Geographic Challenge

Yaroslav Lissovolik

The Eurasian Development Bank’s chief economist

After almost 25 years after the breakdown of the Soviet Union, disputes as to the efficiency of integration in the post-Soviet space have not subsided, but sometimes even flare up. The challenges Eurasian integration has been facing over several recent decades remained invariably significant. While in the 1990s the political factor of disintegration prevailed, in the most recent decade economic obstacles associated with the global economic crisis and growing protectionism also emerged.

The establishment of the Eurasian Economic Union (EAEU) has become the key integration project in the past decades. At that, despite all the difficulties associated with falls in raw material prices and economic recession in some of its member countries, there were also achievements in trade and joint infrastructure projects. However, while the period of the EAEU operation is just some few years, it’s too early to make any final conclusions as to Eurasian integration based primarily on short-term and environmental factors. It may be significantly more important to pay attention to fundamental factors relating to the peculiarities of Eurasian countries, which can help to assess the importance of Eurasian integration in the light of new considerations.

Eurasian countries are endowed with a unique geography that differs from other regions in the global economy and determines the specifics of economic development and integration in the Eurasian space. Lev Gumilyov wrote about this in his last work, The Rhythms of Eurasia, pointing out to the remoteness of many countries on the continent from oceans. "We should say that of all the land on our planet, Eurasia is the most ‘continental’ region, a giant territory that is remote from all the oceans and seas."

As regards the EAEU, the unique geography of its member countries consists in the extreme nature of their “continentality” and separation from ocean spaces: Belarus is the biggest land-locked country in Europe (with the longest land border); Kazakhstan is the world’s biggest land-locked country; Kyrgyzstan and Tajikistan share the third and fourth places among the world’s land-locked countries located at the highest average elevations above sea level (with the first/second places shared by Bhutan and Nepal); Armenia is the only country of Western Asia (as defined by the United Nations) without access to sizeable water space (Azerbaijan has access to the Caspian Sea); and Russia is the world’s biggest country with the longest land border.

In Eurasia, four of the five EAEU countries (five of the six EDB member states) have no access to World Ocean spaces, which necessitates the creation of transport corridors and strengthening of inter-regional ties.

Economic research suggests that land-locked countries’ transportation costs associated with selling their products in global markets may exceed those of coastal economies by 50%. Other estimates indicate that the share of transportation costs in total imports may reach 10–20% for countries without access to a seacoast, while for developed countries and the U.S. this figure is around 5% and 2%, respectively. This is what the early Eurasian school of thought discussed, especially Pyotr Savitsky as he wrote that, "Those countries and regions that can predominantly use maritime transport due to their location are much less dependent on distance in their international and inter-regional exchange processes than countries focused mainly on continental transportation in their economic life."

In addition to the development of transport infrastructure, foreign economic policy, particularly regional integration, can play an important role in the neutralisation of the factor of remoteness from ocean spaces. The main positive factors of regional integration in overcoming continental isolation include, in the first place, the lowering of the inter-country customs and other barriers for each country’s access to the major ports and world markets. The second is standardisation and simplification of transport regulation with a view to reducing the transportation costs of delivering goods to coastal regions. The third factor is pooling resources for building and funding joint transport corridors to coastal regions.

Another positive factor is the strengthening of integration in the Eurasian land space, particularly in the EAEU. This improves inland Eurasian countries’ / regions’ ability to integrate into global logistical chains and mega-regional blocs like the Silk Road that connect the inland regions with the coastal regions of Europe and Asia. Finally, it is the creation of conditions promoting co-operation among sub-regions.

In view of the geography factors, greater co-ordination of the economic policies among countries of a landlocked region becomes essential. This is associated with a high degree of interdependence between neighbouring land-locked countries and sensitivity of transport costs and trade flows to swings in neighbouring states’ economic policies. Such co-ordination can be considerably enhanced by regional integration processes.

Ultimately, Eurasia’s geographic peculiarities is a challenge that needs to be responded in economic policies, in particular by means of economic integration in Eurasia. These peculiarities suggest that economic integration for continental Eurasian countries becomes even more essential than for many other countries and regions. Joint efforts based on a coordinated economic policy can help our countries to turn the geographic element from an obstacle into a key development factor conducive to enhancements in trade, economic and investment cooperation between Asia and Europe.