The EAEU – Singapore Win-Win Cooperation

08.05.2017 Author: Dmitry Bokarev

562432434In the just over 2 years of its existence, the Eurasian Economic Union (EAEU) has gained considerable influence on the world economic stage. The combined potential of Armenia, Belarus, Russia, Kazakhstan and Kyrgyzstan, as well as the idea of ​​creating a common economic space for Eurasia and the surrounding territories, continue attracting more and more partners to the EAEU. Southeast Asian countries are currently actively establishing contacts with the EAEU. Since the very beginning of the work of the Union, the Republic of Singapore, seeking to establish a free trade area (FTA) with the EAEU, has increasingly shown great interest in cooperating with the regional association.

Singapore is a small island nation, one of the smallest in Southeast Asia. The country also has one of the world’s most developed economies, and is one of the ‘Four Asian Tigers’ along with Hong Kong, Taiwan and South Korea, so-named because of their impressive economic success. Singapore has one of the world’s largest GDP, and is a trading and financial center of global importance.

The prosperity of the country rests on it having a well-developed industry, foreign trade, financial services and transit routes. As you know, Singapore is situated at an extremely favorable geographical location. Together with the Malay Peninsula and Sumatra, the country forms the Strait of Malacca, one of the most important sea routes in the world, through which up to a quarter of all sea freight on the planet passes. The Strait of Malacca acts as a link connecting Europe with most of the Asia-Pacific region. Naturally, being located on this route is extremely beneficial for Singapore, since the country acts as the main port for almost all the ships going to Southeast Asia from the Middle East and Europe, including oil and LNG tankers.

However, Singapore has also a great disadvantage. With a population of about 5.5 million people, the country has a relatively small land area, very limited fresh water reserves, no mineral resources and no natural sustainable conditions for agriculture. Singapore cannot provide itself with fuel or food, which it has to import from other countries. Thus, the prosperity, and even the very survival, of Singaporean citizens, greatly depends on the country’s foreign policy and trade with other countries. Recently, there have been reasons to believe that the economic prosperity of Singapore was under threat. Due to instability on the world market, the Singaporean economy has shown a decline in growth. Foreign demand for Singaporean products has decreased. Moreover, Singapore has not been able to maintain consistently high profits, on its part, stemming from its strategic location along the Strait of Malacca. The fact is that China has long dreamed of digging a channel through the narrow Kra Isthmus of the Malay Peninsula in southern Thailand. If this happens, the Strait of Malacca will lose a significant part of the ships passing through it, which will then divert to the new Chinese channel. If implemented, the Chinese plan will deal the hardest-yet blow to the Singaporean economy.

To add on, Singaporean energy and food security may be under threat. Thus, in order to secure itself in advance, the country needs to continue developing contacts with countries having well-developed agricultural sectors and hydrocarbon resources. These countries should be conveniently located, so that Singapore can be able to access sufficiently high-quality food and fuel at reasonable prices. China may be good candidate. However, like many countries in the region, Singapore would like to be minimally dependent on its powerful neighbor.

Russia and other countries of the EAEU are good candidates to becoming the primary suppliers of agricultural products and hydrocarbons to Singapore. Singapore is famous for maintaining active cooperation with the Russian Federation in the field of agriculture, case-in-point being Singapore-based company Olam International, one of the world’s major agro-traders, recently making major investments in the Russian agro-industry. On the same note, in March 2017, Russian livestock companies were granted the right to supply their meat products to Singapore. Considering the fact that it is not only Russia that has a well-developed agricultural sector, but also all the members of the EAEU, these countries will all benefit from the creation of a Eurasian-Singaporean FTA. In addition, cooperation between the EAEU countries and Singapore in the fuel sector is increasing. For example, in October 2015, Gazprom and Singaporean state-owned company Pavilion Energy through subsidiaries signed an agreement on the supply of Russian LNG to Singapore for a period of 10 years. In April 2017, Singapore’s Keppel Corporation expressed interest in participating in the Russian project – Geological Exploration and Industrial Development of the Western Anabar Subsurface Area of the Sakha Republic (Yakutia). This project may be the beginning of the large-scale development of energy resources, concentrated on the Lena-Anabar Basin. Keppel management has stated that Russia’s huge oil and gas reserves make it an extremely attractive partner for the Singaporean corporation. Apparently, against the backdrop of growing energy trade, the timing for the establishment of a FTA could not have been better.

In May 2016, a memorandum of understanding was signed between the Singaporean government and the Eurasian Economic Commission (EAEU), the supranational executive body of the EAEU. In accordance with the document, the EAEU and Singapore have committed themselves to developing cooperation in all spheres, as well as eliminating trade barriers. Countries within the blocs will cooperate in transport and infrastructure, and in ensuring food security. Customs services operations will be jointly coordinated. Executive committees will also be established that will familiarize both sides with the features of each other’s economies and establish mechanisms for interaction.

In December 2016, the Supreme Eurasian Economic Council held a meeting that was attended by the EAEU heads of states. It was decided that negotiations would be initiated on the establishment of an FTA with Singapore, as well as with Egypt, India and Iran.

In February 2017, Prime Minister of Singapore Lee Hsien Loong held a meeting with the Chairman of the UNECE Tigran Sargsyan, at which the head of the Singaporean government stated that his country was ready for a constructive dialogue and hoped to sign the agreement on the FTA by the end of 2017.

The establishment of an FTA between the EAEU and Singapore is expected to bring considerable benefits to all the parties involved. An important point to remember is that, despite all the difficulties that Singapore has faced in recent years, this Asian country remains one of the strongest economies in the world. Even if China goes ahead and implements its plan to dig up a channel through Thailand (which is still under review), the Strait of Malacca is likely to remain one of the most important shipping areas in the region, and Singapore will remain one of the world’s major ports. Gaining access to this port is a considerable achievement for the EAEU. Moreover, Singapore is one of the most important members of ASEAN (Association of Southeast Asian Nations), and in cooperation with this bloc, the EAEU will be able to establish viable trade with all its members. For Singapore, partnership with the EAEU could become a way of insuring the country against economic instabilities and guaranteeing food and energy security.

Dmitry Bokarev, expert politologist, exclusively for the online magazine “New Eastern Outlook.