Sunday, January 1, 2012

A New Year, a New Eurasian Union

Happy New Year Comrades!

2011 was a year to remember for Central Asia with Presidential Elections in Kazakhstan (April) and Kyrgyzstan (October), the deterioration of U.S.-Pakistani relations leading to an increased U.S. dependence on the NDN, and the December 16th events in Zhanaozen – just to name a few events. The New Year appears no less interesting with Parliamentary elections in Kazakhstan (January 15) and Presidential elections in Turkmenistan (February 12). In Kazakhstan, the joint Government – UN investigation into the Zhanaozen events will reveal the regime’s true commitment to transparency and accountability. In neighboring Kyrgyzstan, Atambayev continues to attempt to lead a country plagued by a corrupt government, ethnic division and few resources. In Foreign Policy Magazine, President of International Crisis Group Louise Arbour ranks Central Asia as number six on the list of wars in 2012. The preconditions for conflict are present in Central Asia, which if catalyzed, could whirlwind into a major conflict. So in 2012, watch this space.


Today, January 01, 2012, the Eurasian Union comes into effect. Based on the European Union, the Eurasian Union is an upgraded version of the EurAsEc customs union between Russia, Belarus and Kazakhstan established in 2007 granting privileged trading rights and reduced trade barriers. Between the three economies, the EurAsEc customs union includes 170 million people and represents an area with a combined annual output of some $2 trillion. In November 2011, the three countries signed a declaration creating the Eurasian Economic Union, which lays out a roadmap for integrating the economies into a common economic space under the leadership of the Eurasian Customs Commission. Both Russian President Dmitry Medvedev and Prime Minister Putin have articulated their intentions to fully realize the Eurasian Economic Union by 2015. Putin has even suggested the creation of a single currency in the future.

President Rahmon of Tajikistan and President Atambayev of Kyrgyzstan have both expressed their desire to join the Eurasian Union.  Given the deplorable state of Tajikistan’s economy, it is highly unlikely it will gain membership. Kyrgyzstan’s membership in the World Trade Organization, until Russia’s December 16th accession into the international organization, was a technical barrier to harmonizing the country’s trade policies with those of its counterparts in the Eurasian Union. Now that Russia is a WTO member, Kazakhstan is accelerating its domestic reforms with the intention of joining the WTO by the end of 2012. Given that Russia is Kyrgyzstan's primary export market, Atambayev desperately wants the country to join the Eurasian Union. President Atambayev is known for his ability to charm Putin -- after all, he did name a mountain peak after the Russian Prime Minister in 2011. Over the next year, I predict that Atambayev will continue to appeal to Putin for monetary assistance and Russian support of Kyrgyzstan's admission into the Eurasian Union. I also predict that Kazakhstan will join the WTO, if not by the end of 2012, then certainly within the next three to five years. 

Not to exclude Uzbekistan and Turkmenistan, but neither will join the Eurasian Union in 2012. President Karimov has criticized the regional institution as a Russian political attempt to recreate the Soviet Union. President Berdimuhamedov in Turkmenistan, on the other hand, continues the “positive neutrality” policy of his predecessor and has kept the country out of most regional organizations.  Berdimuhamedov’s primary foreign policy objective in the new year will be the construction of the TAPI pipeline.

While I doubt the Eurasian Union will create a single currency, given the troubles of the euro (happy tenth anniversary today J) and the economic turmoil of the 1990s after the collapse of the ruble, increased economic integration and the relaxation of trade barriers will benefit Russia, Kazakhstan and Belarus. Creating a harmonized system of bureaucratic practices and procedures as well as a uniform nomenclature of tariff classifications will streamline the regional movement of goods while promoting increased investment and trade. For the five CARs, Russia remains the largest market for selling goods. Russia is also a primary destination for Central Asian migrant workers to labor in low-skilled industries, sending remittances to their families. Given the existing levels of economic integration between Russia and the CARs and the economic potential for future growth, the Eurasian Union has the potential to generate an enormous amount of prosperity to the three economies. This requires effective management, transparency and high levels of trust between individual leaders and government institutions.

On the one hand, I doubt the Eurasian Union will be as successful as it could be due to the history of failed attempts of regional institution building in the region. There is an entire alphabet soup of acronyms for weak attempts at regional integration including Georgia, Ukraine, Uzbekistan, Azerbaijan and Moldova (GUUAM), the Central Asian Economic Community (CAEC), Conference on Interaction and Confidence-Building Measures in Central Asia (CICA) and the Central Asian Cooperation Organization (CACO).  In 2005, the CACO was absorbed by the Eurasian Economic Community (EurAsEc). And, let us not forget the Russian-led Commonwealth of Independent States (CIS), the Collective Security Treaty Organization (CSTO) and the Chinese-lead Shanghai Cooperation Organization (SCO). Since 1991, the pattern of institutional formation and deterioration in Central Asia reveals that the most successful regional organizations -- the SCO, followed by EurAsEc and the CSTO -- include Russia. Intra-Central Asian integration excluding Russia is not feasible due to weak institutions, a scarcity of resources and high levels of mutual trust between Central Asian regimes. Yet, with the resources and political power of Russia and increasingly China, as visible with the success of the SCO, regional integration in the economic and security realms occurs. In 2012, I predict that the Eurasian Union, with Russian leadership, will work to further integrate the economies of Russia, Belarus and Kazakhstan, and consider allowing Kyrgyzstan to gain full membership. 

In a region that confronts significant threats to security and stability, I hope the Eurasian Union brings prosperity to the people and governments of Central Asia in 2012. We shall see.

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