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Sep 13, 2012 | 11:00 GMT

Russia-Led Customs Union Focuses on Asia

Russia-Led Customs Union Focuses on Asia

Vietnam and the member states of the Customs Union (Russia, Belarus and Kazakhstan) completed a joint research group study Sept. 11 that offered a favorable assessment of the possibility of a free trade agreement between the two entities. Representatives of both sides said they intend to start negotiations on the agreement in the first quarter of 2013. The study comes on the heels of the Asia-Pacific Economic Cooperation summit, held Sept. 7-9 in Vladivostok, Russia, in which discussions of trade expansion between Russia and Asian countries dominated the agenda. 

As the Customs Union evolves toward the Eurasian Union, recent trade developments indicate that the existing members could be shifting their focus from expanding within the former Soviet Union to building economic ties with other regions, namely Asia. Given that Vietnam appears to be the furthest along in examining the prospects of such a free trade agreement, it will be an important country to watch to gauge how serious Russia is in its Asian trade expansion.

The Customs Union — which Moscow dominates economically and politically — has been an economic priority for Russia for several years, but the bloc has not achieved all of its goals, as it reaches the halfway point of its evolution into the Eurasian Union, which is set to formally take place in 2015. The group's membership has not expanded beyond the original members, and the most sought-after country, Ukraine, has so far resisted Moscow's attempts to get it to join. Furthermore, many of the prescribed milestones of the transition to the Eurasian Union have not yet been met — at least not completely. Many sensitive goods, particularly energy, are still subject to customs controls between members.

Custom Union Members

Customs Union Locator Map

But Russian President Vladimir Putin has recently indicated that the focus of the Customs Union — and, eventually, the Eurasian Union — may have shifted. At the Asia-Pacific Economic Cooperation summit in Vladivostok, Putin said Russia would "actively promote collaboration" between the Customs Union and the Asia-Pacific bloc. Putin added that dozens of countries have already applied for trade agreements with the Common Economic Space — the current phase of the Customs Union — and that the Common Economic Space can provide an important trade connection between Asia and Europe.

This is not a complete reversal of the Customs Union's objectives. When Putin first began talking about the Eurasian Union in 2011, he did vaguely refer to it as a bridge between the two continents. However, the lack of expansion within the former Soviet Union may spur Russia to elevate trade between the existing Customs Union and other regions to a higher priority. Trade with Asia might be particularly emphasized; Russian First Deputy Prime Minister Igor Shuvalov did say at the summit in Vladivostok that Russian trade with the Asia-Pacific countries is likely to surpass the country's trade volume with the European Union in the next five to 10 years.

But beyond vague statements, it is unclear what the process of building trade ties between the Customs Union and other countries will actually entail — particularly because the Customs Union is undergoing its own changes. On the same day that the joint research group's study on Vietnam-Customs Union trade prospects was released, Eurasian Economic Commission Chairman Viktor Khristenko said that dozens of other countries are interested in establishing a free trade zone with the Customs Union. Thirty-five countries have submitted applications to set up a free trade zone, and the Eurasian Economic Commission is "actively working out some of the details," Khristenko said. Little was revealed in the way of specifics, however. Establishing the legal and technical framework to move forward with the free trade agreements is likely to be a multiyear process.

In many ways, Vietnam is a logical choice to serve as a test case for expanding trade ties because of its historically cooperative relationship with Moscow. There are also reports that, if the free trade agreement were realized, Vietnam could act as a trade hub in Asia for former Soviet states due to the preferential trade tariffs and market access that would be included in the agreement. Vietnam would also stand to gain from the agreement — it is trying to diversify its relationships with external actors in order to keep China's regional rise in check. Progress in these free trade agreement talks will be important to watch in order to gauge the prospects for further trade agreements between the Russian-led economic bloc and Asian countries.

Russia-Led Customs Union Focuses on Asia
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