A POLITICALLY INSPIRED CUSTOMS UNION
The Russia-Belarus Union State is only one piece in the mosaic of Russia’s neoimperialist strategy. Because this model of a reintegration of the former Soviet Union, focusing on a direct political integration, has shown its limitations, being too dependent on the whims of the political leadership of Russia’s partner country, Moscow had already developed a parallel approach, based on economic integration. Although this approach initially seemed less promising than straightforward political integration, it might, in the end, prove more successful. There are two reasons for this: first, because it is more focused on mutual economic benefits, and, second, because it is experienced by Russia’s partners as less threatening to their national sovereignty. Economic cooperation projects had already started under Yeltsin. On March 29, 1996, the Eurasian Economic Community (EurAsEc) was founded with Russia, Belarus, and Kazakhstan as its members. During Putin’s reign, in October 2000, Kyrgyzstan and Tajikistan joined, followed by Uzbekistan in January 2006. The goal of the Eurasian Economic Community was to create a Free Trade Area among its six member states.
However, the three founding members of EurAsEc—Russia, Belarus, and Kazakhstan—decided to go further and form an inner circle with a fully fledged customs union, leading to a single market. The Customs Union (Tamozhennyy Soyuz) was ratified on July 5, 2010. It included plans to adopt a common currency. In this instance, Russia was following the logic of European integration in which a deepening of economic integration leads, via a process of functional spillover, to a gradual political integration of the member states. Unlike the Union State the Customs Union is making progress and Russian officials are busy expanding its scope beyond the existing three members. Ukraine, here again, is the main target. The Ukrainian Economy Minister, Vasyl Tsushko, announced in December 2010 that Ukraine will act as an observer in the negotiations between Russia, Belarus, and Kazakhstan on the creation of a Customs Union.[24] He emphasized that “it is interesting for us to see what they are discussing there.” According to him, “Ukraine is not yet considering participating in the customs union.” It would be “primarily interested in [the] creation of a free trade zone within the Commonwealth of Independent States.”[25] But Russia is constantly raising its pressure on the Ukrainian government. In July 2012 Ukrainian President Viktor Yanukovych said that Kiev and Moscow “were discussing, are discussing, and will continue to discuss” the question of Ukraine’s joining of the Customs Union, a question, he said, that was “directly connected with national interests.”[26] Yanukovych was also discussing with the EU. After six years of negotiations he was expected to sign an Association Agreement with the EU during the Eastern Partnership summit, organized on November 28–29, 2013, in the Lithuanian capital Vilnius. At the last minute, however, he refused to sign and turned to Moscow. Putin had offered $15 billion in loans and an important discount in the price of imported gas. Yanukovych’s U-turn led to massive demonstrations in the center of Kiev.
The great geopolitical interests that are at stake here must not be underestimated and the choices that are made now will have deep and lasting consequences for the future of the European continent. What, exactly, is at stake becomes clear from the comment of the EU Commissioner for Enlargement, Štefan Füle, who said that the “creation of a free trade zone between Ukraine and the European Union, to which Ukraine aspires, is incompatible with Ukrainian membership of the [Russia dominated] Common Economic Area’s customs union.”[27] Anders Åslund, a political analyst, declared that he “does not believe there are any real economic benefits in the customs union for Russia.”[28] Economic benefits were certainly not Putin’s main motivation for launching this project. In the long run also the benefits for the eventual partner countries are restricted—in particular for Ukraine. Putin, however, did his best to minimize the benefits for Ukraine of an association agreement with the EU, saying that “Ukraine sells Europe two litres of milk, [while] the Customs Union brings her 9 billion dollar per year.”[29] One may ask oneself why the customs union—despite its limited economic rationale for Russia—is so important for Moscow. One reason was possibly Russia’s aspiration to become a member of the World Trade Organization. After the Russian invasion and dismemberment of Georgia it was clear that Georgia, which already was a WTO member, would be inclined to block Russian membership. Putin first declared that Russia was no longer interested in becoming a member of the WTO. Later, however, he changed his tactics, and in June 2009 he announced that Russia wanted to join the WTO as a single customs union with Belarus and Kazakhstan. This collective application would make it more difficult for Georgia to block Russia’s WTO membership. But this option had to be dropped because there were too many technical obstacles. Thereupon Moscow declared that the three countries would negotiate individually, but harmonize their positions and enter the WTO together. Putin sought—and got—the support of the United States and the European Union to put pressure on Tbilisi. Things were, however, not so easy. The government of Mikheil Saakashvili said it could accept a Russian WTO membership only if Georgian customs officials would man the border posts in Abkhazia and South Ossetia, a demand that was unacceptable to Moscow because it would mean that the Kremlin would recognize Georgian sovereignty over the two breakaway territories.[30] Finally, in November 2011, a compromise was signed, brokered by the Swiss government. The parties agreed on international monitoring of trade along the mutual borders of Abkhazia and South Ossetia.
WTO membership, however, was not the real reason behind the launch of the customs union. The real reason was political rather than economic. The customs union served the same goal as the other Russian projects in the post-Soviet space, which is to reestablish Russian hegemony over the former Soviet republics. Moscow is ready to pay and does not hesitate to take up its former Soviet-era role when it generously subventioned the economies of the other republics. In the year 2011 the price Moscow was ready to pay for its customs union with Belarus, for instance, amounted to cancelling the customs duties for oil exported to Belarus, which cost the Russian budget about $2 billion.[31] Putin boasted in July 2012 that due to the low energy prices Belarusian GDP was raised with 16 percent.[32] In the meantime Russian officials are busy traveling around in the post-Soviet space, proselytizing and spreading the word. One of the envoys, Georgy Petrov, vice president of the trade-industrial chamber of Russia, went to Yerevan in December 2010 to woo the Armenians. According to an Armenian news agency, “Petrov implied Armenia’s joining the union will be advantageous for the country.”[33]
24
“Ukraine to Observe Russian-Belarusian-Kazakh Negotiations on Creation of Customs Union,” Office for a Democratic Belarus (December 1, 2010).
25
“Ukraine to Observe Russian-Belarusian-Kazakh Negotiations on Creation of Customs Union.”
27
“Ukraine to Observe Russian-Belarusian-Kazakh Negotiations on Creation of Customs Union.”
28
Åslund quoted by Konstantin Rozhnov, “Will a New Customs Union Hurt Russia’s WTO Bid?”
29
“Putin: Ukraina prodast Evrope 2 litra moloka, a Tamozhennyy Soyuz dast ey $9mlrd v god,”
30
Cf. Konstantin von Eggert, “Due West: Georgia’s Wildcard in Russia’s WTO Membership,”
31
Pavel K. Baev, “Medvedev Enjoys Foreign Policy ‘Successes,’”
33
“Russia Still Considering to Include Armenia in Single Customs Union,”