Customs Union and Eurasian Union: Problems on the road to integration
The EurAsEC summit in late March laid bare some disagreements between Russia and Belarus. An attempt to speed up implementation of a new integration project in the post-Soviet space proved to be rather problematic. This is not the first time that integration projects backed by Russia have encountered a reserved and even skeptical attitude on behalf of its partners. The same attitude was manifested during the formation of the Customs Union (CU) of Russia, Belarus and Kazakhstan; when this initiative was launched, Kazakhstan and especially Belarus made considerable demands.
Russia had to make concessions on many issues. This is why the current operation of the Customs Union is not ideal for Russia. Suffice it to mention the possibility of “gray” re-exports of foreign goods to Russia. Sometimes Chinese made goods were declared as products of Kazakhstan and were brought to Russia within the CU space without paying the applicable import duties. Moreover, the imbalance between Russia and Belarus on imported car duties (in Belarus they were much lower than in Russia) existed for about half a year. In the first half of 2011, Belarusians bought used cars in Lithuania on a massive scale and resold them to Russia, bypassing customs.
It also should be noted that the formation of the CU and the plan for its integration into the Eurasian Union are exerting a diverse influence on the economic development of Siberia and the Russian Far East. On the one hand, the closure of customs posts between Russia and Belarus has noticeably increased the competitive advantages of Russian land-based routes from East Asia to Europe. Cargoes shipped from China, Japan and South Korea to the European Union via the Trans-Siberian Railway have to pass through customs only once on the CIS territory, which simplifies and speeds up relevant procedures.
On the other hand, by the same logic, the CU consolidates the competitive advantages of Kazakhstan over Siberia and the Far East. The elimination of the customs border between Russia and Kazakhstan is prompting Chinese companies to use Kazakh transit routes because they are shorter and more convenient. In this context, instead of shipping their cargoes via the Trans-Siberian Railway they may prefer to use the railway passing through Western Xinjiang to Kazakhstan and onward to European Russia. This route is shorter and faster. Obviously, Russia should take urgent, large-scale measures to sharply increase the appeal of its Trans-Siberian Railway for Chinese transit for fear of losing this battle.
Kazakhstan is also becoming a Russian rival in gas transportation to China. The active use of the Kazakhstan-China gas pipeline may kill the interest of Chinese partners in building new gas mains from Russia to China both on the Western (Altai) and Eastern routes. In turn, this will encourage China to further toughen its already adamant position on the price of Russian gas. Joint Russian-Chinese projects may be blocked as a result.
This is why it is so important for Russia to make Siberia and the Far East a fully-fledged participants in the Eurasian Union. The federal authorities should make all decisions on integration with Kazakhstan with due account of the opinion of the heads of the Siberian and Far Eastern regions. Russia should send a Siberian representative to the Eurasian Union commission, which is being formed. It is vital for Russia to prevent the new integration project from becoming an obstacle to the development of our own regions.
To sum up, Russia had to make serious concessions even to make the first step toward integration under the Customs Union. Most likely, the next step – the formation of the Eurasian Union – will also be accompanied by concerted efforts by Belarus and Kazakhstan to extract as many privileges as possible. To some extent, Russia will again have to pay for its integration initiatives from its own budget, that is, from the pockets of its taxpayers. However, their political significance is self-evident.
Vladimir Putin announced the idea of the Eurasian Union as a priority of his new presidency and a strategic task of Russian foreign policy. Putin made a well-known statement about the Soviet Union’s disintegration being the major geopolitical disaster of the 20th century. Obviously, these largely nostalgic and psychological aspirations of the Russian leaders for re-integrating post-Soviet space are rather strong and will play a major role within the next six or twelve years. It is understood in Belarus and Kazakhstan and some other CIS countries that may decide to join the Eurasian Union at a later date. Clearly, they will try to receive as many economic and financial perks from Russia as possible, in particular, on prices on gas and other energy sources. They may also demand political concessions with respect to the decision making process in the future Eurasian Union.
The institutional structure of the future Eurasian Union is being modeled largely on the EU. Its commission has already been established. It will be a supra-national body where all decisions will be made by the three member-countries.
Concessions will help resolve many economic issues and facilitate the free movement of people, in particular migration from Kazakhstan to Russia and the opening of the border with Kazakhstan (immigration control with that country may be eliminated, as has been done with Belarus).
Another important aspect is the formation of a new legal system at the CU level. Many issues pertaining to the regulation of exports and imports and foreign trade in Russia are being resolved not under Russian law, but in accordance with the new supra-national law adopted by the CU. Apparently, this trend will continue along the lines of the EU process. This will consolidate the parliamentary mechanisms of the new integration union and parliamentary associations in the CU and the Eurasian Union. In turn, this will enhance the supra-national element in administration and law and will reduce Russia’s control over many major issues of foreign economic regulation.
Oleg Barabanov is Professor of Department of World Politics, Faculty of World Economics and Global Politics, National Research University – Higher School of Economics; Head, Department of EU Politics and Policies; European Studies Institute at Moscow State University of International Relations (MGIMO University)
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.