GRIM DIAGNOSIS PRONOUNCED.

Publication: Monitor Volume: 5 Issue: 177

Meeting on September 24 in Astana, the prime ministers of the CIS Customs Union member countries–Russia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan–lamented the organization’s failure to stop the decline of intra-CIS trade, let alone boost it. Russia’s Prime Minister Vladimir Putin admitted that the CIS in general and the Customs Union in particular have proven unable to deal with the consequences of the financial and economic crisis. Putin could only propose a remedy which has eluded the CIS for years: creation of a “free trade area” of the CIS or at least of the five-country Customs Union.

That goal, along with a January 2000 deadline, was set at the March 1999 CIS summit. But Putin’s words in Astana rang hollow because Russia’s draft budget for 2000 anticipates levying value-added taxes on CIS countries’ goods according to the country of origin, not the country of destination. That practice suits Russia’s protectionist interests, contravenes the World Trade Organization’s (WTO) country-of-destination rule and amounts to double taxation of goods from CIS countries, in view of the fact that most of these follow the WTO rule. It was Ukrainian President Leonid Kuchma and Prime Minister Valery Pustovoytenko–frustrated advocates of a CIS free trade area–who disclosed, following their talks with Putin earlier this month, that Russia had decided to continue its taxation practices into 2000, thereby thwarting the stated goal of a free trade area.

Kazakh President Nursultan Nazarbaev, in his dual capacity as host of the meeting and current head of the CIS Inter-State Council, delivered a grim diagnosis in his opening address and at the concluding news conference. “The organization is losing its ability to function as an integrating framework. Disintegration rather than integration is what is occurring within the CIS,” Nazarbaev observed. He cited trade data showing a 70 percent decline in overall intra-CIS trade since 1991, and estimated that at most only 5 to 10 percent of CIS decisions are ever implemented–an estimate shared by most of his fellow-presidents. Nazarbaev also spoke for the other CIS leaders in criticizing Russia’s onerous transportation tariffs for goods from CIS countries as yet another stumbling block to intra-CIS trade. That factor is of great importance because CIS countries’ goods often must cross vast stretches of Russian territory before reaching their markets.

Kyrgyzstan also incurred criticism at this meeting over its relationship with the WTO. Last year, Kyrgyzstan–after accepting the WTO’s usual terms for membership–became the first CIS country to gain admission to that organization. President Askar Akaev’s government thereby broke ranks with the CIS Customs Union countries and weakened their hand in negotiating special conditions for admission to the WTO. Those conditions center on special exemptions, intended to protect noncompetitive industries against international competition. The Astana meeting adopted a strongly worded supplement to earlier resolutions pledging close coordination among CIS Customs Union countries in negotiating with the WTO and obliquely chastising breaches of solidarity. A concluding statement even implied that Kyrgyzstan should “accept all the conditions of the Customs Union” in order to enjoy its eventual advantages. That formula would seem to ask Kyrgyzstan to choose between the CIS Customs Union and the WTO. The pressures on Kyrgyzstan seemed to ignore the country’s current security predicament and resulting aggravation of its economic situation. That discrepancy in turn only underscored the irrelevancy of CIS solutions to the member countries’ problems (Itar-Tass, Habar, September 24-25).

The Monitor is a publication of the Jamestown Foundation. It is researched and written under the direction of senior analysts Jonas Bernstein, Vladimir Socor, Stephen Foye, and analysts Ilya Malyakin, Oleg Varfolomeyev and Ilias Bogatyrev. If you have any questions regarding the content of the Monitor, please contact the foundation. If you would like information on subscribing to the Monitor, or have any comments, suggestions or questions, please contact us by e-mail at [email protected], by fax at 301-562-8021, or by postal mail at The Jamestown Foundation, 4516 43rd Street NW, Washington DC 20016. Unauthorized reproduction or redistribution of the Monitor is strictly prohibited by law. Copyright (c) 1983-2002 The Jamestown Foundation Site Maintenance by Johnny Flash Productions