New integration processes within the CIS space

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Baku, June 4, 2013 –

Although regional integration bears great significance in the modern era, correspondence to economic interests of a certain country defines the success of integration from the perspective of individual states. On the other hand, viability of replication of integration processes that proved to be successful elsewhere depends on realities and conditions in the concerned region and its surroundings.

What does Eurasian Union idea imply?

Article titled "New integration model for Eurasia – future conceived today” by then Prime Minister of Russia Vladimir Putin was published in the 03 October, 2011 edition of the "Izvestiya” newspaper. Article suggested the Common Economic Space, conceived based on the Customs Union by Russia, Belarus and Kazakhstan (as of 01 January, 2012), as integration model for the CIS member states. It should be noted that in the beginning this idea envisaged elimination of borders and customs barriers among the signatories, unification of domestic markets and ensuring free movement of labor force, while Eurasian Union is suggested as the ultimate level of integration and foresees the establishment of supranational institution akin of the European Union.

Russia’s new "Foreign Policy Concept” defines integration in the post-Soviet space as priority and attaches special significance to such integration formats as Customs Union and Eurasian Union. It is indicative of the fact that those issues will prevail in Russia’s relations with the CIS countries.

What does membership to the Common Economic Space promise?

Currently, certain intensity in the process of joining the Customs Union and Common Economic Space is observed. Reportedly, Kyrgyzstan and Tajikistan have already applied for membership to the Common Economic Space, while a "road-map” for Kyrgyzstan is elaborated to secure the country’s membership to the Customs Union by the end of the year.

Upon the meeting with Russian President Putin on the sidelines of the CIS Summit in Ashgabat in 2012, Ukraine’s President Viktor Yanukovich announced that his country should join some chapters of the Customs Union. April 2013 saw signing of a memorandum of understanding between the governments of Ukraine and Armenia and the supranational body of the Common Economic Space - the Eurasian Economic Commission. Bolstering of cooperation with the Customs Union in certain areas was also announced.

Armenia’s prospects of joining the Common Economic Space can be characterized as a special case. Without any immediate borders with the Customs Union member states, Armenia’s any comprehensive integration engagement depends on Georgia and Azerbaijan. Trying to walk the thin line between the interests of the West and Russia, Armenia refers to it as a "complementarism policy” and deems the realization of such an idea as a threat of Russia’s growing political and economic influence. Armenia’s authorities oppose the idea citing the lack of common border as their key argument.

Viktor Khristenko, the chairman of the board of Eurasian Economic Commission, responded to the objection by calling Armenia an exclave. It was the manifestation of exclave logic that Armenia’s authorities have actually agreed to sign a memorandum of understanding with the EEC. Although respective memorandum does not imply Armenia’s integration to the Common Economic Space, there is no doubt about the likelihood of some sort of voluntary or compulsory engagement with the processes.

Compatibility of the integration processes within the CIS space with the EU cooperation of some countries provokes questions. Some EU officials declare that association agreement to be signed with Ukraine and Armenia constitutes conflict with the membership to the Customs Union. Indeed, prospects of countries to individually seek the establishment of the free trade zone with the EU and the conception of similar mechanisms with the Customs Union appear bleak.

Azerbaijan – region’s key player

Strategic position, abundant energy resources, transit capabilities and the economic growth makes Azerbaijan’s participation in any regional integration process crucial. Russia also recognizes that. Various Russian officials voice opinions that Azerbaijan’s participation in the Common Economic Space and Eurasian Economic Union would be a serious development. Round tables are organized to discuss Azerbaijan’s prospects of joining the union and Russian political scientists speak of the benefits of Eurasian Union membership vis-à-vis the resolution of the Nagorno Karabakh conflict.

The first question to be addressed by such deliberations has to be the benefits of the membership to the Customs Union and Common Economic Space. In his interview with the "Russia-24” television channel President of Azerbaijan Ilham Aliyev highlighted that for now Azerbaijan does not envisage joining the Customs Union and Common Economic Space. The head of state explained it with economic viability and Azerbaijan’s current stable economic growth. As an example President stated that due to protection of domestic production, agriculture and entrepreneurship in the country Azerbaijan is also yet to be become a member of the World Trade Organization.

Indeed, some Customs Union and Common Economic Space related processes are indicative of the urgency of those issues. For instance, inundation of Kazakhstani market with the goods of Russian origin made it to the news. Inability of local companies to compete with Russian producers spurred the price growth. This trend is described as the "expansion of Russian business”.

Certain unease related to the Customs Union is also observed in the Russian media. Pace of trade growth is said to be declining within the union. The reason is the lack of capacity of member states, with the exception of Russia, to invest resources and services into the other member’s market. On the other hand, similar to other projects, assumption of greater responsibility by Russia causes discontent. Warnings are made about Russia’s partners to benefit from the country’s resources. Ultimately, there are questions with regard to the economic benefits of the membership to the Customs Union.

Unresolved Nagorno Karabakh conflict also questions Azerbaijan’s engagement with the process. As it was mentioned earlier in one way or the other Armenia is likely to cooperate with the Customs Union, whereas Azerbaijan’s membership would end Armenia’s isolation and ensure direct border access to the union. However, as long as the conflict remains unresolved there are zero chances of Azerbaijan-Armenia cooperation.

Russia expects the organization to be fully operational as of 01 January, 2015. Surely, the regional processes to develop by that time are difficult to predict. Should the EU model be chosen as an example, it would take years to verify the benefits of those prospects. On the other hand, EU itself faces serious crisis. It is only deteriorating and the fate of intra-organizational mechanisms is doubtful. Therefore, under the circumstances, it is most expedient that Azerbaijan pursues its economic interests in equality based bilateral format.

Elmar Huseynov

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