Vladimir Putin Builds His Eurasian Empire

By Tony Halpin, Times of London - March 10, 2010

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The Soviet Union is gradually being rebuilt as Vladimir Putin eyes a return to the Kremlin. The man who declared the collapse of the Communist state to be the “greatest geopolitical catastrophe of the century” appears determined to forge a new empire.

The latest evidence emerged in a suggestion by Igor Shuvalov, First Deputy Prime Minister in Mr Putin’s Government, that Russia may abolish the rouble and create a common currency with Kazakhstan and Belarus.

The three states have already established a customs union and plan to form a single economic market by 2012. Mr Shuvalov said that he would not rule a currency union as “the next logical step”, adding that it would be modelled on the euro.

The last time these countries had a common currency, of course, was in Soviet times. Mr Putin was quick to extend an invitation to join the customs union to Viktor Yanukovych, Ukraine’s new pro-Russian President, when they met in Moscow on Friday.

Were Ukraine to sign up, there would be a common economic space encompassing the “Big Four” republics of the Soviet era, with a combined population of 213 million and stretching from the European Union to China. Its political, military and economic centre would be in Moscow, where Mr Putin is expected to reclaim the presidency in 2012 for up to 12 more years.

A common currency would give him an economic lever to challenge the US dollar and the euro by creating a regional reserve currency. Finance Minister Aleksei Kudrin stated last month that Russia, as the world’s largest energy supplier, may soon sell oil in roubles.

A restored union also offers Russia a chance to “bulk up” as it fights for survival between the EU and Chinese giants. Its industry is outdated in comparison to Europe and out-priced in labour costs by China, so a future beckons as supplier of energy and raw materials to both economies. Mr Putin has no interest in competing on price in these markets with Kazakhstan or Ukraine.

Other ex-Soviet republics would find it hard to resist the gravitational pull of a single currency and economic space. Armenia’s economy is almost completely owned by Russian companies already, neighbouring Azerbaijan would risk Russian meddling in the frozen conflict over the Armenian enclave of Nagorno-Karabakh, and struggling Kyrgyzstan has already accepted a $2.15 billion (£1,6 billion) bailout from Moscow.

But doesn’t the euro demonstrate that independent states can co-exist within a single currency? Aren’t fears of a new Soviet Union overblown? Perhaps, although Russia’s history of political interference in its former Soviet satellites has no comparison in the EU.

Mr Putin learned his lesson after Ukraine’s pro-Western Orange revolution and refrained from overt support of Mr Yanukovych in last month’s election. He will have opportunities soon to ensure compliant regimes in Belarus and Kazakhstan.

Aleksandr Lukashenko’s third term as President of Belarus ends next year and he will have to show utter loyalty if Mr Putin is to be the only major international leader to endorse a fourth term. Nursultan Nazarbayev will be 70 this year and has no obvious heir in Kazakhstan. When his term as President for life expires, Mr Putin will almost certainly be in the Kremlin and in prime position to influence the choice of successor.

A willingness to defer to Russia as members of a new Eurasian Union, with its own currency controlled from Moscow, may be the price both countries have to pay for nominal independence.

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