Regional Trade Agreements in the ECE

Russia joins CACO

RFE/RL NEWSLINE Vol. 8, No. 198, Part I, 19 October 2004

The Central Asian Cooperation Organization (CACO) welcomed Russia as its fifth member state at a summit in Dushanbe on 18 October, Asia Plus-Blitz reported. CACO now consists of Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan; the leaders of all member states attended the summit. Russian President Vladimir Putin commented, "As part of this organization, we hope, first of all, to develop our practical capabilities in fighting such threats as terrorism and regional extremism -- I mean religious extremism in our region -- in fighting illegal drug trafficking and other challenges," RFE/RL reported. Tajik President Imomali Rakhmonov said that Russia's membership "will increase the potential and the dynamics of our organization"; other Central Asian leaders expressed similar sentiments. Summit
participants also decided to give Afghanistan the status of an official observer within CACO, ITAR-TASS reported. DK

...Tajik President Rakhmonov described security as the summit's main issue, but it was not the only issue on the agenda. Kazakh President Nursultan Nazarbaev outlined other summit decisions, saying, "Within three months the governments of CACO members will develop conceptual frameworks for signing agreements to create transportation-communications, produce, and water and power consortiums with the participation of the World Bank, the Asian Development Bank, and the Islamic Development Bank," Avesta reported. DK

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SCO Meeting of 23 September 2004

From: RFE/RL NEWSLINE Vol. 8, No. 183, Part I, 24 September 2004

SHANGHAI ORGANIZATION PREMIERS MEET IN KYRGYZSTAN. The prime ministers of the Shanghai Cooperation Organization (SCO) member states met in Bishkek on 23 September to discuss economic and security cooperation, akipress.org reported. They signed a joint communique and several agreements on the SCO's 2005 budget. Chinese Prime Minister Wen Jiabao said that SCO economic cooperation will focus on the transportation, telecommunications, energy, and agricultural sectors, Interfax-Kazakhstan reported. Russian Prime Minister Mikhail Fradkov and Kyrgyz Prime Minister Nikolai Tanaev stressed the importance of increasing cultural ties as well, Kabar news agency reported. The SCO member states are China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. Tajikistan and Uzbekistan sent deputy prime ministers to the meeting.

CIS Summit, 16 September 2004

CIS SUMMIT FOCUSES ON FIGHT AGAINST TERROR... A summit of CIS leaders took place in Astana on 16 September with a focus on antiterrorism efforts in the wake of recent attacks in Russia, news agencies
reported. "The terrorists who have committed crimes against the Russian Federation present an extremely serious danger to all countries of the world without exception," read a joint statement
cited by regnum.ru. "The heads of the CIS member states express their full solidarity with the Russian Federation in its battle against terrorism." The leaders agreed to step up the activities of the CIS Antiterrorism Center, Kazinform reported....... The summit, which was attended by all CIS leaders except Moldovan President Vladimir Voronin and Turkmen President Saparmurat Niyazov, selected
Putin to replace Ukrainian President Leonid Kuchma as CIS chairman. The next summit will take place in Minsk, Belarus in September 2005. DK

...AS KAZAKH PRESIDENT ADVANCES REFORM PROPOSALS... Kazakh President Nursultan Nazarbaev proposed a far-reaching reform of the CIS at the leaders' summit on 16 September, Interfax-Kazakhstan reported. He suggested putting the Council of CIS Foreign Ministers in charge of a special Security Council and delegating executive-organ functions to the CIS Antiterrorism Center and Executive Committee, Kazinform reported. Nazarbaev also urged the elimination of duplicate functions by abolishing the council of defense ministers, the headquarters to coordinate military cooperation, the economic court, and the interstate statistics committee. The CIS Executive Committee's staff should be reduced from 220 to 140 people, he said. Nazarbaev said CIS foreign ministers will review his proposals over the next year. Armenian President Robert Kocharian told the press conference after
the summit that "the main reform of the CIS should be to ensure that the decisions that it makes are carried out," RIA-Novosti reported.
DK

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SES Presidents sign agreement on VAT

