Russia: Moscow Embraces New Initiative to Forge Post-Soviet Trade Bloc

Russia wants to turn a newly minted Customs Union with Belarus and Kazakhstan into its major vehicle for post-Soviet economic integration in Central Eurasia.

Russia, Kazakhstan and Belarus signed documents to establish a customs union during a summit meeting of the Eurasian Economic Community (EEC), held November 27 in the Belarussian capital Minsk. Under the agreements, a unified Customs Code and common customs tariffs will go into effect on July 1, 2010.

"We have entered a new phase of cooperation," Russian President Dmitry Medvedev said in comments distributed by the official RIA Novosti news agency. "This is an extremely important and long-awaited event that has taken place after very complex negotiations."

The customs union will unite three states with combined GDP of $2 trillion, and $900 billion in mutual trade turnover, Kazakhstani President Nursultan Nazarbayev said. The group could emerge as a major oil and grain exporter, he predicted. Initial projections show the customs union can enhance Russian trade turnover by up to $400 billion, while Kazakhstan and Belarus could each gain upwards of $16 billion in additional trade revenue, according to Nazarbayev.

Sergei Glaziyev, head of the Customs Union Commission, predicted earlier in November that by lifting trade barriers, the three states could achieve 15-17 percent GDP growth by 2015.

The Kremlin has long been urging all other EEC members to join. Kyrgyzstan has applied to join the customs union while Tajikistan also indicated interest in entering the trade group.

Efforts to forge the customs union began in January 2008. All along the way, the proposal encountered skepticism.

Russia confirmed its willingness to move forward with the customs union just days ahead of the EEC summit in Minsk. On November 20, the Russian State Duma, the lower house of parliament, ratified six trilateral agreements, including tariff and licensing matters. On November 24, the Russian government approved the draft of the joint Customs Code.

Kazakhstan also appeared to have reservations about entering the customs union. A November 5 ruling by Kazakhstan's Constitutional Court finally cleared the way for Astana's participation. The decision upheld the concept that customs union regulations would take precedence over Kazakhstani domestic legislation. The court issued its decision at the request of Kazakhstani Prime Minister Karim Masimov.

Belarus seemed to share Kazakhstan's hesitation. Belarussian President Alexander Lukashenka on November 24 questioned the benefit of a customs union, saying that it appeared largely geared toward bolstering the Russian economy.

Once the customs union cleared its final hurdles, Russian officials lost no time in pressing for further moves toward closer multilateral economic integration. Russia's first Deputy Prime Minister Igor Shuvalov called on customs union members to create the common economic space by the start of 2012. He also said that common customs tariffs were largely based on the Russian system of import and export duties.

Several Moscow-based experts cautioned against a rush to expand the customs union. Participating states should wait and see initial results of the group's operation before accepting new members from Central Asia, argued Alexey Kuznetsov, head of European Studies Center at the Institute of World Economy and International Relations.

Meanwhile, some experts suggested that the customs union could act as a vehicle for the development of protectionist policies. It could help protect domestic producers from an "obvious economic expansion of third countries," argued Vladimir Yevseyev, researcher at the Institute of World Economy and International Relations.

Editor's Note: Sergei Blagov is a Moscow-based specialist in CIS political affairs.

Eurasianet