Publication: Eurasia Daily Monitor Volume: 3 Issue: 24

A new World Bank study, released on January 31, warns that the countries of Eastern Europe and the former Soviet Union are moving along two divergent economic trajectories: a group of more prosperous and faster-reforming states are forging closer ties with Western Europe, while the poorer, slower-reforming group have begun to pull back into a Russia-centric sphere. Russia’s current policies toward its Commonwealth of Independent States (CIS) neighbors likely seek to make Europe’s division into the two “blocs” permanent.

After the 2004 “big bang” enlargement of the European Union, when 10 countries of Central and Eastern Europe became full members of the rich bloc, enthusiasts of further eastward expansion liked to describe the EU as an emerging new great power, or even empire, with a constantly shifting eastern frontier. The triumph of the “color” revolutions” in Georgia and Ukraine and the markedly pro-European rhetoric of the post-revolutionary governments in Tbilisi and Kyiv appeared to have bolstered the view that what used to be regarded as Russia’s “near abroad” is in fact United Europe’s “new neighborhood.”

The latest EU enlargement has also radically changed the traditional politico-geographic “image” of Europe. With Russia’s sphere of influence seemingly on the wane, there appeared a need to re-conceptualize Eastern Europe. After the former communist Eastern bloc countries joined the EU, some commentators argued, Eastern Europe came to comprise mostly the states from the western part of the CIS – namely, Belarus, Ukraine, and Moldova. Other thinkers went even further, noting that the EU push into the East was “drastically changing the mental map of Europe, leading to the ‘shrinking’ – in fact, disappearance – of Eastern Europe.” Basically, the notion of Eastern Europe, they argue, is now associated almost exclusively with Russia.

To be sure, the Kremlin strategists refuted this type of theorizing and, for their part, advanced a concept of the “two Europes”: the Brussels-led EU and Moscow-led Euro-East, Russia’s “civilizational” sphere based on the myriad of historical, economic, cultural, and linguistic ties between the predominantly Slavic peoples of the region. The Kremlin’s recent policy has clearly signified that Russia intends to reassert its political leadership in the region through its economic dominance in the post-Soviet lands. Furthermore, Moscow appears to feel sufficiently strong to compete with the EU and the United States in what it continues to regard as its geopolitical turf.

Remarkably, the World Bank report, “From Disintegration to Reintegration: Eastern Europe and the Former Soviet Union in International Trade,” cautions about the danger of Europe permanently breaking into two intra-regional trading blocs — one rich and one poor. The report analyzed the evolution of trade in 27 transition countries since the collapse of the Soviet Union in 1991. “One [bloc] is tending toward trade with the advanced countries in Western Europe and enjoying relatively high national incomes. The other bloc is significantly poorer, and tending to pull back toward a Russia-centric sphere,” the report warns.

The study says the Euro-centric trading bloc comprises the eight new countries of the European Union, Turkey, and, gradually, many of the seven Southeastern European countries. The “Russia-centric” trading bloc largely comprises the twelve CIS countries. “There’s an emerging bipolarity in the region,” says Harry Broadman, a Bank Economic Adviser and the study’s lead author.

The study finds the most prosperous countries of the region are those that have found ways to leverage greater integration internationally into more rapid development at home. Thus, the faster-growing countries include the Czech Republic, Hungary, and Slovenia. At the other end of the spectrum, the countries such as Belarus, Tajikistan, Turkmenistan, and Uzbekistan maintain relatively closed trading systems and lag in fundamental market reforms as many businesses remain in state ownership and service sectors are closed to competition.

But the blocs’ boundaries are “soft,” the report notes, and a “dichotomous” Europe is not inevitable. To prevent the two intra-regional trading blocs becoming a permanent fixture in the region, further market reforms need to be carried out in the post-Soviet countries, the report suggests.

It would appear, however, that the World Bank study’s recommendations do not sit well with the Kremlin’s strategic objectives. Russian President Vladimir Putin’s government will likely want to make a “Russia-centric bloc” a permanent element of Europe’s politico-economic architecture. The recent “gas wars” between Moscow and its post-Soviet neighbors were not so much about trade profits as about economic and political control in Eurasia. A number of influential political analysts note that over the last year Russia has seriously shifted gear in its dealing with the CIS countries. The imitation of integration is being replaced by the aggressive expansion of Russian capital; instead of subsidies and barter trade Moscow is now resorting to “market relations” and demanding cash for its hydrocarbons. Overall, Russia isn’t retreating any more, contends Dmitry Trenin, the security expert at the Carnegie Moscow Center, in a recent policy paper; on the contrary, he says, it is launching counter-attacks on certain strategic directions and likely getting ready for a general offensive.

(Kommersant, February 2;, AP, January 31; Nezavisimaya gazeta, January 30;, January 26)