Kazakhstan and the Proposed Eurasian Union
02/20/12 – A central agenda item of Vladimir Putin’s reelection campaign is his call for a “Eurasia Union” among the former Soviet republics.
Although denying any effort to simply restore the Soviet Union, Putin emphasizes the value of consolidating the former republics into something like the European Union. The republics would coordinate their foreign, economic, and other policies—presumably under Moscow’s leadership—to enhance their (Moscow’s) global influence. The intent appears to build on the new trilateral Customs Union between Russia, Belarus, and Kazakhstan by expanding its members, functions, and powers. Putin’s Press Secretary, Dmitry Peskov, told the influential Kommersant newspaper that the Eurasian Union would be one of his “key priorities” during Putin’s next term as president.
Kazakhstan can best promote its interests within any Eurasian Union by ensuring that the structure does not impede its economic and other ties with non-members, including other Eurasian countries but also China, EU members, and the United States. (Credit: Bigstock)
The Kazakhstani government has endorsed the initiative, but major obstacles stand in the way of Putin’s project. The prospects of a new Eurasian Union emerging anytime soon in the former Soviet Union appear small.
Soon after making his September 24 declaration to run again seek the Russian presidency, Putin called for a Eurasian Union in a rare lengthy article published in the October 4, 2011 issue of Russia’s Izvestia newspaper. Putin disclaimed any intent to try to recreate the USSR, noting “it would be naive to try to restore or copy something that belongs to the past.”
But he added that “a close integration based on new values and economic and political foundation is a demand of the present time.” Putin called for building on the valuable “inheritance from the Soviet Union,” which he described as “an infrastructure, specialised production facilities, and a common linguistic, scientific and cultural space,” in pursuit of the “joint interests” of the former Soviet republics. Putin further wrote that his goal was “an ambitious task of reaching a new, higher level of integration” and that he wants to create “a powerful supranational union capable of becoming one of the poles in the modern world.” He compared his proposed union with “other key players and regional structures, such as the European Union, the United States, China and the Asia Pacific Economic Community.”
Putin evidently wants Russia to again lead a multinational bloc of tightly bound former Soviet republics. Putin is a well-known fan of the Soviet Union. He has publicly described his dismay at being in Germany without guidance as the Soviet empire in Eastern Europe collapsed. In a nationwide television speech in April 2005, Putin famously described the collapse of the USSR as the “greatest geopolitical catastrophe of the 20th century.”
On November 22, 2011, President Nursultan Nazarbayev, Russian President Dmitry Medvedev, and Belarus President Alexander Lukashenko signed an agreement to integrate their economies in the form of the Eurasian Union, which would coordinate their economic and currency policy and adopt unified visa and migration rules, on the basis of World Trade Organization principles. They agreed to create a Eurasian Economic Commission to manage the integration of the three countries, which have a combined population of 170 million people. The three already have established a single economic space within the framework of their new Customs Union, which became effective on January 1, 2012. The Eurasian Union would not arise before 2015.
President Nazarbayev indicated that at some point the integration might lead to the adoption of a common monetary unit. “First of all, we should prove for ourselves expediency and parity of our economic space. After that, a question of a single currency will arise,” Nazarbayev said. “I believe that none of the national currencies, including such a powerful one as the rouble is suitable for this role. It should be a different name and it should be a different currency.”
Nazarbayev stressed that the considering a single currency was premature at their early stage of integration, arguing that, “Integration begins by the creation of a free trade zone, then a customs union, then a common economic space. An economic union is built afterwards and a unit of account like ECU (European Currency Unit) in Europe is introduced,” Nazarbayev said. “It is necessary to create all this, and then to think about a single currency.”
The prospects of a Eurasian Union in the near future seem unlikely. It has taken the Russian Federation a decade to launch its Customs Union with the limited membership of Belarus and Kazakhstan. Policy differences among CIS members have repeatedly undermined the viability of the Moscow-backed multinational institutions in the former Soviet Union.
For example, the former Soviet republics have disagreed over the appropriate prices for Russian energy and Russia’s restrictions on labor mobility. Plans to establish a free trade zone have been repeatedly postponed due to the disparities among its members in terms of economic policies and attributes. It took a decade to negotiate and implement the Russia-Belarus-Kazakhstan Customs Union.
