the beginning of an active actual plan of the logistic “North-South” corridor. This project was debated since the middle of the 1990s, however it is only now that it is becoming a geopolitical reality. One of the strategic attractive aspects of the new project happens to be that the logistic corridor actually supplements the concept of the “industrialization belt”, and is guaranteed with the Russian forces capabilities.

The military forces component unfortunately presently appears as fundamental in the context of problem resolution in the world economy: the politico-military instability in key regions of the world acquired a stagnant character, where the number of “instability zones” considerably increased.

At the Hangzhou summit (as a minimum, on its “sidelines”), especially with the given location, a “proposal” will be made for a new economic course. And the “North-South” project fully falls into the development logic.

Arguably we really face a situation where the crisis creates new unprecedented possibilities of development for these countries that are ready to risk and are able for complex approaches to emerging situations. After all the construction of the “North-South” corridor, especially if the logistical component will fill with projects in the sphere of “new industrialisation”, is impossible in the classical “macroeconomic” approach. It is important to factor in the military forces, the political aspects and the social questions.

Let us note two aspects. On the one hand, the participating countries of the “corridor” project (Russia, Iran, Azerbaijan) acquired the foreign policy and foreign economic business experience, where compromises of long-term geo-economic are possible, where parts of the last-minute dividends can be sacrificed for a strategic perspective.

On the other hand, a real possibility to change the system of “distribution of roles” has appeared in the world economy, not very convenient for the participating counties of the project, especially in the context of long-term falling prices for raw materials.

From Russia’s point of view, we must pay attention to three facts:

First, the “North-South” corridor is Russia’s first major geo-economic project with elements of industrialization in recent times.

All other major transnational projects basically were in the sphere of export of hydrocarbons. Russia for the first time identifies her participation on the world market as an integrator of major projects on the model of “second industrialization”. How such an attempt will be successful, only time will tell, however it is obvious that Moscow perceives the emerging situation as the basis for transforming the situation of import substitution, into something bigger, in a controlled establishment for Russian industry of sustainable foreign markets, namely commercial products.

Second, the “North-South” corridor is Russia’s first major economic project that is implement not on traditional “Western” (EU) or “Eastern” (China) orientations.

The new project breaks the traditional Russian dualism of geo-economy, making it in a more flexible perspective. It is important as well that the “North-South” corridor be competitive for the “Great Silk Road” project, first from a construction model point of view of the joint economic activities, and from the point of view as well of the organization of transportation routes that in a significant manner will improve the competitive environment.

Third, the project of the “industrial belt” along the “North-South” corridor is implemented outside of the EEU context and the multifaceted systems of economic agreements of the post-soviet sphere.

Russia is starting to develop a parallel economic infrastructure, orienting on the access to key global economic growth centres, bypassing in the process the discussions of the project even with close ally such as Kazakhstan. One can hardly mention that Russia is turning away from the EEU. One must be extremely naïve not to see that Russia is disappointed with the results of the activities, first of all, the inability to go beyond the traditional scope of “free trade zones”.

Although Moscow carries a significant part of responsibility on the delay in the development of the industrial and logistical component in the development of the EEU, too much effort went on discussions about “sanction contraband”. But the situation is clear: EEU was still outside of the global geo-economic “mainstream”.

On the strategic level the agreement in line with Russia-Iran-Azerbaijan, with the possibility of India joining them, where plans are made for Vladimir Putin’s visit, there is talk about the perception of the Russian leadership’s real, and not ideologically motivated principles of the multi-polar world. The multi-polar world is, ultimately, not only the relative and absolute weakening of the USA; it is the formulation of new global important economic systems.

Such an approach corresponds much to the spirit of technocratic pragmatism which is beginning to rule in the modern Russian government and which is important for countries of the post-soviet sphere to adopt as a long-term “signal” that Moscow sees as a model of foreign economic cooperation in the future.

The model for the “North-South” corridor represents the recognition by Moscow of the deadlock of future exploitation of economic rent models, such as raw materials, as well as logistical when income is obtained by foreign transit goods to third countries. It is understood that the project is only at the opening phase of its realization; there is no doubt about its direction.

The “North-South” corridor project, without a doubt, reflects present-day geo-political realities. Realities not of a pre-crisis world, but a world in crisis. Its feature is the comprehensive approach in which communication occurs on the political, politico-military and economic levels. New, flexible forms of institutional processes are being developed and agreements which sometimes do not fit into the traditional models of interaction. The recognition of indivisibility of political and economic factors is key in today’s world.

The problem lies in the desire of some countries of New Eurasia to strictly separate the political, politico-military cooperation and economic dividends.

Such an approach was conceptually true in past historic (and economic, which is important) periods and brought a range of important dividends to the countries (especially Belarus, and Kazakhstan as well), including from the point of view of maintaining the economic stability and relatively high rates of economic growth.

Nevertheless such an approach today can turn out to be out-dated, limiting the possibilities of geo-economic manoeuvring. Ultimately, after the political and politico-military cooperation between Russia and Iran became a fact, though not without its problems, the “North-South” transport corridor started to acquire practical outlines. And this fact must become not only a subject for analysis and critical thinking but as a stimulus for discussion in the framework of the EEC about principals of development.

Dmitri Evstafeev, professor NRU HSE