New customs union becomes reality

Russia, Kazakhstan and Belarus have finally signed a Customs Code declaration, creating a new customs union, at a meeting of the Eurasian Economic Community in Kazakhstan.

It too around 4 years to achieve, but the dream of a real customs union is finally coming to life. 9 agreements aimed at creating the free flow of most types of goods between Russia, Kazakhstan and Belarus have sealed the deal.

Negotiations were far from easy with Minsk nearly dropping out of the project. It refused to ratify the customs code, holding out for Russia to cancel its oil export duties. But with Kazakhstan a major energy exporter itself, Minsk had to give in. First Deputy Prime Minister, Igor Shuvalov says there are still issues to be sorted out but that bedding down the new agreement is the focus.

“Not all customs procedures have been streamlined. There may still be difficulties on the border of the customs union. But we have hotlines ready and specialists on standby to deal with any issues, and we believe that within several weeks we’ll be able to resolve them.”

With a total combined population of 180 million people, Russia, Kazakhstan and Belarus make up over 80% of the economic power the USSR used to have. Cooperation on such a level should open up new opportunities for all three nations. Yaroslav Lissovolik, Chief economist at Deutsche Bank Russia, says it is not unusual to have agreements leaving some issues to be dealt with later.

“We’ve seen with other free trade agreements, with other integration groups, that certain critical sectors where the agreement is very hard to reach, is simply left outside of the brackets of the agreement. It is still a trade liberalization, it is still an integration group, but there’s this one exception where negotiators will deal as things progress.”

The customs union is being developed within the framework of the Eurasian Economic Community, which also includes Kyrgyzstan and Tajikistan. Founded ten years ago it was designed to create a zone of free trade, and investment between all member states.

Now that the customs union has been formed, building a unified economic zone is the next step, and the three partners are stepping up pace and Moscow says it expects that all the needed paperwork to be ready by the end of this year.