Essay: Regional economic organizations

On 15-16 October 2012 the media spotlight was briefly turned on a meeting in Baku, capital of Azerbaijan, of the Economic Cooperation Organisation (ECO) ‘ a body which had almost escaped notice until then. The main cause of this flurry of interest was an unexpected encounter after the end of the plenary sessions between Turkey’s Prime Minister, Tayyip Erdo??an and the Iranian President Mahmoud Ahmadinejad. The two leaders evidently sought to overcome serious differences in their policies towards the civil war in Syria by trying to forge a regional solution to the Syrian impasse . If nothing else, the incident suggested that ECO seemed to have some value as a platform on which government leaders who were divided on important international issues could have a face to face meeting. It also raised the question as to whether this organisation had any other useful functions, granted its normal obscurity. The question is of some importance in the context of economic and political relations between the Caspian nations, since all the countries in the Caspian basin except Russia are members of ECO, together with Turkey, Pakistan, and four other Central Asian republics . Accordingly, this article seeks to outline the historical development of ECO and the political and economic issues which it currently faces. This is followed by an assessment of its potential importance in the years ahead.
ECO traces its origins to the alliances of the cold war, although its scope and purpose has changed fundamentally since then. In 1955, Britain, Turkey, Iraq, Iran and Pakistan, supported by the USA, formed the Baghdad Pact, as an attempted pro-western defence alliance in the middle east. In 1959, following the overthrow of the Hashemite monarchy in Iraq in the previous year, it lost its only Arab member, and was reconstructed as the ‘northern tier’ alliance of the remaining members, known as the Central Treaty Organisation (CENTO). Five years later, in 1964, Turkey, Iran and Pakistan attempted to give their common political alignment an economic dimension by setting up a parallel organisation called Regional Cooperation for Development, or RCD, which was supposed to promote mutual trade and economic collaboration . The CENTO alliance was dissolved in 1979, after the Iranian revolution, and RCD with it. However, in 1985 its three former members established ECO as a successor organisation. Although this achieved little in the immediately succeeding period, it was given a new impetus after the end of the cold war by the accession in 1992 of the newly independent republics of Azerbaijan, Kazakhstan, Kirghizstan, Tajikistan, Turkmenistan and Uzbekistan, besides Afghanistan . ECO’s main stated purpose was to liberalise trade between the member states, first through a Protocol on Preferential Tariffs signed by the original members in 1991, and then through the ECO Trade Agreement (ECOTA) launched in July 2003, in which they committed themselves to ‘the progressive reduction of tariffs and elimination of non-tariff barriers to trade’ , besides the improvement of mutual transport links, among other objectives. Future aims included the establishment of an ECO Trade and Development Bank (ECObank) a reinsurance company, and even an ECO shipping company and an ECO airline . In his speech to his fellow-leaders in Baku in October 2012, Prime Minister Erdo??an admitted that ECO was still a long way from achieving its objective of founding a free trade area. However, he pointed out that the member states had a total population of 400 million people, and claimed that if the ECOTA were fully implemented then mutual trade could be increased eight-fold . Similarly, writing in the normally pro-government Turkish daily Zaman, columnist Kadir Dikba?? emphasised that, in the first eight months of 2012, while Turkey’s exports to the European Union (EU) had declined by 9.1 percent compared with the same period of 2011, in the case of the ECO countries it had increased by 115 percent .In interpreting this, strict caution was needed, however. Paradoxically, Turkey’s trade with ECO was largely with Iran, with whom it had the most problematic political relations, accounting for its extreme volatility. Calculating from Turkey’s official trade statistics for 2011, Iran accounted for just over 60 percent of total trade with the ECO countries (39 percent of exports and 72 per cent of imports) and was heavily influenced by extraneous political factors over which the ECO members had little control. Iran accounted for the vast majority of the exponential increase in Turkey’s exports to ECO in 2012, but this was explained by a sharp increase in sales of gold to Iran. In this case, the imposition of economic sanctions by the United Nations, the USA and EU, due to the dispute over Iran’s alleged attempt to develop a nuclear arsenal, and the subsequent collapse of the Iranian currency, had led to massive imports of bullion by Iranian traders, either directly from Turkey or indirectly via Dubai.e…

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