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Serbia’s deal with the Eurasian Economic Union: A triumph of foreign policy over economics

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Summary:
Serbia recently signed a free trade agreement with the Eurasian Economic Union (EAEU). Vuk Vuksanovic writes that although the deal was praised by some politicians for opening up new economic opportunities, the economic impact is likely to be minimal for both Serbia and the EAEU. He argues the real aim of the agreement from Serbia’s perspective was to use the spectre of closer relations with Russia as leverage against the West. On 25 October, at the sidelines of a meeting of the Eurasian Intergovernmental Council in Nur-Sultan, Kazakhstan, Serbian Prime Minister Ana Brnabić signed a free trade agreement (FTA) with the Russian led Eurasian Economic Union (EAEU). The optimism on the Serbian side was as strong as always. However, this latest move by Serbia was not guided by major commercial

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Serbia’s deal with the Eurasian Economic Union: A triumph of foreign policy over economicsSerbia recently signed a free trade agreement with the Eurasian Economic Union (EAEU). Vuk Vuksanovic writes that although the deal was praised by some politicians for opening up new economic opportunities, the economic impact is likely to be minimal for both Serbia and the EAEU. He argues the real aim of the agreement from Serbia’s perspective was to use the spectre of closer relations with Russia as leverage against the West.

On 25 October, at the sidelines of a meeting of the Eurasian Intergovernmental Council in Nur-Sultan, Kazakhstan, Serbian Prime Minister Ana Brnabić signed a free trade agreement (FTA) with the Russian led Eurasian Economic Union (EAEU). The optimism on the Serbian side was as strong as always. However, this latest move by Serbia was not guided by major commercial considerations. Rather, it was part of the wider pattern of Serbian foreign policy where the country balances and pits the West and non-western powers, like Russia, against each other.

The economic benefits for Serbia from the free trade agreement are highly questionable: some Serbian observers have stated there are no economic benefits from the deal. Indeed, the agreement replaces bilateral agreements that Serbia already has with Russia, Belarus and Kazakhstan, extending them to Armenia and Kyrgyzstan. As such, this deal only opens up two new markets for Serbia. Neither are among the most attractive target markets and a rapid jump in trade volume with them can hardly be expected.

One only needs to inspect the numbers to see that the EU outweighs Russia and its EAEU grouping. In 2018, Serbia’s trade with Russia and the EAEU countries was estimated at USD 3.4 billion. Among the EAEU members, Russia is the only major trading partner for Serbia. Even then, trade with Russia is less than 10 percent of Serbia’s total trade as opposed to 63 percent with the EU, while investments from the EU are more than 10 times higher than Russian investments.

This begs the question of whether the agreement is really about the markets, or something else. As Serbian policy researcher Stefan Vladisavljev has noted: “what constitutes a significant part of the signing of the agreement is the further intensification of relations with partners from the East and the tendency to act towards an alternative to the process of gaining EU membership.” Since 2008, the Balkans have been in a strategic vacuum caused by the EU’s inability to incorporate the region and the fact the US has been invested in other parts of the globe. In this vacuum, Belgrade was particularly motivated to pursue a policy of alternative partnerships, with Russia being among them.

Serbia’s deal with the Eurasian Economic Union: A triumph of foreign policy over economics

Russian President Vladimir Putin at a meeting with Serbian President Aleksandar Vučić, Credit: kremlin.ru

The free trade agreement was preceded by the visit of Russian Prime Minister Dmitry Medvedev to Belgrade, and by the Slavic Shield 2019, a set of joint military exercises involving the Serbian and Russian military that featured Russia’s S-400 air defence system. The signing of the free trade agreement occurred at a very specific point in time when Serbia is again showing a tendency to use Russia as leverage against the West.

The need for leverage is a product of the unresolved Kosovo dispute and the fact EU enlargement for the Balkan countries has been frozen for the foreseeable future, as illustrated by France exercising a veto over the start of accession talks with Albania and North Macedonia. As such, signing a free trade agreement with the EAEU was a way for Serbia to send a message, on a tactical and symbolic level, to the EU and the West that it has other options, while indulging pro-Russian sympathies among parts of the Serbian electorate. The deal constitutes a small piece of the wider pattern where the Serbian government plays Russia against the West with the purpose of seeing whose offer is better and bolstering support among both pro-western and pro-Russian Serbs.

While the EU will have observed the deal with a sense of unease over Serbia’s commitment to EU policies, the Russian side will have been pleased, even though for Russia it is more profitable as political capital than in market terms. Russia’s Ambassador to Serbia, Alexander Botsan-Kharchenko, praised the fact that Serbia had joined a “market with a capacity of over 182 million consumers and the combined GDP of more than $1.9 trillion”, but his message was political. As the Ambassador added: “this is an example of Belgrade’s balanced policy, an approach to conducting international affairs, taking into account its own national interests”. This was an evident sign that Moscow is simply pleased with the fact Belgrade is still happy to embrace the country as a partner and not that Moscow expects any major economic gains.

Serbia will still not make the final step and join the EAEU as it would endanger its most important political and economic partnerships in Europe. As Aleksandar Vučić stated back in 2017: “for those who would say that seventy percent of us (Serbs) are for joining the Russians against the West, these people do not think about where is our market, where do we export our goods, from what will we live tomorrow, what will our economy be like.” As such, interest-based calculations will prevent Serbia from aligning itself fully with Russia and its EAEU club. However, it is precisely the interest-based calculus which will force Belgrade to keep the Russian option there. Ultimately the deal was not about the economy; it was about Belgrade’s foreign policy leadership trying to avoid putting all its eggs in one basket.

Note: This article gives the views of the author, not the position of EUROPP – European Politics and Policy or the London School of Economics.

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Serbia’s deal with the Eurasian Economic Union: A triumph of foreign policy over economicsVuk Vuksanovic – LSE
Vuk Vuksanovic is a PhD Candidate in International Relations at the London School of Economics. He previously worked at the Ministry of Foreign Affairs of the Republic of Serbia and as a political risk consultant in Belgrade. He writes widely on modern foreign and security policy issues, and is on Twitter
@v_vuksanovic

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