Custom Union between Russia-Belarus and Kazakhstan

A trilateral Customs Union between Russia, Belarus and Kazakhstan came into force, after Belarusian President Aleksandr Lukashenko put apart the ongoing conflict with Russia about the tariffs on crude oil and agreed to sign the Customs Code at a summit between the Head of States of the three countries in Astana last week. For now, the trilateral agreement eases trade between the three economies, but does not abolish all tariffs and duties. Russian President Dmitri A. Medvedev underlined the gradual approach at the summit: "The first step is harmonizing customs rules. Later, we will discuss free movement of labor and capital." The official objective is to inaugurate a Free Trade Area with 170 million inhabitants by 2012.

The diplomatic advance by the Russian government has been welcomed by the business and financial sectors in Moscow, who hope that the establishment of a Central Asian Free Trade Area will further strengthen Moscow as a financial centre. However, the main motivations behind the new agreement are supposed to be of political nature.

On the one hand, it may be a sign towards the West that Russia has alternatives to the WTO. Russia started accession negotiations to the WTO in 1993, but has repeatedly been frustrated in its efforts. However, US President Obama had promised the backing of Russia in the accession negotiations during President Medvedev's visit to the US last June. German Prime Minister Angela Merkel indicated her support for Russia to join the WTO yesterday at the Russian-German Forum that took place in Yekaterinenburg. At the same time, she expressed concerns that the Customs Union may make Russia's accession process to the WTO "more complicated".

On the other hand, the Custom Union may increase the influence of Russia over their neighboring states and be a diplomatic tool to pressure Central Asian countries to build stronger ties with Russia. Talant Sultanov, a financial consultant in Bishkek said to Eurasianet: "Russia pressured the Kazakh government into joining it, although most of the Kazakh people are against it." In the meanwhile, the inauguration of the Custom Union has already awaken the interests of Kyrgyzstan and Tajikistan, who are concerned about their regional economic competitiveness. Ukraine, which has become more Russia-friendly with the election of President Victor Yanukovich last February, hasn't made a public statement yet.

By Lukas Linsi (JTW)


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