The Customs Union of Belarus, Kazakhstan and Russia, which came into existence
in January 2010, became fully operational on July 1 with the removal of all
customs borders, fueling debate on the future of the post-Soviet space and even
the grouping itself. Ruptures have already revealed themselves among existing
members (such as the recent "tariff wars" between Russia and Belarus over dairy
and oil imports), inviting substantial opposition from local and foreign
audiences who view the union as Moscow's tool to project its influence in what
is increasingly a non-Russian backyard.
Against Russia's stalled World Trade Organization (WTO) accession process, the
country's gamble on the Customs Union is widely viewed in economic and
psychological terms given
Moscow's traditional need to bolster its image as a great power. Understandably
for Moscow, however, the Customs Union is also grounded in political and
security concerns about China's economic expansion in the Far East and Central
Asia.
While many foreign observers are fixated on Russia's related steps in the
framework of its alleged stand-off against the West, many local ones
increasingly interpret Russia's push in the Customs Union in the context of
Sino-Russian economic rivalry in energy-rich Central Asia.
With India, Pakistan, and Iran seeking membership in the Sino-Russian-led
Shanghai Cooperation Organization (SCO), Moscow pays more attention to its
Central and South Asian perimeter. In WikiLeaks, the Chinese ambassador to
Kazakhstan, Chen Gopin, offered his view of China's position on Russia to his
US counterpart: "I will have to cautiously balance between our growing
cooperation in the region and Russian interests. However, we cannot harm our
interests because of Russia. In Sino-Russian relations in Central Asia, there
is both cooperation and competition. Our policy is to co-exist here, and we
need to maintain a dialogue."
For Central Asia, China's economic expansion and Russian-led integration
schemes can be both a blessing and a curse. The region's countries, if they are
to develop as transit, trade, and production centers, need China and Russia but
they cannot afford to become overly dependent on either. A standard guideline
for the countries is not to yield to the extreme pressures of the two giants,
one of which is increasingly on the defensive, and the other - more frequently
on the offensive.
In the context of the Customs Union, doing just that is far from easy,
particularly for Tajikistan and Kyrgyzstan, which are currently weighing the
pros and cons of accession to the union.
Both are poor countries, highly dependent on fuel imports (in the 90% range)
and migrant remittances (billions of dollars) from Russia to sustain their
fledgling economies. They also rely on "Silk Roads" visions to generate
revenues from re-export and transit of Chinese goods. Kyrgyzstan and Tajikistan
have recently seen fuel price increases after Russian imposed restrictions on
fuel exports. The Kyrgyz prime minister and presidential candidate, Almazbek
Atambaev, has already visited Moscow in an effort to secure more steady gas
supplies. He has also called for Kyrgyz membership of the Customs Union.
Membership may help Kyrgyzstan and Tajikistan improve their bargaining position
on energy imports, but it could also trigger a strong social backlash as a
result of higher unemployment, increased prices, and reduced capacity to
re-export Chinese goods. Kyrgyzstan is now a major regional transit point for
Chinese products, with up to 75% of imports from China being re-exported. Tens
of thousands of workers in the country are engaged in re-export activities. Two
Kyrgyz large markets (Dordoi and Kara-Suu) generate about 33% of the country's
gross domestic product (GDP). The head of the Markets Association, Sergei
Ponomarev, stated that the trade turnover involving Dordoi alone has already
declined almost twofold following the launch of the Customs Union.
Bishkek and Dushanbe, as well as others in the region, look to China to
overhaul their badly crippled Soviet-era economic infrastructures and
revitalize economic flows across regions. In 2009, China offered US$10 billion
in loans to the SCO members "to shore up the struggling economies" in response
to the global financial crisis. Trade between China and Central Asia grew from
$0.5 billion in 1992 to $25.9 billion in 2009. General Liu Yazhou of the
People's Liberation Army says that Central Asia is "the thickest piece of cake
given to the modern Chinese by the heavens" (www.the-diplomat.com, accessed on
July 26).
The region is a platform for China to maintain its energy security, trade
expansion, and territorial integrity. There is already a growing spree of
infrastructure development funded by Beijing, which includes energy pipelines,
roads, railways, and trade links connecting China with Eurasia through Central
Asia.
For some, anchoring the regional economies to the controversial Customs Union
would enable Moscow to deal with such a flurry of Chinese activity in Russia's
zone of "privileged interests". For Russian Prime Minister Vladimir Putin, the
Customs Union is a logical step on the way toward creating a single economic
space and a Eurasian Economic Union. But whether Russia can achieve this
remains an open question. Andrei Grozin, the head of the Middle Asia Department
of the CIS Institute, believes that Russian policy toward Central Asia has
experienced many setbacks in recent years.
For another expert, Sergei Chalogo, Russia's designs in the post-Soviet space
are a sham: "The [Eurasian Economic Community] EurAsEc's anti-crisis fund is
one's own small IMF [International Monetary Fund]; the single economic space -
one's own EU [European Union; the Customs Union - one's own WTO; while the
[Collective Security Treaty Organization] CSTO - is one's own NATO. That is,
everything is as it should be with adults; only that nothing works."
It remains to be seen to what extent China is capable of affecting the
Russian-led Customs Union agenda in Central Asia, where Sino-Russian ties are
likely to enter a more completive mode.
Roman Muzalevsky is an international affairs and security analyst. He can
be reached at muzalevsky@hotmail.com.
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