The Common Economic Space of Russia, Belarus and Kazakhstan, which enables the free movement of goods, services, capital and workforce, was launched on January 1, 2012. This creates a new reality in the post-Soviet space and raises a number of new questions, including the possibility of expanding the new organization.
It would be logical for Tajikistan or Kyrgyzstan to join the Common Economic Space (CES), as their economies are fairly closely integrated with the economies of Russia and, to a lesser degree, Kazakhstan. This integration can be seen in the large-scale migration of Tajik and Kyrgyz workers to Russia and the large amount of money they transfer from Russia back to their home countries. Integration may be hindered by internal instability in these countries or political problems in their relations with Moscow. Also, these countries have certain economic commitments within the WTO and other international organizations.
On the other hand, the admission of new members will pose certain problems for the founding countries. They will have to work hard to lift technical barriers to the formation of a common market, which are the result of gaps in economic development standards and legislation between candidate countries and CES member states.
Ukraine presents an even more complicated case. Unlike Tajikistan and Kyrgyzstan, it has the option of choosing a European path to development. A substantial part of the Ukrainian elite would prefer pro-European integration, at least in the economy. Ukraine’s future in the CES does not look enticing even to advocates of closer political ties with Russia.
Two issues will influence Ukraine’s choice. First, it is unclear what Russia can offer Ukraine to encourage it to join the CES other than the traditional gas discount. Cheap hydrocarbons are a strong but not decisive selling point. Much will depend on Russia’s ability to convince Ukraine of the advantages of its economic model, which are not evident now. In fact, the picture is not at all attractive, given Russia’s economic structure and its development standards in the past years, as well as the pressure of its monopolies, bureaucracy and corruption. Ukraine’s choice will also depend on Russia’s ability to complete reforms as soon as possible and to demonstrate fundamentally new development dynamics.
The second issue is whether closer association with the EU is actually an option for Ukraine. The deep financial crisis in the eurozone and the threat of recession seem to have postponed Ukraine’s integration in the EU once again. But it is difficult to say how long the pause will last or whether Europe’s policy towards Ukraine will involve expanded cooperation.
Therefore, Ukraine’s choice of foreign economic strategy will largely depend on a combination of circumstances, in particular Russia’s economic and social modernization and innovative development, as well as the situation in Europe and obstacles that could complicate its policy towards Ukraine.
Although the goal of creating a Eurasian Economic Union has been declared, a number of uncertainties could hinder its realization. We have only made the first, though very important, step towards this goal. Changes will take time, and much will have to be done to attain the EU’s level in the 1980s. We are lagging behind the EU by 30 or more years. We have only started creating the necessary institutions and procedures and standardizing the legislation of member states. The road ahead is very long. Furthermore, our progress will depend greatly on the global economy, that is, on whether countries in the region will have other options, whether they will be able to smoothly join other regional groups, and on the speed of Russia’s development. The latter is very important because Russia is clearly the driving force behind the proposed union – probably even more so than Germany was during the EU’s integration phrase.
In the near term, we should closely watch for signs of change in Moscow’s political and socio-economic strategy, such as new appointments, attempts at political reform, and efforts to develop innovative economic sectors. To what extent can Russia smooth over the effects of a possible economic crisis? Is the country ready for economic restructuring? Can it defeat corruption? If Russia can demonstrate that it is at least serious about reform, the prospects of economic integration around Russia will be favorable. But if it continues to bide its time, its neighbors will look elsewhere.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.