December 17, 2014

Integration or Disintegration? How Russia's Military Aggression against Ukraine Affects the Implementation of the Russian Integration Initiatives on the post-Soviet Territories

Since the early 2000s, the strategic goal of Putin's regime has been the revival of Russia as a “great world state” able to replace the former USSR. To date, the main instrument of Moscow in achieving this goal is building a so-called Eurasian Union (on the principle of expansion and transformation of the existing Customs Union (from January 1, 2015 — on Eurasian Economic Union), which is to consolidate Russian control over the former Soviet territories.

At this, unlike the European Union — an absolutely voluntary organization with equal rights of its members — Russia is building the Eurasian Union, resorting to full pressure on its potential members (as the Kremlin understands it), military force included. An example of this approach is Moscow's policy towards Ukraine, including military aggression against our country.

Russia's policy towards other countries of the former Soviet Union that chose democratic way of development — Moldova and Georgia — is the same. Lately it has been confirmed by the increasing pressure of the Russian Federation on the above-mentioned countries in political, economic and information spheres, Russia's military invasion in Georgia in 2008, and provoking tensions and increasing Russia's military presence in the areas of Trans-Dniester, Abkhazia and South Ossetia.

However, all these actions did not stop the process of European integration of Ukraine, Moldova and Georgia and did not make them move in the direction of the Customs Union (CU) with the prospect of future membership in the Eurasian Economic Union (EEU). Despite Moscow's further attempts to realize its intentions, the final point on its plans was put by Ukraine, Moldova and Georgia's signing Association Agreements and the establishment of free trade area with the European Union that actually made their European choice irreversible.

Moreover, Russia's military aggression against Ukraine was the catalyst of destructive processes within the Customs Union, which actually made impossible real development of it as of a full-fledged political and economic organization. For example, has grown the negative attitude towards Russian leadership's integration initiatives, businesses and the public of current and potential participants in the above-mentioned “unions”, under the auspices of the Russian Federation.

Thus, their discontent with Russia and the Customs Union have repeatedly showed representatives of the state leadership, business and public of Kazakhstan and Belarus, both at the official level and during various conferences, round tables and public hearings. More and more often are expressed doubts about the feasibility of these countries' further participation in integration associations with Russia.

Opposition forces and the vast majority of the population of Armenia and Kyrgyzstan are also against their countries' joining Russian “unions”. Thus, the Armenian government's signing (in October 2014) of the agreement on accession to the Eurasian Economic Union caused mass protests of Armenian citizens, who accused the country's leadership of betraying the country's national interests. Similar actions took place again in December of this year after the ratification of this agreement by the Armenian Parliament. According to experts, if the government of Kyrgyzstan dares to take this step, it will provoke unrest in the country and new attempts to change the Kyrgyz authorities by force.

The leadership of Tajikistan is not hurrying to join the Eurasian Economic Union either. Speaking about its being interested in deepening trade and economic cooperation with Russia, the Tajik side so far does not take any practical steps in that direction.

Moscow's hopes for attracting Uzbekistan to its projects also failed, not to mention Turkmenistan and Azerbaijan, openly spacing themselves from such “initiatives”.

These facts show the deep crisis of the Russian Federation's plans to restore the similarity of the Russian Empire or the Soviet Union in the form of the Eurasian Union and other Russian projects on former Soviet territories. The reason is quite clear: Russia keeps becoming less and less attractive for its potential partners because it is unable to offer an effective model of political and economic cooperation, and because negative trends in the development of the Russian economy keep growing, amplified by Western sanctions against the Russian Federation.

Thus, the USA and EU's political and economic sanctions, as well as the fall in world oil prices have reduced the pace of development of the Russian economy, have led to an outflow of capital from Russia, to the decline in the ruble, and have reduced foreign exchange earnings to the Russian budget, as well as have reduced the volume of foreign trade. According to forecasts of the Ministry of Economic Development of the Russian Federation, in 2015 the financial and economic problems in Russia will escalate, inclusive with the fall of the GDP by 0.8 % (at least), the outflow of capital (at around 90-100 billion US dollars) and a decrease of volumes of exports (by 68 billion US dollars) and imports (by 47 billion US dollars).

Experts believe that after this the negative impact of Russia's economic problems on its partners will grow and the stagnation of trade and economic relations within the Customs Union and the future Eurasian Economic Union will continue.

In particular, the current drop in the Russian ruble by almost 60 % has already caused nearly the same devaluation of the national currency of Kazakhstan. Even more serious are the problems in Belarus which is oriented mainly to the Russian market. First of all, it concerns the leading Belarusian machine builders, including enterprises MAZ, BelAZ, “Gomselmash” and “Minsk Motor Plant”. Because of the fall of the Russian consumer demand for products of these plants, production volumes in Belarus of agricultural machinery over the 10 months of 2014 had decreased by 20 %, of trucks — by 30 %, of buses — by 26 %, of dump trucks — by 46 %. Besides, had also fallen production volumes of engines — by 23 %, of metal working machines — by 37 %, of wood working machines — by 55 %, of household appliances — by 60 %. This has caused a decline in real wages (an average of two times) and mass dismissal of workers.

Reduction of volumes of trade between Russia, Belarus and Kazakhstan continues. Thus, in the first half of 2014, the marked index was 88 % compared to the same period of 2013. At the same time, according to the government of Kazakhstan, since the creation of the Customs Union, Kazakhstan's exports to Russia have fallen by more than twice. Besides, financial and economic problems of the Russian Federation keep reducing its investment abilities, which weakens the concernment in cooperation with Russia.

