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I. After the collapse of the USSR former Soviet republics faced the challenge
to secure their independence by establishing proper international
institutional arrangements of political (security) and economic character. In
fact, they had to solve very difficult problem of integration into international
political and economic structures. In order to solve this problem they needed
quite clear understanding of the national economic and political interests in
the long-term perspective.
1
This text is partly based on the paper contributed to the book Swords and
Sustenance.The Economics of Security in Belarus and Ukraine. Robert Legvold and
Celeste A Wallander, Editors, 2004.
2
Of course, Belarus, with some reservations, can be also included in this list, but in fact this
country has not conducted independent foreign policy and followed Russia’s course.
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Thirdly, third countries importance as trade and economic partners
has been steadily growing (the effect of trade diversion has been already
started).
3. Economic links among CIS states in all configurations are limited
primarily to trade relations. The amount of financial flows is rather
insignificant.
4. Energy sector and transportation of oil and gas have become
already and will be in the future important factors shaping relations in the
post-Soviet space. For many countries the further economic development
will depend upon successful construction of pipelines and transportation
networks.
5. In principle, the process of integration includes key components:
Trade component. By trade component we mean in fact trade regime
or in practice elimination of trade barriers. Ukraine as well as other former
Soviet republics views it as a preferential trade arrangement.
Regulatory component. This component has two dimensions –
shallow and deep. By shallow dimension we mean that partners are solving
issues related to trade, while deep integration means in fact that cooperation
on regulatory issues goes beyond pure trade issues. So far Ukraine’ has
been advocating the necessity to implement free trade regime, while
Russia’s approach has been to set up the tasks of coordination of national
economic policies.
Political component. At the moment this component is one of the
most important one. In fact this aspect refers to the problem of striking
delicate balance between liberalization at the national level and reaching
certain level of supranationality in terms of managing different integration
schemes.
6. A lot of economic arrangements in the post-Soviet space have
distinct political content: politicians view them as a proper and rather
efficient instrument of signaling political closeness and solidarity. At the
same time new political elites try to use these arrangements as a tool for
internal consolidation of their power.
7. So far these attempts to integrate have brought no significant
results. The main obstacle to integration is inadequate economic reforms
pursued in the CIS countries.
8. The cooperation on the CIS space will be influenced by the EU
enlargement.
9. The WTO accession has become very important issue of regional
economic cooperation.
III. After the collapse of the USSR former Soviet republics have clearly
demonstrated two principal ways of so to say political and economic self-
determination both in international and regional coordinates.3
The first one can be tentatively named “Baltic way”. This strategy in
practical terms means joining existing political and economic organizations
3
We shall discuss here only agreements meant for forming either economic or political
groupings and omit numerous other agreements and treaties though these contractual
arrangements are very important and form the basis of rather close cooperation in a
number of fields.
2
like NATO, Council of Europe and EU. And now we can say that this strategy
was successfully implemented by Estonia, Latvia, and Lithuania. This
strategy has a clear distinctive feature – avoidance of any strong
institutionalized ties with the former Soviet republics.
Three Baltic republics have declared EU membership as the national priority
and have been constantly rejecting the very idea of participating in any
regional arrangements with the participation of the former Soviet republics
only (regional and sub-regional). These countries have positioned
themselves politically beyond the bounds of economic and political groupings
emerged on the post-Soviet space.
At the same time these countries has been trying to preserve economic links
with the former Soviet republics on bilateral basis (free trade agreements,
for example).
The second strategy can be named as a “mixed” one in the sense that
in this case former Soviet republics have been trying to combine accession
to existing political and economic organizations (like NATO, WTO, closer
relations with EU, etc.) with searches for different interstate institutional
arrangements on the post-Soviet space (both political and economic ones).4
IV. This region (that is fifteen newly independent states) has attracted
attention of powerful international economic and political players who have
their own so to speak agendas and their impact upon economic and political
affairs has been constantly increasing.
4
In order to avoid misunderstandings the term post-Soviet space is used here to denote the
region comprising 12 CIS states, and in this meaning it is equal to terms “CIS space” or
“CIS region”.
3
Russia Working party established on 16 June 1993
Tajikistan Working party established on 18 July 2001
Turkmenistan No application for accession
Ukraine Working party established on 17 December 1993
Uzbekistan Working party established on 21 December 1994
Now, except 3 Baltic state (Estonia, Latvia and Lithuania) four CIS countries
have already accessed to WTO while Turkmenistan did not apply for
accession at all. WTO accession is an important factor shaping CIS state
foreign economic regime in general and their mutual economic cooperation
in particular.
VI. All CIS states except Belarus, Tajikistan and Turkmenistan have some
contractual relations with EU (see Table 2). At the same time the goals of
their European policies varies from official declaration to join EU (Ukraine) to
establishing some loose forms of cooperation like common European
economic space as in case of Russia.
