CIS CUSTOMS UNION: STILLBORN IN ITS FIFTH YEAR.

Presidents Vladimir Putin of Russia, Alyaksandr Lukashenka of Belarus, Nursultan Nazarbaev of Kazakhstan, Askar Akaev of Kyrgyzstan and Imomali Rahmonov of Tajikistan headed governmental delegations to the summit of the CIS Customs Union (CU) on May 23 in Minsk. The non-Russian participants were hoping against hope that this summit would at last produce Russian agreement on the creation of a “free trade zone” (FTZ) of the five countries to lend real substance to the CU. Closely related goals of the non-Russian group are: (1) uniform tariffs on overland transport, essentially meaning equal treatment of Russian and CU countries’ goods in transit across Russia; (2) abolition of Russian tax surcharges on oil and gas exports to CU member countries; and (3) the perennial desideratum that Russia adopt the international practice of levying value-added taxes in accordance with the country of destination, not the country of origin, in trading with CU countries.

Those elusive goals themselves represent a scaled-down version of the earlier expectations attached to the CIS. The FTZ Treaty, signed in 1994, was to apply CIS-wide, and continues to figure as a contentious item on the agenda of every CIS summit. The CU, created in 1996 and now embracing five out of the twelve CIS countries, was supposed to set up the FTZ for this group of loyalist countries only. It never came to pass because Russian protectionist interests and the needs of the hard-pressed Russian state budget continue to prevail in Moscow.

The Minsk summit saw a united front of Kazakhstan and Belarus pressing for Russian compliance with the original CU goals. Nazarbaev and Lukashenka, having caucused on the eve of the summit, declared during and after the event that the CU and the CIS itself face the danger of unraveling unless the FTZ becomes a reality. “What can we possibly achieve in the CIS if we can’t solve this economic problem? Failure to create the FTZ would bring the CIS to the verge of ruin.” Nazarbaev blamed that prospect on (unnamed) “state leaders” who apply the “senior brother-junior brother” treatment to CIS and CU countries.

Kyrgyzstan poses–and faces–a special problem as the sole CU member country to have gained admission to the World Trade Organization (WTO). Russia and Belarus are pressuring Kyrgyzstan to choose between the CU and the WTO. Apparently acting as Moscow’s proxy, Lukashenka announced that the CU would decide within six months whether to compromise with Kyrgyzstan or relegate that country to a status below that of full member.

It was Putin who had initiated the pressure on Kyrgyzstan while prime minister and maintained that pressure as president. Although clearly unwilling to renounce Russian unilateral advantages for the CU’s sake, Moscow seeks for political reasons to keep the CU intact at least pro-forma, above all preventing Kazakhstan’s accession to the WTO. The defection of Kazakhstan would virtually doom the CU as well as setting back Russia’s political ambitions to play the role of bloc leader. Moscow and Minsk therefore suggest that a country cannot be a full member of the CU and the WTO at the same time.

The summit in Minsk resolved to empanel a joint task force of the five governments and the Integration Committee–executive organ of the CU–which will submit proposals on FTZ and the full range of associated issues. The five heads of state will consider the proposed measures at a summit scheduled for October. Relegating contentious problems to staff-level committees and deferring decisions from one summit to the next are tried-and-tested recipes in the CIS. But the Minsk summit added an innovation. It concluded that the CU should be upgraded politically and legally by giving it the status of an “international organization” and securing its recognition as an entity under international law. Putin even defined that as “the key issue before the CU.”

Putin and the other presidents stopped short of specifying publicly what that would entail or how it would change the CU. At the very least, it would enable Russia to lead a four-country group in negotiating the terms of joint accession to the WTO. That would set back Kazakhstan’s negotiations with the WTO while relieving such pressure as exists on Belarus to reform its economy. Politically, international recognition of the CU can sanctify a Russian-led bloc and help Moscow toward its wider goal of obtaining international recognition of the CIS–a goal which has eluded Russia to date.

The hope for international recognition looks unrealistic in the light of the CU’s internal disarray, as highlighted once more by the difficulty of choosing a presiding country. Kyrgyzstan should have succeeded Kazakhstan, but Kyrgyzstan is being treated as a black sheep by Moscow and Minsk and faces possible sanctions come October; the CU would suffer a severe embarrassment by suspending the membership of its presiding country. The next in line would have Russia, but that country is keen to demonstrate that it can yield some of its numerous chairmanships of CIS bodies to other member countries. Tajikistan would have been next, but none considered it acceptable. That meant rewinding to the beginning of the alphabet. The conferees deemed Belarus unsuitable because it already holds chairmanships and co-chairmanships in the Russia-Belarus Union. That left Kazakhstan for another term in the presiding chair by default (Minsk Radio, Itar-Tass, RIA, Kommersant, Nezavisimaya gazeta, May 23-24; see the Fortnight in Review, October 8, 1999, February 4; the Monitor, October 8, 11, 1999, January 28, May 1, 16).

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