Sam's Exchange: New spheres of influence – ECO and the Eurasian Union

© Photo : Source: Sam BardenSam Barden
Sam Barden - Sputnik International
The European debt crisis is shifting up a gear, with debt and bank downgrades that will only serve to accelerate the inevitable, which is of course debt default.

The European debt crisis is shifting up a gear, with debt and bank downgrades that will only serve to accelerate the inevitable, which is of course debt default. The ability of either Europe or the U.S. to issue yet more taxpayer-funded debt to the banking sector is very limited on two fronts: social and economic.

Social, because there is already rioting and social unrest in Europe and the U.S.; and Economic because there is already more debt out there that can be paid back, so issuing more makes no sense economically. The collapse of the debt-based system as we know it in Europe and the U.S. is feeding uncertainty in financial markets and creating high levels of volatility. However, while Europe and the U.S. struggle, other multinational unions and organizations may gain prominence and play a part in providing regional and global security through trade and infrastructure-based cooperation and agreements. Russian Prime Minister Vladimir Putin is pushing for creation of a Central Asian “Eurasian Union,” which will provide former Soviet States a framework for trade and development of economic security. Kazakhstan has welcomed the idea. Interestingly, Kazakhstan is also a member of another regional union, the Economic Cooperation Organization (ECO). What is ECO, and how can it contribute to regional and global economic security?

ECO is an intergovernmental regional organization established in 1985 by Iran, Pakistan and Turkey for the purpose of promoting economic, technical and cultural cooperation among Member States. In 1992, the Organization expanded to include seven new members, namely: Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. While many people in the west will associate these countries with war, terrorism or international sanctions, if you look at this union on a map  you will notice that in fact these countries surround the oil-rich Caspian basin and in many cases are resource rich themselves. Moreover, they are also key countries for pipeline routes to ship oil and gas from the Caspian to China, India and to Europe through Turkey. If ECO members can build and share common infrastructure in the form of oil and gas pipelines across their territories, that will go a long way to achieving global energy security and efficiency.

The ECO and Putin’s proposed Eurasian Union plans differ from another regional organization, the Shanghai Cooperation Organization (SCO), in that the SCO is largely military, while the ECO and Putin’s Eurasia Union are economic. The SCO, ECO and Putin’s Eurasian Union have many of the same members in each respective organization. What this means, and indeed achieves, is interlocking complementary spheres of influence, which naturally drives economic and energy security. While the Western media continually holds up organizations such as NATO as the only hope for regional security in countries like Afghanistan and Pakistan, and while the U.S. and Europe push ahead with sanctions against Iran, ECO is in fact far better placed to deliver economic and energy security through cooperation than NATO, Europe or the U.S. can through intervention. 

The current European banking crisis and those out there who are calling for death to the world of debt are only half correct in their stance. Economic security, and therefore social security, can only be achieved when other organizations can step in to fill the void left by a weakened U.S. and European banking system. I believe Vladimir Putin understands this and whilst many may see his Eurasian Union as a power grab, it will add economic security to a region that could definitely use it.  So too, the ECO member states could use some economic support and cooperation. More than this, they could use some recognition and support from other countries around the world that organizations such as ECO are credible alternatives as secure trade unions that can help provide economic security to their members and make a significant contribution to the world’s energy security complex. 

The message that Putin’s Eurasian Union and more specifically ECO can give is that political and economic interdependence rather than sanctions and interventions will provide the platform and framework for prosperity in their respective regions.  What Europe’s banking crisis will provide to intergovernmental organizations such as ECO is a window of opportunity to raise their profile internationally via trade agreements and infrastructure developments; in short through 21st century market development.

The big question is will ECO and Putin’s Eurasian Union really achieve the levels of cooperation needed to create economic prosperity? There is little doubt that if they can, the economic benefits to member states will be immense, and if a common oil and gas pipeline network can be brought to life through common trade and infrastructure agreements, this will translate into energy security. Surely this would be good for all countries, and we should support organizations such as ECO on their route to the market.


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Current markets are anything but global or integrated.  What if we had a paradigm shift in the way we think and transact when doing business with each other?  Balanced global trade can only occur if we have transparent, accessible and efficient markets.  We are on the cusp of achieving this, although most people cannot see it.  Sam’s Exchange aims to give its readers a clearer view and a platform for discussion.  Markets, trade and economics are in fact nothing more than the result of our thoughts and actions expressed in numbers, not the reverse.

Sam Barden is founding Partner of SBI Markets DMCC, a Dubai-registered commodities trading and advisory company.  Barden has worked in the global financial markets for more than 17 years in Europe, Russia and the Middle East.  He has advised and executed strategic transactions for both the government and private sector, in particular in energy and commodity markets, advising various energy producing nations on their strategic market developments and interaction.  He holds a degree in economics and finance from Victoria University, Melbourne, Australia.

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