Helena Yakovlev-Golani on the Eurasian Economic Union: For twenty years, Russia and its neighbors, Kazakhstan and Belarus, have been trying to establish the Eurasian Union or as it is officially called the Eurasian Economic Union agreement signed in Kazakhstan on May 28, 2014 and which will come into force on Jan. 1, 2015. This union envisions the gradual integration of the three former Soviet countries economies, establishing freedom of trade, services, financial interaction and labor migration. The agreement in fact combines the previous agreements reached between the three countries under the Customs Union and the Single Economic Space. Initially, the union was supposed to have a single market for energy and finance by 2015. It was supposed to have a common currency (“oltin” or ruble), a dual-triple citizenship, and a common sub-national Central Bank. However, the new agreement does not include any of this and it doesn’t explain how a single market for energy and finance will be regulated. It has deadlines but it lacks mechanisms. What is odd about this agreement, though, is its timing. After twenty years of negotiations, all three sides suddenly agreed to sign it now. Why? In my opinion, Moscow has finally realized that Ukraine will never join this structure and therefore there is no other incentive to wait for this agreement to be signed. Moreover, in light of Russia’s loss of Ukraine, it was politically important for the former to establish this union to demonstrate that even at this dire situation, where Russia is ostracized by the West, in the post-Soviet space, it’s still a center of attraction and there are states that are willing to join Moscow-led regional initiatives. Therefore, for Russia, it is a union of political convenience rather than of an economic significance. In fact, Russia undertakes a serious burden. According to Russian Deputy Finance Minister Sergei Shatalov, this Union will cost Russia about $30 billion (USD) annually because of the removal of economic restrictions such as tariffs and taxes, which Russia will have to compensate by raising taxes for its citizens. Then, who benefits from all this? Russia’s neighbors – Belarus and Kazakhstan. Belarus is interested in a single market with no limitations that would include energy, meaning that it won’t have to continue paying duties to Russia on Belarussian exports of oil products based on oil imported from Russia. In addition, Minsk has already received Russian loans in total of $2 billion and was promised that around $1.5 billion out of annual $4 billion in duties on petroleum products will stay in Belarus next year. Kazakhstan’s goal, on the other hand, was to get an access to Russia’s energy transportation infrastructure and to its market. Despite the Customs Union, there are several technical and judicial barriers that prevent Kazakhstani business and products from penetrating the Russian market. The other advantage will be a more favorable business climate with the prospect of increased foreign direct investment if trade and regulatory freedoms will be observed in the future and the geopolitical tensions decrease. Considering these advantages, Russia is likely to draw more post-Soviet states to the Union by subsidizing them in the form of reduced prices for gas and oil. Armenia, Kirgizstan, Tajikistan, Georgian breakaway republics and maybe even Turkey, from outside the region, are Union’s potential members.
Posted on: Tue, 03 Jun 2014 13:55:44 +0000
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