Worries grow in Kazahstan over its membership of Russia-led Customs Union

By bne IntelliNews April 9, 2014

bne -

Kazakhstan's membership of the Russia-led Customs Union continues to cause controversy. The bone of contention has so far been the damage the membership it's inflicting on Kazakhstan's economic interests, but the Kremlin's behaviour towards Ukraine is clearly raising tension amongst Kazakh officialdom.

On April 8, Kazakh First Deputy Prime Minister Bakytzhan Sagintayev wayed into the simmering debate, which this week centred on claims Kazkhstan's food security is suffering due to its membership in the free trade area that also includes Belarus. Addressing a press conference, the official insisted Kazakhstan will have levers available to protect it from any danger of domination by Russia once the project widens.

As the second largest of the former Soviet economies, Ukraine's participation in Russia's pet project to form a Eurasian version of the EU, the so-called Eurasian Economic Union, is seen as crucial. Moscow's pressure on the interim authorities in Kyiv is widely understood to be part of a effort to force it to abandon plans to sign up to a political and trade pact with Brussels. The Russian annexation of Crimea in March has prompted concern in Kazakhstan over ceding sovereignty to the Eurasian Economic Union, a structure which will be dominated by the Kremlin. 


Addressing these concerns, Sagintayev said Astana would be able to defend its interests using two supranational bodies - the Eurasian Economic Commission and Eurasian Court - in which, he claims, the equality of parties will be ensured. "There will be equality in the court as each party [member state] delegates two judges," Sagintayev said, adding that the alliance is not political but economic.

The official also insisted that membership in the Eurasian Economic Union, which is expected to be formed in 2015 by members of the Customs Union, which should also by then include Armenia and Krygyzstan, will not prevent Astana from developing relations with other countries. "It is important to stress that according to the treaty nothing bans us from concluding treaties with third countries and international organisations," Sagintayev told a news conference. "This is our principle of multi-vector foreign policy."

However, sensitivity to speculation that the plans are little more than a "resurrection of the Soviet Union" remains. Russia's First Deputy Prime Minister Igor Shuvalov floated an idea in March that a Eurasian Central Bank could be set up by 2025. That revived speculation seen in recent years years that Kazakhstan could at some point lose its national currency to adopt either the Russian ruble or another Eurasian currency.

Sagintayev, however, dismissed such talk out of hand, and insisted Kazakhstan will not give up the tenge. "I don't know where rumours about a single national currency of the Eurasian Economic Union come from, but we've never discussed these issues. Kazakhstan has had, and will have, the tenge," he said. Forbes Kazakhstan has reported that a single financial regulator for the Eurasian Economic Union will be established in the Kazakh financial capital Almaty.

Nervously watching Ukraine

Despite the authorities' insistence that Kazakhstan is a full and equal partner in the project, there are signs that Astana is nervous as it watches events in Ukraine. Russian forces are reported to be massing on the border with eastern Ukraine, and Moscow insists it reserves the right to move in to protect ethnic Russians from what it claims are fascist forces in Kyiv. Ukraine, meanwhile, blames Russian provocation for the ongoing protests and occupation of government buildings in cities in the east of the country. 

Kazakhstan also has a large Russian minority, mainly in the north of the country, and is clearly wary of any similar action against its sovereignty. On April 8, local media reported that the government is to criminalize "separatist activities" and raise tough new penalties, in a new draft of the criminal code. 

“The draft criminal code will have a new article that criminalizes separatist activities. Calls for illegitimate, unconstitutional changes to the territorial integrity of Kazakhstan or disintegration will be considered a criminal offense," Arman Ayaganova of the Prosecutor General's Office, announced, according to Tengrinews. Under the new legislation, calls for the illegitimate violation of Kazakhstan's territorial integrity will be punishable by up to 10 years in prison.

Analysts say the move bars the way towards federalization and creation of national autonomies, but warn that due to vague language the law could also be used against any protest - noting the recent rise in complaints over the economy since the devaluation of the tenge in February.

Russia insists that federalization is the only route out of the standoff in Ukraine. Kyiv rejects the call, saying such decentralization would set the scene for further secession of regions.

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