4
case the level of reorientation (or trade diversion), that is the share of third
countries market, varies from country to country (90% for Azerbaijan and
Russia, more than 50% for Armenia, Kazakhstan, and Uzbekistan, 71% for
Ukraine). At the same time it is worth mentioning that there the commodity
structure of export virtually has not changed. On contrary, in some cases the
share of traditional export commodities has even increased.
5
G.N.Egorov. Economic Transformation, Industrial Potential and Current Status of the CIS
Countries: The Role of Science and High-technology. UNIDO, Vienna, 2000, p. 29.
5
Of course, these bilateral agreements differ from each other in terms of
coverage of goods, etc. Ukraine, as well as other CIS countries also
concluded bilateral free trade agreements with the Baltic states (Estonia,
Latvia and Lithuania). But all the former Soviet republics in general and
Ukraine in particular viewed these arrangements as a tool of preserving
cooperative links established under USSR (preserving so to say common
economic space) and in this capacity as a measure counteracting economic
recession followed USSR dissolution. This approach has had some logic
behind: after the disintegration of the USSR the newly independent states
inherited only fragments of industrial chains and thus have been trying to
re-establish production relations in a new economic environment.
At the same time “broad” integration has had from the very beginning rather
strong political component (security cooperation, for example), which has
been favored only by certain CIS countries and directly or indirectly opposed
by others.
Russia has been constantly trying to transform CIS into a full-fledged
military and political grouping under Russian leadership, while Ukraine has
opted for rather limited participation in CIS activities and development
approach toward cooperation within the Commonwealth of Independent
States and has stressed more than once the necessity to concentrate efforts
on economic side of cooperation. But at the same time Ukraine did not
become member of the Customs and Payments Union actively promoted by
Russia.
6
In fact, at the moment there is a huge gap between intentions of integration and their
implementation, but for the sake of clarity the term grouping is used here despite the fact
that a number of them are at the early stage of development.
6
transporting Caspian oil and development of a road network linking Middle
East and Europe. In 2002 the presidents of Georgia, Ukraine, Azerbaijan and
Moldova signed agreement on establishing of free trade area. This step
signaled attempt to boost economic integration.
Ukraine has demonstrated special interest to GUUAM and has already rather
developed contractual framework of bilateral cooperation with all members.
Ukraine has bilateral free trade agreements with all GUUAM members.
GUUAM united countries opposing so to say Russia-led integration attempts.
At the same time GUUAM is an example of regional project whose destiny
depends predominantly upon economic and political agenda of third parties
(USA, EU, Russia, etc.) having special interests in the region concerning
transportation of Caspian energy resources to the world markets. In this
relation one can assume that closer cooperation between Ukraine and EU
could potentially contribute to the revitalization of GUUAM. So far this
grouping has not demonstrated any significant economic success because
the member-states have not enough financial resources to implement far-
reaching and ambitious goals.
7
Constantine Michalopoulos. The Integration of Low- Income CIS Members in the World
Trading System. Paper prepared for the CIS-7 Conference. Draft as of December 2002.
7
Russia’s opinion on this problem is rather critical. In November 2001, the
Government of Russia discussed the problems and perspectives of Russia’s
cooperation with CIS countries and officially declared Russia’s wish to
coordinate efforts aimed at WTO accession with other CIS countries. In
Russia’s view non-coordinated activities of CIS states aimed at WTO
accession will result in substantial losses for Russia. The logic behind this
argument is, that being WTO members, these countries may demand
opening Russia’s markets as Kyrgyzstan (EvrAzES member-state as well as
Russia) already did. Such a situation may harm not only Russia but EvrAzES
states as well.8
Later on 13 May 2002, this idea was realized in a form of agreement of
Presidents of EvrAzES agreed upon mutual consultations and coordination of
efforts in terms of WTO accession. According to mass media it was agreed
that EvrAzES states would base their WTO accession negotiations on Russian
terms of WTO accession. Besides, such common position must take into
account elaboration of EvrAzES common external tariff.
That’s why this organization has been seen by the founding states as tool to
create subregional market, which will facilitate overcoming their relative
isolation from world markets, rapid industrialization and in the end
contribute to sustained economic growth. This organization as many other
arrangements on the post-Soviet space is in fact intention to intensify
economic cooperation while the actual level of internal economic links trade
is rather small.
8
common economic space and later the Agreement was signed. The ultimate
goal of the project is establishing the so-called Organization of regional
integration. This Agreement envisages:
1. establishing common economic space;
2. coordinated economic policy in a number of fields;
3. harmonization of respective legislation;
4. establishing “single regulatory interstate independent commission on
trade and tariffs”;
5. coordination of WTO accession efforts.
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fundamentalists. Such an alliance may have serious economic implications
because of China’s membership in the organization. Rapidly growing Chinese
economy can stimulate economic development of Central Asian republics,
which despite their rich natural resources endowment has been
characterized by rather low level of economic development. At the same
time China, though having considerable deposits of natural resources,
demands increasing quantities of fossil fuels and imports sizeable portion of
oil.
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