If Putin genuinely envisions a European Union-type alignment as a model, it would imply the need to create a single currency and an independent bureaucracy to administer and enforce the agreed rules and common economic policies. It took Europeans decades to transfer considerable, if strictly limited, powers to the EU bodies in Brussels, which has required harmonizing many national powers and laws. The different growth rates and other economic characteristics of the member states will prove as disruptive to the proposed Eurasian Union as it has been in the European Union.
Many of the former Soviet republics trade more with European or Asian countries than they do with each other.
Similar divergences are evident in the desire of some but not all members to move closer to seemingly rival Western institutions like the European Union and NATO.
The wave of color revolutions a few years ago has widened divergences among the members’ political systems, with certain countries seeking to establish European-style liberal democracies and other regimes committed to preserving their authoritarian status quo. There are also serious rivalries among former Soviet republics for regional leadership–such as that between Kazakhstan and Uzbekistan–that will likely act as an impediment to the establishment of joint economic and other policies.
Furthermore, Putin’s proposed Eurasian Union faces serious competition from the existing multinational institutions currently operating in the former Soviet space—the Collective Security Treaty Organization (CSTO), the Shanghai Cooperation Organization (SCO) and other multinational institutions. The proposed Eurasian Union would need to define relations with them. Putin’s team has said that the Eurasian Union would not duplicate or replace existing collective bodies, but it is unclear how the Eurasian Union would work with, or around, the other structures. Despite decades of coexistence and overlapping membership, NATO has still not worked out an effective modus vivendi with the European Union.
Perhaps most importantly, many of the former Soviet republics have serious reservations about forming any sort of alignment with Moscow given their unhappy history of Soviet and Russian domination. The former Soviet republics, even those whose leaders did not initially seek independence, jealously guard their sovereignty and autonomy. Although Kazakhstan has endorsed Putin’s union proposal, the governments of Georgia and Ukraine have already said they have no plans to join it.
Despite strong pressure from Putin to join the Customs Union, Ukraine has thus far striven to move closer to the EU instead. Moldova and Georgia are also negotiating free trade agreements with the EU, while Armenia and Azerbaijan might soon follow them. Many of the other former Soviet republics are eager to develop their relations with China or the West to balance their ties with Moscow. There are also serious rivalries among former Soviet republics for regional leadership–such as that between Kazakhstan and Uzbekistan–that will likely act as an impediment to the establishment of joint economic policy let alone a common currency.
In this regard, the union proposal seems aimed at reining in those former Soviet states that have so far remained outside Moscow’s control, such as Ukraine. Even though Ukraine is now headed by a government more friendly to Moscow, Ukrainian leaders are wavering whether they should join the Customs Union or try to move closer to the EU. Putin has already indicated that Kyiv cannot pursue both goals. Since March 2007, the EU and Ukraine have been negotiating a free trade agreement as part of a new Association Agreement to replace the present Partnership and Cooperation Agreement established in 1998. Putin told Ukrainian Prime Minister Nikolai Azarov that joining the Customs Union will give Ukraine some $6.5 billion to $9 billion in direct benefits through expanded industrial opportunities.
Russia has considerable leverage over Ukraine due to the deep interdependencies between the two national economies.
Most of Ukraine’s high-tech exports go to Russia. Like Moscow, the EU insists that closer integration will contribute to economic growth for Ukraine given that the EU is Ukraine’s primary commercial partner, the EU accounts for one third of Ukraine’s external trade, and Ukraine will benefit from the political association. Conversely, Putin has warned that a free agreement between Ukraine and the EU would require Russia to take protective measures such as raising trade barriers between their two countries.
To overcome these centrifugal tendencies without coercion, Russia has to make itself a more attractive partner. In principle, Moscow could garner more support for its integration programs by sharing more influence within collective institutions and adopting a more conciliatory approach on disputes with its neighbors. In practice, Russia probably has to achieve greater success in its domestic modernization and other reform efforts to become a more attractive economic partner that could trade more goods from these countries and generate more mutual investment.
Kazakhstan can best promote its interests within any Eurasian Union by ensuring that the structure does not impede its economic and other ties with non-members, including other Eurasian countries but also China, EU members, and the United States.
In the interim, Kazakhstan would be wise to focus on securing its accession into the World Trade Organization, whose external tariffs are likely to be lower than that of any Eurasian Union.