This goal is not surprising: declining or not, Russia has always seen itself as a great power that should be surrounded by buffer states. Under the Czars, Imperial Russia extended its reach over time. Under the Bolsheviks, Russia built the Soviet Union and a sphere of influence that encompassed most of Central and Eastern Europe. And now, under Putin’s similarly autocratic regime, Russia plans to create, over time, a vast Eurasian Union.
While the EAU is still only a customs union, the European Union’s experience suggests that a successful free-trade area leads over time to broader economic, monetary, and eventually political integration. Russia’s goal is not to create another North American Free Trade Agreement; it is to create another EU, with the Kremlin holding all of the real levers of power. The plan has been clear: Start with a customs union – initially Russia, Belarus, and Kazakhstan – and add most of the other former Soviet republics. Indeed, now Armenia and Kyrgyzstan are in play.
Once a broad customs union is established, trade, financial, and investment links within it grow to the point that its members stabilize their exchange rates vis-à-vis one another. Then, perhaps a couple of decades after the customs union is formed, its members consider creating a true monetary union with a common currency (the Eurasian ruble?) that can be used as a unit of account, means of payment, and store of value.
As the eurozone experience proves, sustaining a monetary union requires banking, fiscal, and full economic union. And, once members give up their sovereignty over fiscal, banking, and economic affairs, they may eventually need a partial political union to ensure democratic legitimacy.
Realizing such a plan may require overcoming serious challenges and the commitment of large financial resources over a period of many decades. But the first step is a customs union, and, in the case of the Eurasian Union, it had to include Ukraine, Russia’s largest neighbor to the west. That is why Putin put so much pressure on former President Viktor Yanukovych to abandon an association agreement with the EU. It is also why Putin reacted to the ouster of Yanukovych’s government by taking over Crimea and destabilizing eastern Ukraine.