Customs Union instead of WTO?
Russia, Kazakhstan and Belarus may be on the brink of creating a supranational body modelled on European integration, but this could be a difficult task given the problems that their customs union has faced so far, writes George Bovt, a journalist and political observer, in a March publication for the EU-Russia Centre.
Russia, Kazakhstan and Belarus could be at the point of creating a supranational body, which would acquire some of the same prerogatives as the three national governments. This body, according to Kazakh Prime Minister Karim Masimov, would be modelled after the European design of integration, developed during the initial steps of the EU's formation. Mr Masimov said that such a move could happen as early as 2012. Would that be really possible, given that the customs union, made up of the three states, is far from being a smooth- working body so far?
According to Mr Masimov, a supranational authority of the customs union would be responsible for regulating natural monopolies, tariffs, unified competitive rules and energy policy. This is quite a challenging goal, assuming that the current conditions of cooperation between the member states continue. As Masimov put it, while it took more than 20 years for the EU member states to cope with the same problems (reaching agreed terms of regulation), the three member states of the customs union have to manage these problems in two years.
The customs union started working on 1 January this year, but it appears that not all of the problems facing it were effectively solved prior to its launch. The unified Code of the Union is still not in effect; it was supposed to start working from 1 July. The beginnings of the Union's operation were spoiled by the quarrel between Moscow and Minsk over Russian oil and gas imports and transit. To put it plainly, Belarus insisted on its right to discounted prices for Russian oil and gas, with a presumed right to subsequent resale to the West at market prices.
Another area of disagreement has been the allocation of import duties between Russia, Belarus and Kazakhstan. Initially, Russia insisted on receipt of 93% of all duties gathered by the other three nations. In the end, the three countries reached a compromise, with 87.97% going to Russia, 4.7% to Belarus and 7.3% to Kazakhstan.
Also, Russia has managed to persuade Minsk to agree not to use the Odessa-Brody pipeline for Russian oil resale in exchange for privileged prices (Russia agreed to supply Belarus with 6.3 million litres of duty free oil this year). Discounted prices for Russian gas for Belarus have been retained and Minsk pays $168 per 1,000 cubic metres of gas, compared to $305 paid by the neighbouring Ukraine.
Russia and Belarus have a long history of uneasy relations. The two countries have been in a customs union since 1995 and in a union state for over ten years. During that time, Minsk has imposed 24 trade restrictions on Russian goods and Moscow has imposed 15 on Belarusian goods. These numbers demonstrate that the two governments do not, in reality, have a free trade area.
Last year Belarus-Russia relations were set alight by trade disagreements over dairy products, gas, meat and tractors. As a result, trade between the two countries dropped 40%. The New Year started in similar fashion with a row over oil, in which Moscow demanded that Minsk pay full export duty on the discounted oil that it was buying from Russia and re-exporting to the West at a profit. The issue was only finally (or temporarily) solved after the visit of Russian Prime Minister Vladimir Putin to Minsk at the end of March.
This article appeared in
Belarusian Review, Vol. 22, No. 2
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Source: Office for Demo0craticBelarus
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