From: RFE/RL NEWSLINE Vol. 8, No. 177, Part I, 16 September 2004

SINGLE ECONOMIC SPACE PRESIDENTS INK TAX AGREEMENT... The presidents of the Single Economic Space (SES) member states (Belarus, Kazakhstan, Russia, and Ukraine) met in Astana on 15 September,
agencies reported. Belarusian President Alyaksandr Lukashenka, Kazakh President Nursultan Nazarbaev, Russian President Vladimir Putin, and Ukrainian President Leonid Kuchma signed an agreement to levy the value-added tax (VAT) on a destination-country principle starting on 1 January 2005, Kazinform reported. The presidents also charged the SES High-Level Group with developing documents by the end of 2004 to ease border-crossings for citizens of member states, ITAR-TASS reported. They affirmed a list of 29 basic documents for the SES legal structure to be readied for signing by 1 July 2005. President Putin said that the VAT agreement was a difficult decision, as it will cost the Russian budget $800 million, RBC reported. But he said that it will increase trade volume and benefit all four countries. DK

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ECO Summit in Dushanbe - 14 Sept. 2004

From:
RFE/RL NEWSLINE Vol. 8, No. 176, Part I, 15 September 2004

ECONOMIC COOPERATION SUMMIT HELD IN TAJIK CAPITAL... Heads of state and government from the member states of the Economic Cooperation Organization (ECO) met in Dushanbe on 14 September for the group's eighth summit, agencies reported. The two main results of the meeting were a commitment to create a free-trade zone among member states by 2015 and a decision to create a fund for Afghan reconstruction. ECO members also agreed on the importance of coordinating the actions of tax officials, customs services, and antidrug structures, Tajik radio reported. A final declaration affirmed the ECO's resolve to support modernization, growth, development, and economic integration in the region, Avesta reported. ECO Secretary-General Askhat Orazbai said that Iran sponsored the initiative to create an Afghan reconstruction fund and that Pakistan has already pledged to give the fund $5 million, RIA-Novosti reported. The summit elected Tajik President Imomali Rakhmonov to chair the ECO. Member states are Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan. DK
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CACO Meeting of 27 August 2004

From:
RFE/RL NEWSLINE Vol. 8, No. 165, Part I, 30 August 2004

CENTRAL ASIAN COOPERATION ORGANIZATION RATIFIES RUSSIAN MEMBERSHIP...
Kazakh Foreign Minister Qasymzhomart Toqaev announced on 28 August that the council of foreign ministers of member states in the Central Asian Cooperation Organization ratified Russia's accession to the organization during a 27 August meeting in Astana, Interfax-Kazakhstan reported. Toqaev said that the main topics at the meeting were the inclusion of Afghanistan in regional integration processes, the creation of an international hydropower consortium within the organization, shared television and radio broadcasts, and the removal of trade barriers between Kazakhstan and Uzbekistan, "Kazakhstan Today" reported. Toqaev also stated on 28 August that the OSCE needs to pay more attention on issues of trade and security, and avoid an excessive focus on humanitarian concerns. His remarks echoed a Russian-initiated statement on 3 July by a number of CIS states (see End Note, "RFE/RL Newsline," 4 July 2004). Russia's Foreign Ministry said on 28 August that it is satisfied with the results of the Central Asian Cooperation Organization's 27 August meeting, RIA-Novosti reported. Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan founded the Central Asian Cooperation Organization in February 2002. The leaders of the member states will gather for a summit in Dushanbe in October. DK

...AND HOLDS 'CENTRAL ASIA-PLUS-JAPAN' MEETING. The foreign ministers of Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan met on 28 August in Astana with Japanese Foreign Minister Yokiro Kawaguchi, Kazinform reported. The meeting ended with a joint declaration and a vow to hold further "Central Asia-plus-Japan" meetings. The declaration stressed the need to broaden cooperation in a variety of areas, including the economy, energy resources, the environment, and exchange programs, "Kazakhstan Today" reported. On the latter count, Japan will accept 1,000 students from Central Asia over the next three years. Japan will also organize training for Central Asian specialists on energy supplies, the environment, and water resources. At a separate meeting with Kazakh Foreign Minister Toqaev on 27 August, Kawaguchi said that Japan is prepared to help Kazakhstan in its bid for WTO membership, Kazinform reported. DK

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Single Economic Space Mtg. 20 August 2004

