Russia's Trade Bloc

After Armenia's decision Sept. 3 to join the Customs Union, a Russian-led trade bloc, a number of European politicians said Armenia will not be able to have a free trade agreement with the European Union because the two blocs are incompatible. Lithuania, which currently holds the EU presidency, is leading efforts to bring six former Soviet states -- Moldova, Georgia, Armenia, Ukraine, Belarus and Azerbaijan -- closer to the European Union through political and trade agreements under the European Union's Eastern Partnership program, initiated by Poland and Sweden in 2008.

Russia has been using its strong economic and energy ties to these countries to block Brussels' efforts, with varying degrees of success. As Armenia's largest trade partner and foreign investor and as owner of many of the country's strategic assets, Russia is crucial to Armenia's stability. Russian President Vladimir Putin recently indicated that Russian Railways would invest heavily in Armenia's rail system, and further investment is likely by Russia's Rosneft and Rosatom to upgrade Armenian chemical plants and nuclear sector. Because of the distance separating them and its deep political and economic crisis, the European Union does not have the same opportunities as Russia to become a sustainable economic and investment partner for Armenia and other countries in the region.

Moscow will likely intensify pressure leading up to the Eastern Partnership summit in Vilnius in November, during which numerous Eastern Partnership countries are expected to decide whether to strengthen political and trade ties with the European Union through new agreements. Considering the economic weakness of the European Union and its focus on resolving internal structural problems, Russia -- despite internal challenges of its own -- can expect some success in influencing the peripheral states.

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