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Eurasian Paper Tigers

After signing a series of agreements with Uzbekistan’s president Islam Karimov, Vladimir Putin summarised an April visit to Moscow by Karimov as a hopeful first step towards expanding Russia’s Customs Union.

June 24, 2013 - Devin Ackles - Articles and Commentary

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Yet Putin’s latest push for the Customs Union with other former Soviet states has not been all handshakes and smiles: in a televised call session in Moscow on April 25th, he issued a warning that if Ukraine did not join the Union it faced the potential “de-industrialisation” of multiple sectors within its economy.

A Eurasian Union

The Customs Union has been no stranger to controversy since first being introduced in January 2010. The contested nature of the organisation was exemplified last December when Hillary Clinton drove another nail into the coffin that now entombs Obama’s much-hyped “reset” policy with Russia by labelling the Russia-led Customs Union “an effort to re-Sovietise the region,” and vowing that America is “trying to figure out effective ways to slow down or prevent it”.

Plans for the long-term development of the Eurasian Union were laid out most clearly by Putin in a November 2011 editorial that appeared in the Russian publication Izvestiya. The Russian president envisions a trade zone that will allow a “free flow of capital, services and labour”, with a European Union-style political system planned further down the line. United Russia, Putin’s increasingly embroiled political party, has been quick to capitalise on the project, writing in campaign literature that the “new union will allow our country to become another pole of influence in the modern, multi-polar world”. But is the Union really deserving of Clinton’s combative rhetoric or United Russia’s grandiose claims? A comparison between the Kremlin’s rhetoric and reality tell a different story: in spheres like visa regimes and the labour market, the picture is one of incoherence, not unity, while the long-term, or even short-term, benefits for the countries involved are themselves questionable.

One of the most important elements of the Customs Union is its plans to deal with Russia’s long-standing issues surrounding immigrant labour. The liberalisation of labour quotas for other former Soviet states will mean a large influx of migrant workers into Russia, even more than official estimates of ten million. This large figure already makes Russia the country with the largest percentage of foreign workers after the United States, and the world’s leader in the number of illegal immigrants. Putin attempted to play both sides in his December 2012 State of the Nation Address. He stated that by 2015, new regulations will be in place requiring citizens of former Soviet states to use foreign-travel passports to enter Russia, ending the long standing practice of using domestic passports. At the same time, he stated that for Eurasian Customs Union member states the visa regime would be made as simple as possible.

Visa-free regime

A visa-free regime for Customs Union members, however, would not only make the type of visa-free regime between Russia and the European Union that Putin’s administration has made a priority much more difficult, it will likely also run against increasingly nationalist sentiments within Russian society. The EU and Russia have just recently concluded a series of difficult discussions and are on the brink of a visa-regime breakthrough which would allow Russian journalists, students, business people and, after some haggling, even Russian governmental officials who hold special “service” passports to travel to the EU without a visa. While not extending this visa-free regime to the whole of the Russian population may be seen as a safeguard for EU member states, it also neglects regional political and societal dynamics at play. The EU appears to have done its utmost on paper to limit the influx of illegal immigration through Russia to its own territory in its proposed cooperation, but the formal restrictions for those who will be granted preferable visa-free status will likely create a new black market in Russia to obtain the requisites necessary.

Attempting to find a balance will be quite difficult as the tide in Russian society continues to turn against guest workers. Petitions calling for the introduction of a visa regime with Central Asia and opposing the liberalisation of laws for obtaining Russian citizenship have quickly garnered tens of thousands of signatures. These petitions reflect that 65 per cent of Russians believe that the number gastarbeiters (guest workers) must be reduced, according to a November 2012 poll by the independent Levada Center. It is difficult to imagine how the visa regime will result in free movement of labour between the member countries, as it will likely instead promote an almost exclusively one-way influx of workers to the Custom Union’s members whose populace are similarly weary of hosting more guest workers. This is another problem that will only be exacerbated by a Customs Union that includes Kyrgyzstan and Tajikistan. Indeed, why would Russians or Belarusians want to trade Moscow and Minsk for the steppe, particularly since Central Asia has a seen mass emigration of its Slavic populations as a result of ethnic hostilities since the end of the Soviet Union? Although membership talks with other Central Asian nations have taken a temporary backseat as Putin seeks to pull a much more lucrative Ukraine into its economic union, his rhetoric betrays experts’ more dire economic forecasts for Russia’s ageing workforce and its need for cheap labour.

Consider Belarus, a country notorious for its hyper-authoritarian government and state-dominated economy. It is no secret that Putin and his entourage maintain a certain disdain for Belarusian president Aleksandr Lukashenka. Despite massive subsidies from Russia and promises from Belarus over the past decade, Russia has been unable to introduce even the most basic economic reforms and Belarus’ economy remains a constant drain on Russian coffers. Lukashenka counts on Russian support in return for the status that its association provides to Russia as a regional power. Other than providing a Russian presence within the EU neighbourhood, the benefits of its association with the black sheep of Europe remain questionable considering the bill. Lukashenka’s regime has long been weary of Central Asian labourers, as Belarus struggles to maintain its own standard of living and exodus of citizens to Russia. Belarus is hardly a reliable partner and is certainly not the type of economic powerhouse that Russia needs to bolster the Customs Union’s collective prosperity or economic influence.

An incoherent vision

In attempting to silence domestic critics, maintain his support base amongst the Russian populace, and bolster a Russian economy under state surveillance and control, the Kremlin has exposed an incoherent vision for its latest attempt at consolidating its influence in the post-Soviet space. While both Brussels and Washington have expressed their concern about the direction of the Customs Union, it is far from a unified vision that is capable of uniting the disparate former Soviet Republics into an economic superpower to compete with the United States, the EU or even China. Despite its more recent formal tendencies towards customs harmonisation, the Customs Union is far from capable of developing into a stable unified economic entity.

In fact, it would seem that the Customs Union is more a political force that impedes genuine political and economic development than a path to integrating former Soviet states into the global economy. Ukraine certainly sees it as such and has committed itself, even under a “Russia-friendly” administration, to European integration. Ukrainian President Viktor Yanukovych’s first official visit abroad was to Brussels, not to Moscow. While Russia has exerted a great deal of pressure to pull Ukraine into the fold, including extensive discounts on gas, Ukraine has done little more than offer Russia some vague promises of cooperation with the Customs Union. The markets of Europe and the quality of products that will flow into Ukraine as a result of closer economic integration with the EU drastically outweigh any long-term benefits that Ukraine would receive from joining the Customs Union. According to the EU’s Delegation in Ukraine, the trade volume between Ukraine and the EU has mushroomed over the past decade, constituting 14.5 per cent percent of Ukraine’s trade volume in 2011, only slightly below trade volume with Russia.

While Ukraine’s signing of the Association Agreement with the European Union is still under question, it is highly unlikely that Ukraine will formally join the Customs Union or any other Russian-led project, as its invitation to join Europe will be, at worst, subject to another delay. Meanwhile, Central Asia continues to pursue a multi-vector foreign policy that courts other regional powers like Turkey, Iran, and especially China, whose influence in Central Asia has been cemented through soaring levels of trade, control over its energy infrastructure, and increasing attempts to build transportation networks linking the Silk Road with the Middle Kingdom. Russia’s power in the former Soviet space is waning, not growing, as Clinton suggests. In terms of maintaining Russian hegemony, the Customs Union is too little, too late.

Devin Ackles is an analyst for CASE Ukraine, Kyiv, and an editor for Belarus Digest.

Luke Rodeheffer is an MA student in International History at Koç University in Istanbul and a freelance analyst on Eurasian geopolitics.

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