As published on
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RFE/RL NEWSLINE Vol. 8, No. 160, Part II, 23 August 2004

BELARUS HOSTS MEETING ON CIS SINGLE ECONOMIC SPACE. On 20 August in Minsk, representatives of Belarus, Kazakhstan, Russia, and Ukraine adopted a list of 29 agreements that the four countries are to draft and sign in order to develop a Single Economic Space (SES), Belapan reported. Kazakh Deputy Prime Minister Sauat Mynbaev told journalists that these accords are to be drafted by the end of the year. "We hope that the sides will manage to sign the first package of agreements by mid-2005," he added. According to Mynbayev, the agreements will provide for a uniform approach to the appraisal of goods, standard rules concerning the origin of goods, uniform principles of policy regarding competition, and the removal of trade quotas. Russian Deputy Prime Minister Viktor Khristenko expressed hope that the next summit of the four countries, scheduled for 15 September, might result in an agreement on the universal use of the country-of-destination principle in trade among all SES participants starting 1 January 2005. "It would be a good step, the first stage of which has already been implemented by Russia and Ukraine," he said. JM

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SES Meeting May 2004

Report from the meeting of the Presidents of the Single Economic Space (SES) countries: Russia, Ukraine, Belarus, and Kazakhstan in Yalta in May 2004 during which pledges were made to implement this agreement

Copied from: RFE/RL NEWSLINE Vol. 8, No. 98, Part I, 25 May 2004

FOUR CIS PRESIDENTS VOW TO PROCEED WITH CREATION OF SINGLE ECONOMIC
SPACE... The presidents of Russia, Ukraine, Belarus, and Kazakhstan -- Vladimir Putin, Leonid Kuchma, Alyaksandr Lukashenka, and Nursultan Nazarbaev, respectively -- pledged in Yalta on 24 May that
they will proceed with the implementation of the treaty on the creation of the Single Economic Space (SES) they signed in September (see "RFE/RL Poland, Belarus, and Ukraine Report," 23 September 2003), international media reported. "The primary objective of the next stage in the evolution of the [SES] is to formulate as quickly as possible a workable regulatory and legal basis for economic cooperation," Interfax quoted Putin as saying in Yalta. The four governments are to present 61 draft agreements in extension of the SES treaty during the next SES summit in Astana in September. Putin proposed that the first package of agreements include documents on foreign trade, customs tariffs, and the business environment. Nazarbaev recommended beginning the development of the SES by establishing a customs union, while Kuchma suggested a free-trade zone (see also End Note below). "Russia, which is by far the dominant player in the new body, has been seeking increasingly to reestablish its influence in the former Soviet Union, in competition with the United States," "Business Week" commented in its 31 May issue. JM/VY

...BUT PLANS MAY COLLIDE WITH REALITY. At the same 24 May press conference, President Putin admitted that he spent 90 percent of his time in arguments with the other SES leaders about the adoption of a
single "economic constitution," but instead it was decided to adopt the 61 separate agreements. Putin also said that the sides will define the priority of the agreements at the September summit in Astana. Meanwhile, participants of the talks failed to overcome some basic differences, izvestiya.ru and polit.ru reported. Lukashenka told journalists that initially the four countries wanted to join the World Trade Organization as a single entity, but because of differences will do so separately. Another disagreement is between
Russia and Kazakhstan, which insist on creating a customs union, and Ukraine that opposes it. VY

END NOTE

YALTA SUMMIT PRODUCES LITTLE OF SUBSTANCE

By Jan Maksymiuk

The presidents of Russia, Ukraine, Belarus, and Kazakhstan -- Vladimir Putin, Leonid Kuchma, Alyaksandr Lukashenka, and Nursultan Nazarbaev, respectively -- gathered in the Ukrainian sea resort of Yalta on 23-24 May to discuss further moves in developing the Single Economic Space (SES), the body they created in September 2003. The agreement on the SES commits the signatories to establishing a free-trade zone and a customs alliance as well as ensuring free movement of commodities, labor, services, and capital between the four countries. It also calls for a high level of political coordination of economic and financial policies of the four states.

