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30 Jun, 2010 15:55

Customs step closer as Russian and Kazakh economies link up

Economic ties between Russia and Kazakhstan will move closer on Thursday when the two countries commence the second stage of their Customs Union and free up trade between them.

Russia and Kazahstan are entering the second stage of Customs Union integration by ratifying a common Customs regime – known as a customs codex.

From July 1 there will be no virtually customs duties between the two nations, with goods entering either country also not subject to further documentation when passing to the other. Energy tariffs and auto production will remain outside the new customs agreement according to Dmitry Abzalov, senior expert at Russia's political conjuncture center.

“All customs branches are included into the Custom's codex with 2 exceptions. First is oil and gas tariffs – because budgets of both Russia and Kazakhstan heavily depend on those resources, and it's not very well regulated. Second is auto production. Russia has presented protectionist measure to support domestic car production and can't zero out tariffs and all the work that has been done previously. These two spheres will be regulated by separate intergovernmental agreements.”

After the longest ever accession process, Russia is edging closer to joining the World Trade Organisation. The creation of a common customs Union is seen in some quarters as complicating that process – but Art Franczek, President or the American Institute of Business and Economics, sees Russian entry as paving the way for other customs union members to follow.

“Russia could take a seat first and then have the Customs Union move in after that. That might be the most workable situation. To move the whole Customs Union at once is a very complex issue. Russia has been 99% done for years.”

Belarus will also become part of the customs union, but the recent gas dispute with Russia has seen it postpone ratification of the common customs legislation. Ukraine and Kyrgystan have expressed interest in following suit.

The aligning of customs provisions between the countries follows in the footsteps of the EU. The move is expected to help both economies integrate more effectively into the global economy over the medium term.