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EURASIAN UNITY UNDER STRAIN EVEN AS BLOC EXPANDS
http://www.ft.com/cms/s/0/b08c2e4e-8ab2-11e4-8e24-00144feabdc0.html#ixzz3MjxKvaEf
December 23, 2014 4:34 pm
Jack Farchy
Kyrgyzstan on Tuesday a signed a treaty to join the Eurasian Economic
Union, expanding the membership of Moscow-led project to five even
as its unity is strained by the market turmoil gripping Russia.
"We have just signed an agreement on joining the Eurasian Economic
Union," Almazbek Atambayev, Kyrgyzstan's president, announced at a
meeting of heads of state of the union in Moscow.
The Eurasian Economic Union will formally come into existence on
January 1, replacing the customs union of Russia, Kazakhstan and
Belarus, with Armenia set to join a day later. Kyrgyzstan's treaty
is due to come into force in May.
But its unity is already fraying as Moscow's rift with the west and
the wild gyrations in the rouble upend trade relations and imperil
the ideal of the union as a counterweight to the EU.
Kazakhstan and Belarus have refused to follow Russia in imposing an
import ban on western produce, effectively resurrecting trade barriers
in what is supposed to be a free trade zone.
Alexander Lukashenko, president of Belarus, on Tuesday complained that
the countries "still do not have absolutely free movement of goods".
"There is no point in hiding it," he said.
Kyrgyzstan's agreement to join the union comes after years of haggling
in Moscow and Bishkek.
The move has been contentious within Kyrgyzstan, where there are
concerns that joining the union will hurt the country's ability
to function as a hub for re-export of Chinese goods to the rest of
the region.
Mr Atambayev said in October that joining the union could lead to
higher inflation for Kyrgyzstan, but insisted that the country had
no alternative. "We're choosing the lesser of two evils. We have no
other option," he said.
On Tuesday, he said that the country's experience of two revolutions in
the past decade helped make the decision. "We know how fragile peace
and harmony are, so we deliberately chose the path of integration,
of neighbourliness and of friendship," he said.
But Kyrgyzstan's path to the union is being smoothed by Russian money.
The tiny country, with gross domestic product of just $7.2bn last
year, will receive aid from Russia worth $1.2bn over two years in
exchange for joining the union. The money will consist of a $1bn fund
for development and a $200m grant to help Kyrgyzstan implement the
"roadmap" for joining the union.
Russian companies have also become more active in the past year,
with Gazprom buying Kyrgyzstan's indebted gas company in April.
There have also been suggestions that Kyrgyzstan may be allowed some
exemptions, for example by continuing to import Chinese goods for
domestic consumption at the old tariff rates.
Kyrgyzstan's economy is likely to be hard hit by the fall in the
rouble, since it is dependent on money being sent home by migrant
workers in Russia. Such remittances account for 31 per cent of
Kyrgyzstan's GDP, according to the World Bank.
http://www.ft.com/cms/s/0/b08c2e4e-8ab2-11e4-8e24-00144feabdc0.html#ixzz3MjxKvaEf
December 23, 2014 4:34 pm
Jack Farchy
Kyrgyzstan on Tuesday a signed a treaty to join the Eurasian Economic
Union, expanding the membership of Moscow-led project to five even
as its unity is strained by the market turmoil gripping Russia.
"We have just signed an agreement on joining the Eurasian Economic
Union," Almazbek Atambayev, Kyrgyzstan's president, announced at a
meeting of heads of state of the union in Moscow.
The Eurasian Economic Union will formally come into existence on
January 1, replacing the customs union of Russia, Kazakhstan and
Belarus, with Armenia set to join a day later. Kyrgyzstan's treaty
is due to come into force in May.
But its unity is already fraying as Moscow's rift with the west and
the wild gyrations in the rouble upend trade relations and imperil
the ideal of the union as a counterweight to the EU.
Kazakhstan and Belarus have refused to follow Russia in imposing an
import ban on western produce, effectively resurrecting trade barriers
in what is supposed to be a free trade zone.
Alexander Lukashenko, president of Belarus, on Tuesday complained that
the countries "still do not have absolutely free movement of goods".
"There is no point in hiding it," he said.
Kyrgyzstan's agreement to join the union comes after years of haggling
in Moscow and Bishkek.
The move has been contentious within Kyrgyzstan, where there are
concerns that joining the union will hurt the country's ability
to function as a hub for re-export of Chinese goods to the rest of
the region.
Mr Atambayev said in October that joining the union could lead to
higher inflation for Kyrgyzstan, but insisted that the country had
no alternative. "We're choosing the lesser of two evils. We have no
other option," he said.
On Tuesday, he said that the country's experience of two revolutions in
the past decade helped make the decision. "We know how fragile peace
and harmony are, so we deliberately chose the path of integration,
of neighbourliness and of friendship," he said.
But Kyrgyzstan's path to the union is being smoothed by Russian money.
The tiny country, with gross domestic product of just $7.2bn last
year, will receive aid from Russia worth $1.2bn over two years in
exchange for joining the union. The money will consist of a $1bn fund
for development and a $200m grant to help Kyrgyzstan implement the
"roadmap" for joining the union.
Russian companies have also become more active in the past year,
with Gazprom buying Kyrgyzstan's indebted gas company in April.
There have also been suggestions that Kyrgyzstan may be allowed some
exemptions, for example by continuing to import Chinese goods for
domestic consumption at the old tariff rates.
Kyrgyzstan's economy is likely to be hard hit by the fall in the
rouble, since it is dependent on money being sent home by migrant
workers in Russia. Such remittances account for 31 per cent of
Kyrgyzstan's GDP, according to the World Bank.