Saturday, May 3, 2014

Window on Eurasia: Customs Union has Not Boosted Cross-Border Ties in Ways Putin Promised, Study Finds

Paul Goble

            Staunton, May 3 – Despite Moscow’s promises and expectations, its Customs Union is “clearly insufficient for stimulating cooperation in the Russian-Kazakhstan border regions,” according to a Russian expert. For that to change, he says the two sides would have to develop something like the EU’s Euro-Region program something they are very from doing.

            The Russian Federation, Kazakhstan and Belarus have been part of “a single economic space, but problems with transportation networks and various economic and political imbalances mean that that border regions have not benefited in the ways many expected, Gleb Zhoga of Expert Ural says (

            And that failure, especially given that many of those on the opposite side of these borders are ethnic Russians or at least Russian speakers, may be an important factor driving Vladimir Putin’s policies of “ingathering of the Russian lands.” But it clearly signals that the foundation for such integration is not now in place, despite what some in the Russian capital say.

            Many had expected that the first fruits of the Customs Union would appear in the border regions of the countries involved, but Leonid Limonov, the director of the Leontyev Center for Social-Economic Research, says that new studies show that has not happened in any of the three pairs of border countries involved.

            The regions along the Russia-Kazakhstan border have a population of 32 million people, and those along the Russian borders with Belarus and Ukraine have 50 million, so the failure of the Customs Union to have the expected impact there is no trivial matter, the economic researcher says. Their respective GDPs are 300 billion US dollars and 250 billion US dollars.
            Migration patterns reflect this lack of development in the east. Since the Customs Union was signed, fewer Kazakhs have moved into the Russian border regions, although “the share of Russian citizens leaving the Russian Federation for Kazakhstan within the total number leaving Russia has increased.”

            In the western border regions, Limonov says, the situation is different. On the one hand, migration processes have increased. But on the other, fewer Belarusians and Russians have moved to Ukraine than Ukrainians have moved to Russia and Belarus.

            The northern border region of Kazakhstan contributes about 40 percent of that country’s
GDP, a share that is rising, while the share that Russian regions on the other side of the border is only about 20 percent of the country’s GDP and is declining – and without the oil and gas from the northern part of Tyumen “it entirely disappears from view.

            Russia’s trade with Kazakhstan and Belarus forms an “insignificant” part  of Russia’s total foreign trade, but there is one clear benefit Moscow is getting: “investments from Kazakhstan in Russia in recent years have exceeded investments from the Russian Federation by approximately 20 to 25 percent.”

            With regard to the Russian border regions adjoining Belarus and Ukraine, there has been progress toward the formation of “so-called functional regions,” something that has not happened on the Russian-Kazakhstan border. One reason for that, Limonov says, has to do with the far greater population density in the former as compared to the latter.

            Another has to do with Mensk’s policy of import substitution and promotion of exports and greater private capital flows in the case of Ukraine.  But Limonov does point to one positive development in northern Kazakhstan. That country’s northern regions now have an inflation rate more like the one in Russia as a whole than like the rest of Kazakhstan.

            If the Customs Union is going to have a greater impact on cross-border economic activity and integration, the researcher says, it will have to eliminate restrictions on access to national markets, liberalize currency exchange, involve coordination of economic policies, create unified transportation, energy and information systems, and reduce the impact of natural monopolies.

            In short, these regions will have to become more like the Euro-Regions, a direction some analysts have talked about but that few in the post-Soviet capitals appear ready to take, at least anytime soon.  As a result, the promise of cross-border development within the Customs Union is unlikely to be realized.

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