Checking in on Eurasian Union Struggles

by Casey_Michel on 11/7/2013

Three of a kind.

In late October, while meeting with other heads involved in the Supreme Eurasian Economic Council in Minsk, Kazakhstani President Nursultan Nazarbayev turned to the topic of the forthcoming Eurasian Union. There had been hints and drops of Kazakhstani discontent with the EAU’s formulation – talk of business concerns, rumblings of ethno-based discontent. Nazarbayev decided to focus on the former, and gave surprising voice to his country’s grumblings.

“Kazakhstan’s WTO accession is a very serious issue,” Nazarbayev said. “We were walking in the footsteps of Russia. We were promised support with the WTO accession. The Bali Conference will take place in December this year. Kazakhstan’s accession could have been formalized then. But it will not happen because we supported the level of protection of Russia. This is probably the issue between Russia and Kazakhstan, but this applies to Belarus too.”

The comment was the most public jab at the EAU from the inside, and illustrates the myriad frustrations Kazakhstan’s seen since Russian President Vladimir Putin began this march toward economic union. Over at Central Eurasia Standard, I attempted to examine Kazakhstani critiques of the EAU — as well as the methods and motives Russia has used to coerce Ukraine into joining, which seem, to date, to have only worked to push Kyiv toward Brussels.

A brief excerpt:

Still, much as remained reality during the Soviet period, Russia once more seems to stand as a first among equals. As has become apparent over the past 22 months, the formation of the Customs Union – and the eventual creation of the Eurasian Union – was slanted to favor Russia, rather than an equitable, tripartite approach to the situation. As the lone member of the World Trade Organization in the Customs Union, Russia has been able to all but dictate terms of the common external tariff. Likewise, while the three nations agreed to share a joint account for customs revenues, Russia retains a remarkable 87.97 percent of such funding, with only 7.33 percent heading to Kazakhstan and 4.70 percent going toward Belarus. …

Price hikes and inflation have also hampered Kazakhstan’s burgeoning economy, and while the Customs Union allowed exports to Russia to grow by 40 percent from 2010-2012, Russia also increased its exports to Kazakhstan by 55 percent in the same time period. Kazakhstan’s 2012 trade imbalance with Belarus stood even starker, with Astana importing nearly six times as much net product from Minsk as it exported. According to a 2012 World Bank report, Kazakhstan lost “about 0.2 percent in real income per year as a result of participation in the [Customs Union],” due to increasing external tariffs, which jumped on average nearly 50 percent. “Consequently,” the report continues, “we estimate that the [Customs Union] has depressed real wages by 0.5% and depressed the real return on capital in Kazakhstan by 0.6%. Kazakhstan trades less with the rest of the world and more with Russia, Belarus, and the rest of the CIS, resulting in less imported technology from the more technologically advanced European Union and other countries – leading to a loss of productivity gains in the long run.” Clearly, for Kazakhstan, the Customs Union thus far has been a net loss economically. While Putin’s economic and security support has benefited Nazarbayev’s continued consolidation of power – especially following both the country’s 2010 OSCE chairmanship and the 2011 Zhanaozen massacre, as a new International Crisis Group report states – it is clear that the most dynamic economy in Central Asia is suffering due to the formation of the Customs Union.

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This post was written by...

– author of 29 posts on 17_PersonNotFound.

Casey Michel is a graduate student at Columbia University's Harriman Institute, focusing on Eurasian political and social development, and he has worked with both International Crisis Group (Bishkek) and as a Peace Corps Kazakhstan volunteer. His writing has appeared in The Atlantic, Foreign Policy, RFE/RL, Al Jazeera, The Moscow Times, The Diplomat, and Slate. You can follow him on Twitter at @cjcmichel.

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