The Yalta meeting, apart from the reiterated declaration of the four leaders to pursue closer integration within the SES framework, has brought little substance. The presidents agreed that, in order to proceed with further integration, experts need to prepare 61 draft accords and some 50 normative acts that could give some shape to the hitherto amorphous SES idea. These documents are to be viewed by the four presidents at their subsequent summit, in September in Astana. "Each should lose something in order to find something else at the end of the road," Kuchma reportedly said in summing up the Yalta summit on 24 May.

However, what specifically should be lost and/or found by the SES signatories remains unclear. The presidents in Yalta seemed to disagree as regards SES priorities. Putin said the first package of documents to make the SES a reality may be signed in 2005 or early 2006. According to him, this package should include accords on the harmonization of foreign trade, the introduction of common customs tariffs, and the creation of the same competition environment for businesses of the four countries. Putin also stressed the need to set up a supranational "regulatory body" for pursuing SES policies.

Ukraine insists that the formation of the SES should be started from the creation of a free-trade zone without any reservations. According to Kuchma, it is sufficient to adopt some 13 documents in order to achieve this goal. Kuchma expressed hope that these documents could be prepared and signed as soon as in the first quarter of 2005. In its economic relations with Russia, Ukraine is primarily concerned with Moscow's collection of value-added tax on Russian oil and gas exports according to the country-of-origin
principle, that is, in Russia. The introduction of a free-trade zone would switch this collection to the country-of-destination principle, a move that could give Ukraine's budget some $800 million annually.

The Kazakh president said in Yalta that the SES formation should be started with the establishment of a customs union. "Otherwise, I don't understand what we are going to do next," he was quoted as saying. "And afterwards we need a transport union." Nazarbaev stressed that such an approach to the creation of the SES would allow the four states to present the same conditions while applying for membership in the World Trade Organization.

Lukashenka was less clear than Kuchma and Nazarbaev in his vision of the SES. On arriving to Yalta, he announced that Belarus is unlikely to receive any additional advantages in relations with the other three countries at the current stage of the SES's development. "[Belarus] has advanced further than the others in relations with our major partner, the Russian Federation, and the economic measures that we are taking now in the framework of the four are behind the level that exists between Belarus and Russia," Lukashenka added. But following the summit talks, he assured journalists that Belarus does not "regret" joining the SES even if its economic interests are "satisfied" up to 90-95 percent in the Russia-Belarus Union. "But we are international people and advocate the processes of integration," he argued. "Moreover, the remaining 5 percent is not insignificant either."

In theory, the creation of a trade alliance with the same rules of the game for a market of some 225 million consumers is not a bad idea. Today's European Union was also preceded by the European Common Market, a much looser economic alliance than the current union run by an army of bureaucrats from Brussels. But some in the post-Soviet area, particularly in Ukraine, are afraid that Russia is primarily seeking an alliance that could give it political levers of control over republics that left the USSR in 1991. The Ukrainian opposition also argues that the full implementation of the SES treaty will deprive Ukraine of any prospects of integrating with Europe in the future.

In an apparent move to address such fears, Putin stressed in Yalta that the SES will not hinder its members' moves to participate in "European integration processes." "None of these countries is entering an [already existing] organization," he said. "It would be wrong to think that someone is dragging someone else into some sort of a regional organizations by force. We have gathered together in order to work out, through discussion, rules of economic behavior that are favorable to each of the four countries."

It would be hasty to conclude right now that the SES is facing a brighter future than that of the Commonwealth of Independent States (CIS). The CIS, inaugurated by the Slavic "core" of the Soviet
Union -- Russia, Belarus, and Ukraine in December 1991 -- and shortly afterwards joined by Kazakhstan, has since then turned into nothing more significant than a talking shop. On the other hand, the creation of the SES may be Russia's last chance to firmly anchor some of the post-Soviet states in its sphere of political and economic influence. Therefore, Russia may now be ready to make some bolder moves and/or concessions in order not to lose this chance.

Whatever the final outcome of this latest reintegration attempt in the post-Soviet area, one can already say that the SES formation will be the principal issue on the political agenda of Ukraine and Belarus for many years to come. Brussels has recently unambiguously suggested that these two country have no prospects of joining the EU. And one old, wise saying maintains that nature abhors a vacuum.

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