EEU treaty signing sparks Russian-Kazakh clash

By bne IntelliNews May 30, 2014

Naubet Bisenov in Almaty -


Kazakh and Russian officials clashed on May 29, just hours after the signing of the treaty to establish the Eurasian Economic Union – the Moscow-led bloc set up as a counterweight to the EU - as visions of the future of the project diverge.

Kazakhstan, Belarus and Russia may well have signed a treaty to turn the Customs Union (CU) into the Eurasian Economic Union (EEU) in 2015 in Astana, but the member states seem to have very different understandings of what the EEU is going to be. While the various presidents had smiled widely, pen in hand, not long after Kazakh and Russian government officials clashed at a news conference as they attempted to interpret statements made by the leaders.

The treaty will further liberalise trade, and in particular of services, in a common market of over 170m people. The EEU will enable banks to open branches across the bloc (previously they had to set up subsidiaries), and customers and clients to have equal opportunities to obtain loans and open deposits. The labour markets will be further liberalised, providing for the free movement of labour between the member states. Administrative barriers will be reduced for businesses and citizens through unified and mutually recognised licensing requirements and technical standards.

At the same time, on the back of concern in some quarters of the bloc, some aspects of integration are on the slow track. Integration and liberalisation in the insurance and financial markets will be postponed until 2022 and a supranational financial regulator will be not established until 2025. Some trade restrictions concerning military equipment and oil shipments from Russia to Belarus will remain in place until 2015.

The Ukraine crisis – which many analysts suggest has Kyiv's drive towards the West at the expense of joining the EEU as one of its cornerstones – has only helped raise worry that the new bloc threatens the independence of non-Russian members. That has seen Kazakh officials insisting there is no political element to the EEU.

However, not everyone seems clear. At a meeting with Russian President Vladimir Putin and Belarus' Alexander Lukashenko ahead of the signing, Kazakh President Nursultan Nazarbayev suggested the leaders had agreed to headquarter the Eurasian Economic Commission - the EEU's executive body - in Moscow. At the same time, a Eurasian Court would be based in Minsk, he said, and a financial regulator for the union would open in Almaty by 2025.

Russia's main negotiator, First Deputy Prime Minister Igor Shuvalov, took Nazarbayev's words to suggest that the EEU would in future envisage a financial and currency union between the member states. "At some point we will need to seriously study the issue of a financial union or perhaps even currency [union]. But this is in future as this ... issue is not on the agenda yet," Shuvalov told a news conference.

Shuvalov's revelation of Russia's designs for the EEU horrified Kazakh negotiators, whose president and government, as well as state-owned media, have been tirelessly promoting the EEU as a purely economic entity. Deputy Prime Minister Bakytzhan Sagintayev showed his irritation as he immediately dismissed Shuvalov's statement. "[Shuvalov] has talked about a financial and currency union. Not a single time have we discussed this issue, neither at our level nor at the level of heads of state," he said. "Today President Nursultan Nazarbayev spoke about positioning Almaty as a financial centre as part of the creation of a supranational financial regulator. There is no talk of any currency and financial union."

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