Kazakhstan, Belarus and Russia Sign Historic Treaty Creating Eurasian Economic Union

EEU

ASTANA – The leaders of Kazakhstan, Russia and Belarus met in the Kazakh capital, Astana, on May 29 to sign the treaty establishing the Eurasian Economic Union (EEU), a common market of 170 million people and a combined gross domestic product valued at $2.7 trillion.

President Nursultan Nazarbayev hosted President Vladimir Putin of Russia and Alexander Lukashenko of Belarus for the grandiose ceremony at Astana’s Palace of Independence.

Addressing almost 1,000 assembled guests – including the presidents of Armenia and Kyrgyzstan, two countries currently in talks about joining the new group – all three leaders called the signing of the treaty an historical, epochal event.

The signing of the treaty, which must be ratified by the three countries’ parliaments before entering into force on January 1, 2015, heralds a “qualitatively new development stage of integration in the Eurasian space,” President Nazarbayev told the audience, which also included officials from the three countries and members of the Parliament of Kazakhstan.

The treaty is well-balanced, reasonable and responds to all interests of the new union’s member states, he said, adding that the EEU is based on the principles of economic pragmatism, equality and respect for the sovereignty of member states. The document reflects all basic aspects related to international organisations and follows all principles of the sovereign equality of states, as well as respects specific features of the political order of the member states, Nazarbayev explained.

“A new economic organisation, having the rights of a subject of international law in full and acting on the basis of principles of the World Trade Organisation, appears on the world stage,” Putin said in his remarks. “It is important to note that providing certain authorities to supranational bodies will bring absolutely no harm to the sovereignty of our counties.”

According to all three presidents, the road to signing the treaty was very complicated. “Naturally, this journey included arguments which, despite all the complexities involved, have been solved by consensus,” Putin explained.

According to all three leaders, signing the treaty is an important milestone, though a tremendous amount of effort and work is still required to activate and successfully operate the integration mechanisms it sets forth. Reaching the stage of the signing was not an easy task, as the 900-page treaty has four sections, 28 chapters, 118 articles and 32 annexes.

President Nazarbayev underlined that creating the body of the treaty involved many years of dedicated work by the governments and experts, and said the final treaty reflects the interests of the member states and will benefit their citizens.

This was made possible due to the gradual nature of the integration process, he explained. The union was not created overnight, but is the result of a 20-year-long journey through the Eurasian Economic Community, the Customs Union and the Common Economic Space, he explained.

Indeed, as noted by both Nazarbayev and Putin, the idea of the Eurasian Economic Union gestated for more than 20 years after first being proposed by the Kazakh President in his famous speech at Lomonosov Moscow State University in March 1994.

“The signing of this treaty is a notable contribution by the three countries to the chronicles of Eurasian integration. This will provide impetus to the course and dynamics of the developmental processes in the Eurasian space,” President Nazarbayev said.

Economic statistics so far support  integration. Since the beginning of the integration processes, Kazakhstan’s trade turnover with Russia and Belarus increased by 88 percent, reaching $24 billion, while exports to Russia and Belarus grew by 63 percent, to $6 billion.

According to Putin, over the past three years, trade within the Customs Union grew by $23 billion, almost 50 percent, to reach $66.2 billion in 2013. Taken together, Belarus and Kazakhstan are Russia’s third largest trading partner, following the EU and China.

“Let us compare: our [annual] trade with the EU is $440 billion, while with China it is $87 billion. Belarus and Kazakhstan have far smaller economies than those two colossuses of the world economy, yet they are Russia’s third largest trading partner,” the Russian president said. “This speaks to the fact that we are reaching such parameters [in trade] in greater part thanks to the integration processes.”

The presidents also noted that the provisions of the treaty ensure stability and opportunities for growth for businesses and provide for stable markets. “We will not allow any member state to be subject to de-industrialisation as a result of the integration process,” President Nazarbayev said. “We will take into account the lessons learnt from the European Union.”

“The integration itself does not guarantee prosperity, but will require overcoming new challenges and fulfilling new tasks,” said Nazarbayev. “Integration serves as an engine for moving forward. While the Eurasian Economic Union provides favourable conditions for the development of the economies of all member states, equal access to the common market [and] elimination of economic barriers, but the prosperity of our nations depends on the ability to overcome new challenges.”

The EEU is an open community serving as a bridge between Europe and Asia, the Kazakh leader noted. In fact, the EEU may soon welcome new members: Armenia and Kyrgyzstan are both in advanced stages of negotiation over their accession. Putin also noted that the member states agreed to continue negotiations with Vietnam on creating a free trade zone and to strengthen cooperation with China, including in exchanging customs information on goods and services. They also intend to create expert groups on developing preferential trade regimes with Israel and India.

At the event, Nazarbayev and Putin both noted that the EEU represents a self-sufficient market with highly developed human capital and richly endowed with natural resources. The international community has already expressed great interested in this new market, Putin added.

“We are creating the largest common market on the territory of the CIS [Commonwealth of Independent States] with huge industrial, scientific and technological potential and colossal natural resources,” Putin said. “The largest economic players express direct interest in this integration.”

According to officials, the EEU will have its headquarters in Moscow, while the newly created Eurasian Court to settle disputes will be located in Minsk. Almaty will be developed as the EEU financial centre.

The EEU also provides mechanisms for the development of cooperation in science, education, and tourism.

The three leaders expressed their trust in the new union’s ability to create the most favourable conditions for development of the three nations’ economies, as well as to provide security and prosperity for the people of the member states.

At a media briefing following the signing ceremony, First Deputy Prime Minister of Kazakhstan Bakytzhan Sagintayev yet again emphasised the economic nature of the union. He also explained that any discussions of further integration steps, such as creating a financial union or a currency union, are premature at this stage and there had not been any talk about such steps in recent negotiations.

Russia’s First Deputy Prime Minister Igor Shuvalov also stressed that any such talk would only make sense once all the current agreements are implemented in full, and it may be up to 10 years before all limitations and reservations expire and the truly common economic market is established.

At the same media briefing, Viktor Khristenko, chairman of the Eurasian Economic Commission, explained that the crisis in Ukraine, which he called a “crisis of self-identification that Ukraine itself needs to resolve,” did not affect the integration process directly.

“The only way it did affect is by making the people in other countries realise ever more clearly the benefits of integration,” Khristenko said. “And we hope our partners in Ukraine will come to this realisation, too.”

Asked about benefits for the people of the EEU member states, Khristenko listed four freedoms that the new treaty will introduce: the free movement of goods, services, capital and labour. He stressed specifically that the freedom of movement of labour should be beneficial to people travelling to find jobs, as such new employees will be covered by social protection to the same extent as in their host country.

Shuvalov took up this issue, too, stressing that this situation means one thing – “competition” – since business people can now set up enterprises in the three countries on an equal basis with locals, and this naturally will both expand opportunities and increase competition. This process has actually already been going on for two years, with several hundred Russian companies relocating to Kazakhstan for tax purposes, a fact acknowledged by Shuvalov.

As the day of tough diplomacy, high-level talks and public celebrations, including a lavish concert at Astana Opera, was winding down, the sun finally broke through the unusually heavy clouds of the past few days.

The next few years will show if this was a good omen for the new union born in Astana on May 29, which President Nazarbayev proposed to celebrate from now on as the Day of Eurasian Integration.