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Apr 12, 2011 | 16:08 GMT

5 mins read

Kyrgyzstan Aims to Join Russia's Customs Union

Summary
Kyrgyzstan will formally apply to join the Russia-Belarus-Kazakhstan customs union. While joining the union would come with significant economic drawbacks as well as benefits, it would effectively formalize an alliance with Moscow, the security and political benefits of which Bishkek may believe is worth the economic tradeoffs. For Russia, adding Kyrgyzstan to the union will not only strengthen its position in the Central Asia, but will also give it leverage against the United States.
The Kyrgyz government approved a plan April 11 for the country to formally apply to join the customs union of Russia, Belarus and Kazakhstan. A commission has been created to begin negotiations between Kyrgyzstan and the current customs union members, and Kyrgyz Prime Minister Almazbek Atambayev said his country hopes to be admitted to the union by Jan. 1, 2012. Atambayev stated the next steps on integration would be discussed at a meeting of the Eurasian Economic Community in Yalta on April 15. Joining the customs union would have significant drawbacks for Kyrgyzstan, such as displacing domestic industries, cutting out re-export opportunities of Chinese goods to the rest of central Asia, and complicating its World Trade Organization (WTO) membership. However, by joining the union, Kyrgyzstan would essentially be formalizing an alliance with Russia, gaining both security assistance and subsidies that it considers more valuable than the potential economic costs that membership the bloc would entail. Kyrgyzstan's application marks an important milestone in Russia's resurgence into its near abroad as it attempts to further integrate the customs union members within its sphere of influence. Kyrgyzstan is one of the poorest countries of the former Soviet Union, and produces little in terms of exports. The country lacks significant amounts of oil and natural gas that Kazakhstan has and is not a key transit route for Russian goods to and form Europe as is Belarus. Russia already subsidizes much of the Kyrgyz economy by providing duty-free goods to the country like fuel and other energy products, while contributing a significant part of Kyrgyzstan's budget through its rent for Russia's Kant air base near Bishkek. Kyrgyzstan's joining the customs union would be economically beneficial for Russia and Kazakhstan. Russian and Kazakh goods are more competitive than Kyrgyz goods within the customs union and would inevitably lead to a rise in Russian and Kazakh exports to Kyrgyzstan (rather than increased Kyrgyz exports to the other countries). Also, in accordance with the tariff barriers that are part of the customs union's membership, Kyrgyzstan's trade with other countries outside of the union — particularly China, with which Kyrgyzstan re-exports many cheap Chinese goods like clothing — would be curtailed. This would lead to a large boost in transit of Chinese goods in nearby Tajikistan, though Tajikistan may also join the customs union by the end of the year. Bishkek's membership would therefore produce indirect benefits for Moscow as Kyrgyzstan would be squeezed out of a significant portion of its trade with other countries, thereby increasing its dependence on Russia, and would entail legal complications to Kyrgyzstan's status as a WTO member. Despite these drawbacks, there are also several economic benefits to be gained by Kyrgyzstan's joining the union. Russia and Kazakhstan are Kyrgyzstan's largest trade partners by far, and while trade relationships with other countries may be disrupted by joining the bloc, eliminating tariffs with its most significant partners would mitigate much of the tradeoff. In addition, Kyrgyz citizens working abroad would likely no longer need work permits in Kazakhstan, Belarus or Russia, were Bishkek to enter the customs union. Atambayev stressed that this would provide more opportunities to all Kyrgyz citizens, especially the estimated 500,000 already working abroad. However, the stronger impetus for joining the union would be political and security considerations, rather than economic considerations. Kyrgyzstan's accession to the customs union would essentially be a formal declaration of its political alignment with Russia — which certain political factions within Kyrgyzstan could trumpet as demonstrating their effectiveness ahead of Kyrgyz presidential elections later this year. Closer political ties with Russia could be used as leverage (both by Bishkek and Moscow) against the United States, which needs Kyrgyzstan for its Manas air base, a key supply transit hub for forces in Afghanistan. These security considerations could also tie in with economic concerns; by joining the union, Russia would likely increase its subsidization levels even more, and could entice Russia to pay more for the military training facility Moscow is planning to build in Osh in Kyrgyzstan's volatile south. Perhaps more important, it would give Russia the ability to control Kyrgyzstan's border security under the "common external borders provision" of the Common Economic Space (CES). Border security is a significant concern for Kyrgyzstan — not just with its more powerful neighbor, Uzbekistan, but also with its southern neighbor Tajikistan, which has seen growing violence near the Kyrgyz border — and one that is repeatedly stressed by the Kyrgyz government. Indeed, on the same day that Kyrgyzstan's official application process was announced, Atambayev said that "joining the customs union means creating common external borders, that is, strengthening the borders, which Kyrgyzstan will be unable to do on its own." He added that creating a single economic space would enable the country to establish peace, especially in the restive Fergana Valley. For Russia, border security is a focal point in enhancing its influence in Belarus and Kazakhstan; it could serve as an opportunity to enhance its influence with Kyrgyzstan as well. Ultimately, Russia will continue to pursue the establishment of the CES, which is the ultimate goal of the customs union and is set to integrate the custom union's members with Russia even further. If the CES is achieved by Jan. 1, 2012, as expected, it will mark an important milestone in Russia's resurgence — spanning the economic, political, and security realms — in its former Soviet periphery. The decision by Kyrgyzstan to apply for the customs union, and thus strive for membership in the CES, is an important step in this regard.

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