With the rivalry between the European Union (EU) and Russian Federation reaching boiling point over the past few months tensions are high between the former superpower and wannabe superpower. In a move that is sure to increase that rivalry further, Russian President Vladimir Putin announced that he wants the Eurasian Economic Union (EEU) to develop its own version of the single currency.
The EEU was only formed in January this year and is comprised of Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan.
Ukraine had formerly been on the list of prospective members but as the conflict in that nation escalated and relations waned, it has understandably chosen not to take part.
With Russia, being the largest economy in the EEU by far any single currency used by the trading bloc will undoubtedly be in the form of the Ruble and react to the strengths and weaknesses that affect the world’s largest nation.
Potentially the EEU could become a serious player, as it would contain the world’s largest energy producers. The formation of the EEU came at a time when each of its members was struggling economically due to the global financial crisis.
‘As for the formation that we created, meaning the Economic Union, time shows that we took the initiative in due time to create the Economic Union,’ said Belarus President Alexander Lukashnko.
With the Euro proving to be so problematic for the members of the Eurozone and wider EU, the EEU would be wise to ensure that political union and the member nations respective economic policies align before embracing the idea of their own single currency.
The European Union probably has nothing to fear from its younger rival…yet. Cracks are already appearing in the EEU as the leaders of Belarus and Kazakhstan appear to be not keen on the idea of a single currency.
The creation of such a currency would also see the EEU having to deal with the combination of oil market driven volatility and the ongoing global concerns over Russia’s standoff with the West regarding the Ukraine crisis.
Could Greece Align Itself with Russia?
April will be interesting as Greek Prime Minister Alexis Tsipras is set to hold talks with Putin in Russia. Concerns over a ‘Grexit’ from the Eurozone softened at the end of the week as Athens pledged to deliver new economic reforms by next Friday.
If those reform measures were rejected then Greece would become increasingly desperate as its supply of cash runs out.
In a bid to force the EU’s hand, Tsipras could turn to Russia for financial aid. The Greek economy may represent an insignificant portion of the EU’s overall GDP, but its location at the crossroads of Europe, Asia and the Middle East continues to be of considerable geostrategic importance. The last thing the EU and US will want is the possibility that Russia could establish a military presence in Greece.
As such, the USA could exert pressure on the EU to come to a compromise when it comes to delivering a bailout.