Meet the EEU family (Eurasian Economic Union)
(Business New Europe – bne.eu – bne IntelliNews – January 5, 2015)
Members: Belarus, Kazakhstan, Russia
Prospective member: Armenia
Potential members: Kyrgyzstan (likely), Tajikistan (unlikely)
Population: 173mn (Russia, including Crimea, 146mn; Kazakhstan, 17mn; Belarus, 10mn)
Total GDP: $2.7tn
Share of world gas reserves: 20%
Share of world oil reserves: 15%
On January 1, the Eurasian Economic Union Treaty governing what critics have derided as Russian President Vladimir Putin’s plan to recreate the Soviet Union came into force as planned. According to the agreement, the Eurasian Economic Commission (EEC) will be the supranational regulatory body of the Customs Union (CU), which came into effect in January 2012, and the Single Economic Space (SES). The Presidency of the Council rotates every year among the deputy prime ministers of the EEC member states.
Already Russia is using the EEU to further its interests globally, calling on the EU on January 2 to launch talks with the EEU despite the Ukraine crisis, and in a sly dig at the US arguing it is a better partner for the EU given conflicting health standards in the US food industry.
In an interview with EUobserver, Russian Ambassador to the EU Vladimir Chizhov said: “Our idea is to start official contacts between the EU and the EEU as soon as possible. [German] Chancellor Angela Merkel talked about this not long ago. The EU sanctions [on Russia] are not a [hindrance]… I think that common sense advises us to explore the possibility of establishing a common economic space in the Eurasian region, including the focus countries of the Eastern Partnership [an EU policy on closer ties with Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine].”
“We might think of a free trade zone encompassing all of the interested parties in Eurasia,” Chizhov added.
According to the “Eurasian Economic Integration: Facts and Figures,” the EEU Treaty sums up the existing regulatory-legal framework of the CU and SES, consisting of over a hundred international treaties signed between 1995 and 2012. The codification into one treaty is expected to improve applicability of the agreements between the Member States in macroeconomics, finance, trade and investment, transportation and energy, industry and agro-industry, and make them more systematic.
The treaty on Armenia’s accession was signed by the three existing members and Armenia on October 10, 2014. It will come into effect after all four countries confirm completion of their domestic ratification procedures.
As for Kyrgyzstan, it is currently implementing roadmaps for its accession to the CU and SES that were agreed in May 2014 and October 2014, respectively. Both documents set forth numerous terms and conditions calling for legislative and regulatory changes with deadlines ranging from “6 months before accession” to “after accession” or “2014-2020.”
Since in essence the EEU Treaty is a compilation of the relevant provisions of the existing CU and SES laws and regulations, Belarus, Kazakhstan and Russia should not see any overnight changes to their usual business procedures with the launch of the EEU on January 1. The three countries have already launched a unified external tariff and customs code, began unifying their sanitary, phytosanitary, veterinary, and technical regulations, and moved border controls to the external CU border.
For Armenia and, later on, the Kyrgyz Republic it is a different story. Both countries have some import tariffs, including for agricultural goods, that are lower than the unified CU customs tariff, so they will see some phased-in customs tariff increases. For example, the treaty on Armenia’s accession to the EEU foresees the Armenian import tariff on some beef, pork and poultry items increase every year starting in 2016 from 10% to 25%, 15% and 50%, respectively, in 2021, with the final transfer to the unified CU tariffs on these items in 2022.
Moreover, as both countries are World Trade Organization members, before any such EEU-related customs tariff changes can take place, both countries will have to re-negotiate them in the framework of the WTO. Similarly, trade with Armenia and Kyrgyzstan will be affected by their transfer to the unified CU sanitary, phytosanitary, veterinary and technical regulation measures, such as the use of the unified CU forms of veterinary certificates to facilitate trade in goods that are under veterinary control.
Finally, the transfer of border controls to what by that time will be the external EEU border will definitely affect Kyrgyzstan. Armenia, having no common borders with any of the other EEU members, should not be affected.