The Hidden Problems of the EurAsian Union

On 18 November presidents of Belarus, Kazakhstan and Russia met in Moscow and launched the Single Economic Space. They also signed the Treaty on the Eurasian Economic Commission.

If three countries ratify these acts in the near future, on 1 July 2012 the Customs Union’s Commission will be abolished and all its powers will be transferred to the Eurasian Economic Commission.

The Eurasian Union founders use the European integration experience as a model. However, it is hardly possible that they will form a harmonious union because of a number of political, economic and intercultural problems.

How Is It Supposed to Function?

The main governing bodies of the Single Economic Space (SES) will be the Supreme Eurasian Economic Council of heads and prime ministers and the Eurasian Economic Commission.  The Commission will also be the first major supranational institution in the post-Soviet space. 

If any member country violates international agreements or the Commission’s decisions, the Commissions’ Board can bring an action against this state in the EurAsEC Court located in Minsk. Nevertheless, it is still unclear how widely its decisions will be implemented given that Russian state institutions are often reluctant to follow decisions of another supranational structure – the European Court on Human Rights.

The Commission staff will be shaped in proportion to the state’s share in distribution of the customs duties so it will consist of 84% Russian citizens, 10% Kazakh citizens and 6% Belarusian citizens. Russian citizens will therefore dominate the Commission. The Commission's first chairperson will be Russian Minister of Industry Victor Khristenko.

It should be noted that member countries are not planning to speed up integration in their respective parliaments, regions, business associations, youth and civil societies, though it is often a crucial point for approval of the integration process by societies.

Real Aims or Demagogy?

The main aim of the SES is to create a common market of goods, services, capital and labour. In order to achieve it, the Commission was given 175 functions in different spheres, including industry, transport, energy, the agrarian sector as well as natural monopolies and competition. Nevertheless, the interstate agreements do not specify the exact content of these wide powers. It means that most likely they will be hotly debated in the future. It took the European Law system over 50 years to develop and mature and it is naïve to hope that 2-3 years will be enough for the Eurasian Union to adopt legislation in these important areas.

Given the importance of ‘champion enterprises’ such as MAZ and Belkali for Belarus or Gazprom for Russia, it is still unclear how the states can agree on regulation of these enterprises by supranational institutions, especially when they are governed not by economic, but political, logic. Previously the Russian authorities had an experience of imposing different decisions on gas and oil companies in order to achieve some political aims and assert themselves as the ‘energy superpower’.

Member states claim that they want to pursue the coordinated macroeconomic and currency policy and to limit the level of external public debt and inflation. However, given the weak rule of law in Belarus, Kazakhstan and Russia, it is difficult to posit that all provisions of the agreements will be complied to by member states.

Prospects for Eurasian Integration

The states plan to introduce a common defense space based on the CSTO as well as a single currency for the Eurasian Union. Alexander Lukashenka said that the Russian rouble could be used as the common currency, but from Nazarbayev’s point of view, it should be a new currency. Actually, it is almost impossible that Russia will drop its rouble and agree to emission centers outside Russia. Thus the situation with the single currency is likely to reach a deadlock very soon, as has happened many times before in the case of the Union State of Belarus and Russia.

On 18 November Victor Khristenko said in his interview with Russia Today that Tajikistan and Kyrgyzstan can also join the SES in the near future. This may sound good to Russian voters, but in practice these countries are quite poor and not important enough in the regional context to make the Union more attractive to further candidates.

Medvedev stated that the future Eurasian Union will avoid the eurozone's problems, but it is hardly likely, given the fact that Russian economy will play an even bigger locomotive role in the new Union than Germany does in the European Union. There is a high probability Russia will have to lend to and invest large amounts of money in neighbouring economies for the maintenance of coordinated macroeconomic indicators.

Decisions of the Commission will be based on consensus, which means that coordination of the positions of Belarus, Russia and Kazakhstan will take a long time. This is especially so since the Belarusian presidential administration is not ready for economic reforms and even clashed with its own government on this issue two weeks ago.

Implications of the New Wave of Integration for Belarus

Belarus should approach participation in the Eurasian Union pragmatically and use available opportunities to achieve its own ends, including modernization of enterprises and market reforms. A shift to common policies can further the process of Belarusian modernization due to the forced adaptation to modern norms and regulations that are used by Russia as a consequence of cooperation with the WTO, the USA and the European Union.

Despite popular objections, the participation of Belarus in the SES does not contradict its participation in the EU Eastern Partnership or the development of its relations with Western countries. Moreover,  the SES constituent agreements stipulate that the WTO norms are of higher legal force than these trilateral agreements.

It is symbolic that Russian president Dmitry Medvedev left for Bali to take part in the East Asia Summit the day after signing agreements with his Belarusian and Kazakh counterparts. Russia is not retreating from the world market because of Eurasian integration, and there is nothing to prevent Belarus from doing the same, except a lack of imagination.

Participation in the Eurasian Union may help the Belarusian authorities to reduce social tension and improve Belarus' difficult socio-economic situation in the near future if Russia agrees to the substantial cut in hydrocarbons prices. Its decision will be known on 25 November during the Union State’s Supreme State Council's session. According to influential Russian daily Vedomosti, natural gas prices for Belarus in 2012 could be halved to $150 per 1000 cubic meters, with a decrease to the level of internal Russian prices in 2013. 

What is the Future of the Eurasian Union?

To sum up, the founders of the Eurasian Union refer to a large extent to the EU experience and have set similar aims, mechanisms and institutions. However, a weak legal culture, the absence of proper democratic mechanisms, and the differences in the economic structure and economic interests of these three countries cast doubt over the future of all agreements.

Today it is difficult to say whether this new Union will stand the test of time or be used by Russian politicians to increase their popularity in Russia, and by Belarusian authorities as yet another rent-seeking opportunity.

 

George Plaschinsky

George Plaschinsky is an associate analyst at the Centre for European Transformation in Minsk. 

George Plaschinsky is a graduate of the London School of Economics where he studied under the OESS scholarship by European Comission.

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