Nigmatzhan Isingarin
Deputy general secretary, Eurasian Economic Community, Doctor of economics

    Over 10 years have passed already since the break-up of the Soviet power but economies of the new independent states still have not overcome catastrophic aftereffects of rupturing production and economic cooperation ties.
The history cannot be rewritten but it seems reasonable enough to conclude that consequences of the collapse would have been less severe on two conditions.
First, it would be the case if the economy of the Soviet state were working if not on market principles but at least on the basis of sufficiently effective ties between enterprises and other economic entities. Instead, there were officially established schemes of supplying raw materials and marketing products, unjustifiably low tariffs on transportation, electric power and other components of the production cycle. Unprofitable enterprises were subsidized at the expense of the state budget and were functioning not because of some economic necessity but for upholding employment or production development of designated regions.
Second, it would be true if market relations and independent economic systems of the new states were being formed purposefully and persistently as necessary economic conditions were getting ripe. However, it did not happen as well.
The political collapse of the unified state was preceded by a gradual destruction of economic ties. The shock was caused not so much by the renunciation of the old ideology, social and economic system and economic structure as by the loss of interrelations formed in the concrete economic conditions.
Independent budgets of the new states demanded establishing individual tax and customs systems. The flows of goods were hampered by customs duties, quotas, licenses and other restrictions that completed the disruption of economic ties.
Just for the sake of fairness it should be noted that leaders of the new states made attempts to preserve the common economic space. Documents approved in Belovezhskaya Puscha in December 1999 by leaders of Russia, Ukraine and Byelorussia as well as in Almaty by leaders of 12 states stressed the need to keep intact the common economic space, common ruble zone. However, the previous structures of the unified state were liquidated and there was no one to coordinate the necessary actions. A year later the Executive Council of the Commonwealth emerged. But this body could not keep track of economic ties between the new independent states and enforce decisions made by their leaders in the framework of the CIS.
The economic slump in 1992 and 1993 clearly demonstrated the importance of maintaining the major part of economic ties between enterprises. And then Russia, Kazakhstan and other states initiated a decision to intensify efforts aimed at integrating economies of the new independent states.
In September 1993 a treaty to create the Economic Union was signed and all CIS countries gradually joined it. The Interstate economic committee was formed. The preservation of the ruble zone of a new type was declared. Participants signed an agreement on establishing a free trade zone as the first important step of economic integration. There were plans to set up a Customs and Payment Union. But, unfortunately, the centrifugal forces gained such a speed already that they frustrated all these decisions. That same year of 1993 Russia introduced a new currency and literally pushed others from the ruble zone thinking that independently it would get out from the abyss of crises faster. During all five years of its hardly successful activity the Interstate economic committee could not change the situation. Thus, the second attempt to save and develop the broad economic ties within the CIS also failed.
In those years the social and economic changes in the new states were moving at different rates. Russia, Kazakhstan and Kirghizia undertook the liberalization of economic relations and privatization, cancelled state prices. So, the basic market transformations were implemented. At the same time other countries maintained the administrative command system, though modified, to manage the economy, enterprises. A number of states – Moldavia, Armenia, Azerbaijan, Tajikistan – were plunged into armed conflicts.
All this created such a mixed and controversial situation in the post-Soviet space that there were simply no grounds to raise questions of some common economic policy, economic rapprochement.
In the years between 1998 and 2000 new attempts were made to intensify activity of the CIS. The decision to create a free trade zone was reactivated but the turn toward economic rapprochement of all 12 CIS states did not take place anyway. Today it is just impossible to deny this fact.
Under these circumstances some states decided to support integration on a smaller scale: a unified state of Russia and Byelorussia; a Customs union and common market of goods, services, labor and capital to cover Byelorussia, Kazakhstan, Russia, Kirghizia and Tajikistan.
Goals and plans of economic integration of these five states were fixed in a number of documents: the 1995 agreements on Customs union, the 1996 Treaty on deepening integration in the economic and social spheres, the 1999 Treaty on Customs union and Common economic space. A lot was done with respect to integration. Customs duties and restrictions were abolished: in fact, there is a free mutual trade regime now. Steps are being taken to unify foreign trade activity and simplify customs procedures.
However, having been all these years at the head of the Integration committee of the Customs Union I, unfortunately, have to state that many tasks were not accomplished. In my opinion, the main reason is that there were no sufficiently strong and powerful organization and legal mechanism to implement decisions.
In May 2000 at their summit meeting in Minsk heads of five member states of the Customs Union admitted the need to intensify the process of economic integration by creating a full-fledged international organization with legal protection of each entity. Governments of these countries and working bodies of the Customs union were directed to work out new documents. In October in Astana, Kazakhstan’s new capital, the treaty to set up the Eurasian economic commonwealth was signed.
The distinction between the new document and the previous ones is that it does not declare again the goal and task of rapprochement of national economies but, instead, it defines the mechanism of accomplishing them and establishes the Eurasian economic commonwealth.
In the preceding period a normative legal base has been formed, about 30 normative and organizational documents have been prepared and signed. Today the Eurasian economic commonwealth has entered a new phase of its already specific activity: restructuring of the CIS states’ economies is being coordinated, tax and customs systems are being brought closer together, foreign trade activities are being unified, conversion of currency systems and creation of payment system are being mutually supported. There is a hope that this new mechanism will be more productive.
Since 1997 the Intergovernmental Council of the Customs Union and, later, the Eurasian Economic Commonwealth have been headed by the president of Kazakhstan Nursultan Nazarbayev, the author of many integration proposals, including the Eurasian Union, the program «Ten steps toward common people» and others.
