Does the post-Soviet economic space need a Free Trade Zone?

The next meeting of the Council of Heads of Government of CIS countries will take place in Minsk on May 19, 2011. The Treaty on a Free Trade Zone between CIS countries is on the agenda. Valdaiclub.com interview with Arnaud Dubien, Research director at the Institute of International and Strategic Relations (IRIS) and editor-in-chief of the Eurasia Intelligence Report.

There are two groups of factors: political and economic ones.

It is widely known that certain post-Soviet republics are reluctant to expand political or economic relations with Russia or other CIS members, preferring integration with the European Union or other supranational alliances. One such state is Turkmenistan, with its “neutrality” policy. Ukraine also tends to distance itself from the CIS in many subtle ways, obviously fearing that further integration with Russia might affect its planned rapprochement with the EU. Therefore, the political factors hindering economic integration within the CIS are still out there.

There are other technical and economic factors that constrain economic cooperation between the CIS member states. Countries in the region all have different paces of development and are also on different trajectories. Their economic integration will not be easy in these circumstances.

Ukraine does not want to choose between Russia and the European Union – not that it has that option. Russia has long been proposing that Ukraine join the Customs Union; these proposals have become ever more persistent. At the same time Ukraine is in Free Trade Zone accession talks with the EU. Therefore, Ukraine either lacks the desire or the ability to join the Customs Union. It would prefer to see a free trade zone with Russia, but Russia does not seem to be interested in that.

Ukraine has been facing this dilemma for ages. I believe the obvious decision would be for it to try and make a deal with the EU first, and then – having achieved something at least – to try to reach an agreement with Russia. However, officials in Kiev are afraid that both agreements will remain out of reach.

Russia has to date only achieved lackluster results from its diplomatic efforts on integration. There are several organizations that work, such as the CSTO, although it isn’t operating without a hitch.

It is a rare case when CIS members unanimously agree to sign all the agreements; I don’t see any objective reason for that to change now. There will always be a country – or countries – which will refuse to sign one or more documents or which will require special provisos before they sign anything at all. That is why I remain rather skeptical about this Free Trade Zone treaty project in the CIS, although I admit that it could benefit most member states, or probably all of them.

In the era of globalization, some countries cannot survive on their own. It makes perfect sense for them to create free trade zones. Yet, let me repeat that this project is hardly practicable – at least in full, given the political and other obstacles I have described. I also doubt that it would do anything to consolidate the CIS.

This kind of debate has long been underway in Moscow, and is especially heated where Ukraine is concerned. Should political interests prevail over economic ones? I don’t think so. I would rather say the reverse is true. Russia is ever more reluctant to give up its economic interests.

Russia is certainly trying to negotiate both political and economic concessions from its CIS partners. But I think the Russian government is increasingly inclined to emphasize economic interests. Russia could make some concessions with regard to specific countries, but on the whole it is mostly guided by pragmatic considerations.