Four presidents agree to develop blueprint for economic integration

by Roman Woronowycz
Kyiv Press Bureau

KYIV - The presidents of four former Soviet republics, including Ukraine and Russia, announced in Moscow on February 23 that they had agreed to develop a plan for economic integration and much closer cooperation, which would begin with the establishment of a free trade zone.

In a highly unexpected announcement, the four leaders - Presidents Leonid Kuchma of Ukraine, Vladimir Putin of Russia, Nursultan Nazarbayev of Kazakstan and Alyaksandr Lukashenka of Belarus - said at the conclusion of a summit in Moscow that they had gone beyond the stated intention of the meeting, which was to firm up plans for a free trade zone for the region of the Commonwealth of Independent States, and had agreed to develop a single economic space. All four states were once part of the Soviet Union and gained independence just over a decade ago.

In a statement read by President Kuchma, who was recently elected the chairman of the CIS Council of Heads of States, the leaders announced that they had agreed to: "begin talks on measures necessary for the formation of a common economic space," which are to be completed by September 2003 and result in the development of an agreement on creation of common economic policy, harmonization of relevant legislation and creation of an inter-governmental regulatory commission on trade and tariffs."

The announcement called for a working group of representatives of the four governments to agree by July on a manner "to develop a single, independent interstate regulatory commission for trade and tariffs." The end result of the negotiations would be the creation of an Organization of Regional Integration among the four states.

President Lukashenka said the primary purpose behind the decision was to protect the economies of the four countries and to stimulate economic growth by developing trade.

"It is necessary to give complete freedom to the flow of goods among our countries," said President Lukashenka of Belarus, according to Interfax-Ukraine.

While Kazakstan's President Nazarbayev said the decision had not been made as spontaneously as it would seem and was not intended to replace the CIS, Ukraine's President Kuchma explained that the point was to integrate the four economies into a regional power that could effectively compete in the age of globalization.

Perhaps to deflect possible perceptions that this was a Russia-led initiative to shrewdly rebuild empire, President Putin remained restrained and in the background during the announcement. During a brief statement he underscored that the committee that would develop the ideas proposed by the four presidents would sit in Kyiv, not Moscow, and would be headed by a member from the Kazak delegation.

Regardless of the Russian president's intentions and declarations by the other leaders on the exclusively economic character of the integration plans, Kyiv immediately began to deal with the political fallout. Some news publications here suggested that the proposal had all the markings of a future common market and sent more than simple economic signals.

In fact, Interfax quoted remarks by Belarus National Bank Chairman Petr Prokopovich on February 25 in which he noted that during their discussions the four state leaders had proposed 2011 as the target date for the introduction of a single currency. He also stated that the Russians had suggested that it be the ruble.

Advisors in Ukraine's presidential administration attempted political spin control during a press conference the same day in which they repeatedly asserted that this was not the first step towards political union, and that Ukraine had not changed in any way what it has repeatedly referred to as its "European Choice."

"The resolution has an exclusively economic character," explained Anatolii Orel, President Kuchma's chief advisor on foreign affairs. "There is nothing political here, and it has no language that calls for a supra-state or organization. The words are about how to enter Europe: either barefooted and naked, or with economic respect."

He added that the announcement by the four presidents was simply a proclamation, and underscored that the statement would only be the basis for the beginning of negotiations. Mr. Orel went on to suggest that, if the single economic space among the four former Soviet republics proved a successful venture, eventually the entire region might enter into a formal relationship with the European Union.

He also underscored that the economic mandate that the four countries would develop would stand entirely on World Trade Organization standards and requirements. In the past the WTO has, in fact, pushed Moscow and Kyiv to move towards WTO membership in unison.

Vasyl Rohovyi, presidential economic advisor on CIS matters, said Ukraine needed a more pragmatic approach towards its eastern and northern trade neighbors, particularly in regard to Russia, whose trade barriers and tariffs continue to stifle the full development of Ukraine's economy.

Mr. Orel, the foreign policy advisor, added that a free trade zone "would bring Ukraine huge dividends," including the creation of favorable conditions for the sale of Ukrainian commodities in the markets of Russia, Kazakstan and Belarus. He also suggested that the four states needed to develop a broad regional market to compete effectively with the United States and the European Union, which control the flow of imported goods into their countries through quotas and tariffs.

Volodymyr Sidenko, economic expert at the Razumkov Center for Economic and Political Studies, explained that the presidents seemed to indicate that they intend to develop a common market for the Eurasian region, similar to the European Common Market that preceded the current European Union. However, he said that he foresees only difficulties, both within each country and among the four sides, in reaching a substantive and specific agreement on how to proceed toward a single economic space.

Russian and Belarusian politicians welcomed the developments, with one Belarusian lawmaker stating during an evening news broadcast on Kyiv's Novyi Kanal (New Channel) "if this event does in fact succeed in forming a new Soviet Union then I believe the remaining former republics will fall in line eagerly."

On the other hand, Ukrainian politicians from the center-right voiced predictable but not overriding concern. National Deputy Roman Bezsmertnyi, once President Kuchma's representative in the Verkhovna Rada and currently a leading figure in the nominally oppositionist Our Ukraine political bloc, told The Ukrainian Weekly that Ukraine simply is continuing a confusing foreign economic game in which it is trying to have it both ways, to kiss up to Europe and Russia simultaneously.

"It looks like an attempt [by Kyiv] to outfox old Europe while appeasing its old patron, Russia," said Mr. Bezsmertnyi.

He said he also could not envision how the four sides would find agreement on a single economic space when they had yet to agree on the practical matter of how to pay pensions to former citizens now living in the neighboring countries. He said he believes the proclamation is a political ploy, to a large extent, to find support among voters in preparation for upcoming elections in Russia scheduled for March 2004 and in Ukraine in November 2004.

Mr. Bezsmertnyi noted, however, that Our Ukraine strongly supports the implementation of a free trade zone, which he said the CIS had yet to enact even though Kyiv had first suggested it back in 1994.

Ex-Minister of Foreign Affairs Borys Tarasyuk also dismissed the announcement as a "PR move," employed to show that the CIS is a functioning body. But he cautioned that if the agreement did result in economic integration it could eventually "radically change the political situation in Ukraine."

Our Ukraine leader Viktor Yushchenko directed his criticism directly at President Kuchma for announcing a "European Choice" policy eight months ago, followed by a decision to enter NATO - and now deciding to look eastward toward a single economic space. Mr. Yushchenko said the president's decisions simply show a lack of leadership skills and send mixed foreign policy signals.

"That is why Moscow, Brussels and Washington are displeased with Ukraine's foreign policy," explained Mr. Yushchenko.

Copyright © The Ukrainian Weekly, March 2, 2003, No. 9, Vol. LXXI

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