There are some specific features of our economies’ functioning independently. With a single economic complex, when the development was going on according to direction-setting plans, differences between economic interests of the allied republics or individual regions did not show up. But as soon as these republics became independent states, the situation changed drastically. Now, the more intensive the economic development becomes, the more evident the controversies get. Interests of a sovereign state take precedence over common regional interests. It is both understandable and admissible, when routine questions are considered. However, the position should be different, when principles of a long-term interaction are being worked out.
I would classify this combination of differences and coinciding interests the following way.
First, coinciding interests. For example, the Sokolovsk-Sarbaisk Mining Production Association in Kazakhstan is interested in marketing iron ore pellets to the nearest Russian neighbor Magnitogorsk Iron and Steel Works, which was oriented to exactly these raw materials from the very beginning. Thus, both countries have a direct interest in supporting this cooperation. They have the same mutual interest in the effective use of Baikonur, a spacecraft harbor. Examples like these are plentiful.
There are coinciding interests though, which they fail to realize because their joint actions lack vigor. Take, for example, the transit potential of Kazakhstan and Russia. The transportation systems of both states could only benefit from transit freight flows between Southeast Asia and Europe.
There are interests, which are not coinciding but not conflicting either. Kazakhstan, for one, is interested in developing its agriculture, in achieving food independence and, in the longer term, in developing food export. The same is true for Russia as well. Each of them has its own sales markets, both domestic and foreign.
But there are also conflicting interests, which are causing competition. For instance, Russian coal miners are strongly resisting shipments of Kazakh coal from Ekibastuz to electric power stations in the Urals. At the same time Kazakhstan, which is pursuing its policy of import substitution, restricts shipments of some goods from Russia.
There are interests that can be satisfied by putting them in different directions. For example, Kazakhstan brings its grain to markets in Central Asia, Iran. In their turn, Russia and Ukraine might direct their activity to the West. Kazakhstan could do the same thing with respect to its metal products concentrating their shipments on Southeast Asia and, thus, avoiding competition with Russian metals going to Europe.
It is necessary to thoroughly analyze economic interests of each state and build up relations in such a way that will prevent the integration from contradicting vital aspirations of partner states and promote instead uniting their efforts. Decisions, which are being taken now, should help them either coordinate their opposition to external competition or bring their joint products to world markets.
There is still an opportunity to form the through production-and-technological chains. A number of states, such as Russia, Kazakhstan, Kirghizia, Tajikistan, Ukraine, are interested in getting products of their uranium sectors to the world market. It is possible to effectively join efforts in p¤¤¤¤cing and marketing aluminum. There should be not competition but an agreement in the area of marketing oil and gas. In recent years Kazakhstan and Russia have been developing good partnership relations with respect to marketing hydrocarbons. At the same time there are problems with a gas alliance, the establishment of which was agreed upon by leaders of Russia, Kazakhstan, Uzbekistan and Turkmenistan. Taking into account the potential of these countries’ gas-producing industry, they could play a leading role in the enormous market of Eurasia. However, momentary interests are prevailing: obvious maneuvering and retreat from common plans have already started.
Quite often there emerge large-scale tasks in the industrial policy, which can be accomplished with much more success by joint efforts. Russia has made a decision to provide support for its aircraft industry but Moscow is trying to do it alone. Examining leasing schemes it does not attract as potential participants air carriers of the CIS states, which are operating Russian aircraft’. And in their turn these countries are looking to the West because leasing questions are settled there much faster.
Russia is developing its automotive industry, working out a complex system of supporting domestic automobile makers. But neither the government nor the ministry of industry proposed to any CIS state to consider this program on the bilateral level or in the framework of the Eurasian Economic Union. Kazakhstan does not manufacture automobiles on its own and it brings in hundreds of thousands of cars annually from different countries. But the natural ally, the most real consumer of the Russian automotive industry’s products remains outside this program. According to the existing concept production and sales of Russian cars are regarded as a task to be accomplished by Russia alone.
Somehow, our approaches to the matter of joint actions are not becoming viable. Each is trying to solve its problems independently. Acting this way it will be hardly possible to establish a common economy, a common economic space, a powerful integration system.
But life urgently demands exactly this. The globalization, which is being talked about so much these days, corresponds to interests of the technologically developed countries. The economic globalism is a natural process. It is impossible to resist this process but it can be effectively used through regional integration. And it is not only possible but simply necessary to combine efforts of several states so as to occupy together the worthy position in the world market, world economy.
Many of our politicians and economists think: once the WTO membership is secured, problems of regional integration will «dissipate» all by themselves. There will be no need for any unions, associations since each will become «an equal member of the international economic community». This position is so nearsighted that it is not worth refuting. Are 15 states going to dissolve the European Union because they are members of the WTO? On the contrary, the EU and dozens of other regional organizations are closing their ranks so as by consolidating the economic potential to get the common prize. Even in Africa an economic union is being formed now. And after having started a centrifugal speed-up in 1991 only our states are continuing this destructive movement, which keeps accelerating.
The break-up of the Soviet Union and its economic system was an objective process. The further destruction of ties is a result of subjective actions. A political will on the part of ruling elites in our countries is needed. Only then the situation can be changed. Today economies, business and business circles are suffering from tax, customs and other barriers. The common cause is suffering from the weakness of laws and excessive influence of national bureaucracies that for the sake of their selfish interests continue to support tendencies of mutually moving away.
Losses from inability to implement plans of economic integration are much larger than dividends from economic independence or, to be more exact, from national economic selfishness. So far the time has been working against peoples of our countries. And this situation must be sharply changed.