Is Proposed 'Union' a Return to Soviet Era?

0 Comments | Insight on the News, Nov 10, 2003

Byline: Jamie Dettmer, INSIGHT

BELARUS - There have been several attempts to form economic "unions" between former Soviet states since the collapse of communism and the breakup of the Soviet Union but all have failed often to catcalls and mockery from U.S. and European officials. In September, the leaders of Russia, Ukraine, Belarus and Kazakhstan, who all are under pressure to boost their struggling economies, launched yet another effort to start the process of creating what they call a "common economic space" that would stretch from Europe to Central Asia.

The goals of the boldest initiative yet are to end border tariffs between the four states, form a customs union and establish a unified tax regime.

When not predicting the effort to be doomed at birth, U.S. officials argue that the union is a clumsy attempt by Russia to keep neighboring states under its political thumb and to prevent them from integrating with the European economic mainstream to the west of them.

On the signing of the initiative, U.S. Ambassador to Ukraine John Herbst hinted that Ukraine's membership could prevent Kiev's bid for World Trade Organization membership. "Of course, it is the Ukrainian government's decision," he said, adding, "I think there needs to be a careful look at the way this agreement fits in with the aspiration of the Ukrainian government to join Euro-Atlantic organizations."

European officials, too, have raised the specter of a new Russian empire emerging. The European Union's (EU) commissioner in charge of expansion, Guenter Verheugen, was quick to denounce the proposed union during a recent visit to Kiev and to warn Ukraine about the potential harm such an agreement could do to its bid to increase trade and cooperation with EU members. Ukraine has become the subject of a tug-of-war for influence between Russia which has invested heavily in the region and the EU.

The U.S. and European reaction to the proposed economic union is in many ways a testament to the mounting strains between Moscow and the West, particularly with the Bush administration. Despite a successful recent summit meeting between Russian President Vladimir Putin and George W. Bush, U.S. and Russian officials concede that suspicion is starting to mark U.S.-Russian relations once again. Some of that suspicion has emerged because of the failure to realize the high expectations of a "strategic partnership" between the former Cold War rivals, say Bush officials. Washington remains unhappy about Putin aligning with France's Jacques Chirac in opposition to the war in Iraq.

Other observers argue that the most forceful foreign-policy makers in the Bush administration are old Cold Warriors whose reflexes are anti-Russian. The same could be said in reverse about some of the advisers who surround Putin many are ex-KGB and can't forget the past either.

But to see the proposed union as some kind of return to the Soviet era may be a mistake and reflect a failure to understand the economic challenges Russia and former Soviet states face. Putin himself has denied angrily that Moscow is attempting to turn the clock back to a time of Soviet supremacy over neighboring states. "That is complete rubbish ... that matter is closed," he said. In Yalta, on the signing of the economic-union agreement, he declared: "This document is the foundation for solving economic problems. And the most important thing is that it does not threaten the political interests of our countries."

Ukraine President Leonid Kuchma agreed. "European markets are closed to us. ... [Now] we are moving ahead and not standing still."

There are in fact sound economic reasons for the proposed union as far as the four countries involved are concerned. An economic union would give Putin a foreign-policy success to brandish at the next presidential election in six months' time and would assist Russian companies to further their recent expansions in Ukraine and Belarus. "The Russians Putin and his team certainly want to emphasize the importance of economic expansion and, if you look at it realistically, it would be illogical for them to ignore their immediate neighbors," said Alex Vatanka, editor of the London-based Jane's Sentinel newsletter.

For the other countries there is a desperate need for increased exports. "There is still a manufacturing sector in these countries, which is noncompetitive internationally," Rand Corporation analyst Stephan De Spiegeleire told Radio Liberty recently. Like Western companies, firms in former Soviet states see the Russian market as a potentially profitable one.

Russian diplomats concede that it will take years for the proposed union to be negotiated and there will be obstacles and disagreements along the way, especially between Putin and Belarus leader Alexander Lukashenko. The Belarus president is demanding a massive $2 billion credit from Russia as part of a deal to introduce the Russian ruble as the currency in Belarus, and Lukashenko's insistence that Belarus be seen as the equal of Russia is scorned by Putin.