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Problems of Customs Union partners unlikely to pose risks for Eurasian Economic Union

December 22, 2014, 16:51 UTC+3 Alexandrova Lyudmila
©  ITAR-TASS/Mikhail Metzel

MOSCOW, December 22. /TASS/. The Russian ruble’s steep fall against the currencies of Moscow’s other partners in the Customs Union and the current trade disagreements between Belarus and Russia may spill over into the Eurasian Economic Union, which is to officially emerge on January 1, 2015 on the basis of the Customs Union to incorporate Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan.

On the eve of a meeting of the Supreme Eurasian Economic Council in Moscow, due on Tuesday, Belarussian President Alexander Lukashenko and his Kazakh counterpart Nursultan Nazarbayev mentioned that in their view there were certain risks facing the EEU. However, Russian analysts believe it is highly improbable the integration process will be either disrupted or slowed down.

Minsk has not left unanswered Moscow’s accusations it was reexporting sanctioned European goods and from the beginning of this month in fact restored the Belarussian-Russian border and customs inspections of all cargoes coming from Russia. The rifts between the allies grew still wider with the fall of the Russian rouble. Belarus has stepped up currency control introducing a 30% tax on hard currency purchases. The rates on a number of transactions performed by the national bank were raised by 50%.

The ruble’s fall was felt in Kazakhstan, too. In last Sunday’s interview on Kazakh television channels [Kazakhastan's President Nursultan] Nazarbayev said: “The Eurasian Union today is exposed to a major risk. I will be frank - the crises are the reason.” He explained that the devaluation of the Russian ruble made Russian manufacturers far more competitive on the open Customs Union market. In a situation like this the EEU member-states will have to choose between counter-devaluation and protection of their markets, while the EEU’s anti-protectionist nature and the Union’s previously adopted agreements make it rather hard to achieve.

“We should not be so careless as to ruin this association we have established over so many years,” Belarusian President Alexander Lukashenko said on Friday. “The three of us worked really hard to make the union due to emerge on January 1 possible, and it would be a great disgrace if we ruined it with our own hands.”

“From the standpoint of Belarus and Kazakhstan the situation is serious,” a leading research fellow at the Russian Presidential Academy of the National Economy and Public Administration, Sergey Bespalov, has told TASS. “Until just recently they believed (in fact, it was really so) that the emergence of a common economic space, of the EEU would benefit them in the first place with getting access to the Russian market. The devaluation of the ruble has changed the situation dramatically - their producers have gone uncompetitive.”

However, these problems are unlikely to cause adverse effects on the EEU’s future in general.

“All EEU-related agreements have been concluded and ratified. The process has gone too far, and the project can hardly be abandoned or postponed.” The possible options, he said, are few. “Refusal from participation in the EEU will put the other members in a far worse position than the Russian ruble’s devaluation.”

“The fundamental problem that has engulfed the entire Eurasian space, namely, the slowdown of the Russian economy, started taking shape long before the Ukrainian crisis, the sanctions and the oil price slump,” the leading expert at the Economics Center at the Higher School of Economics, Sergey Pukhov, has told TASS. The current problems, he said, stem from very volatile factors and will not last.

The outside shock hit Russia in the first place. But, given its tight relationship with Belarus and Kazakhstan, Pukhov believes that devaluation of national currencies in these two countries will be possible, too. In Belarus, the chances of this are higher and it may happen soon. In Kazakhstan the degree of devaluation will be smaller.

The Russian economy’s problems, Pukhov believes, cannot but cause certain influences on the economies of Russian partners, but they are unlikely to halt the integration process. Common sense will prevail, he said with certainty.

 

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