The majority of the former Soviet republics are actively seeking to develop trade and economic relations with countries of the European Union, China and other partners. Therefore, volumes of their trade with the EU and China for the most part already exceed the volumes of trade with Russia. In particular, the volume of Kazakhstan's trade with the EU is 32 %, with China — 23 %, with the Russian Federation — 19 %; of Turkmenistan's trade — 45 %, 12 % and 68 %; of Kyrgyzstan's — 5.5 %, 51 % and 17 %, respectively. Besides, significantly larger volumes of trade with the EU than with Russia have Moldova — 54 % and 12 %; Georgia — 55 % and 7 %; Azerbaijan — 46 % and 6.3 %.

Besides, against the background of tensions between Russia and the EU due to the Ukrainian question, the ties of Russia's closest allies with Western countries and international organizations are getting stronger. In particular, in October 2014 President of Kazakhstan Nursultan Nazarbayev and President of the European Commission Jose Manuel Barroso signed a document on the completion of negotiations on the draft agreement on the expansion of partnership and cooperation between Kazakhstan and the EU. By its political importance, it is actually equal to the Association Agreement with the EU, signed by Ukraine, Moldova and Georgia.

In recent years, Belarus has noticeably intensified its foreign trade activity in the western direction. This is evidenced by: Belarusian-American Economic Forum September 22, 2014 in New York; Belarusian-Lithuanian economic forum on November 4-6 in Mogilev; Belarusian-European Business Forum on November 14 this year in London; Austrian-Belarusian-Russian Business Forum November 14 this year in Vienna; Belarusian-Croatian Business Forum 28-29 November in Brest; Polish-Belarusian Investment Forum December 1 in Warsaw. These activities have resulted in agreements on development of trade and economic cooperation between the parties and increasing the volume of US and European contributions into the Belarusian economy.

All this runs counter to the interests of the Russian Federation, which positions the Customs Union and the future Eurasian Economic Union as a counterweight to the EU on post-Soviet territories and is trying with the help of its own sanctions against European countries to prevent their pressure.

But such actions of Russia do not suit most of the other countries of the former Soviet Union, who see the EU as one of the most powerful partners in the trade and economic sphere. Considering this, membership in the Customs Union and the EEU in the situation of Western sanctions against Russia, is perceived as an obstacle to the development of relations with the European Union.

Such views have been openly expressed by representatives of the state leadership of Kazakhstan and the political and political-business circles of other countries. Besides, there is a growing negative attitude to Russian integration initiatives, as Moscow's purely political projects meeting the interests only of the Russian Federation and limiting sovereignty of other participants of controlled by Russia organizations on former Soviet territories.

Especially because Russia does not hide its intentions, openly demonstrating contempt for its partners and imposing decisions in the political and economic spheres favorable only for Moscow. An example of this is the distribution of taxes, seized on the border of CU members. Of the total fixed assets, Moscow assigns 87.97 %, leaving to Belarus — 4.7 %, and to Kazakhstan — 7.33 %!

At the same time, there are a number of other problems in the Customs Union, the relevance of which will certainly worsen after its transformation into the Eurasian Economic Union. After the creation of the Customs Union, the main problems for Belarus and Kazakhstan have been as follows: an increase in domestic prices of consumer goods as a result of raising their prices to the Russian level; rise in prices of imports due to the introduction of new (usually large) import duties; increased competition in the domestic market among domestic producers in favor of Russian businesses; transition under Russian control of key sectors of the Belarusian and Kazakh economies. Similar problems will certainly appear in other countries of the former Soviet Union if they join the Customs Union and the EEU.

At the same time, at least until 2025, a number of limitations and exceptions in the mutual trade of member countries of the Customs Union and the future Eurasian Economic Union will be continued (more than 600 different kinds of products), which fact effectively negates the very idea of their creation as integration associations in post Soviet territories. First of all, such limitations and exceptions concern oil and gas, which is an extremely sensitive issue for Belarus and Kazakhstan, and also allows Moscow to use the energy factor as means of pressure on Minsk and Astana. Recently, it has been provoking systematic gas and oil “wars” between Russia and Belarus and Kazakhstan.

Ignoring the formal removal of customs barriers within the CU and the EEU, Moscow resorts to the practice of closing its market (for various made-up reasons) for other types of Belarusian and Kazakh products too.

In particular, an example of such steps of the Russian Federation may be decisions of the Federal Service for Veterinary and Phytosanitary Supervision (“Rosselkhoznadzor”) at the end of November 2014 to ban the import of products to Russia from 32 Belarusian enterprises in the food industry. The reason is violation of sanitary norms. Russia has also introduced customs control of transit of Belarusian food products through the Russian territory, including to Kazakhstan. In such a way Russia is trying to put pressure on Belarus, forcing it to give up the trade and economic cooperation with the USA and EU.

To President of Belarus A. Lukashenko's credit, he has categorically rejected the claims of the Russian Federation and has not agreed to join in Russia's counter-sanctions against Western countries and international organizations. According to him, Belarus will fully meet its obligations to foreign partners and will not stop the import of European products for further processing and selling at the markets of the Customs and the Eurasian Economic Unions. Besides, Belarus will not close its territory for transit of foreign goods to Eurasian markets, because it considers such actions violations of international norms. At the same time, in response to Moscow's actions, Belarus has resumed customs control on the Belarusian-Russian border.

Another problem of the Customs and future Eurasian Economic Union is the unequal attitude of member countries of these organizations to the prospects of their further expansion. Thus, according to Belarusian and Kazakh experts, Armenia's, and especially Kyrgyzstan's and Tajikistan's joining the CU and EEU, may trigger the emergence of new contradictions within these Unions, there will be additional sources of conflicts and confrontations, and the volume of smuggling and other negative phenomena will grow.

So, between Russia and other countries of the former Soviet Union there exist deep contradictions that actually make impossible implementation of Russian integration initiatives in the post-Soviet space. At this, the Russian military aggression against Ukraine has only strengthened these contradictions.