The single economic space in CIS: is it advantageous for us?

Mykhailo HONCHAR, vice president of the Strategic-1 Foundation:

“Participation in the single economic space doesn’t correspond with both the long-term and short-term strategic interests of Ukraine, which has proclaimed European integration its priority vector. One can’t move in two directions simultaneously. The idea of a project of the single economic space is in many ways based upon creating an independent committee on trade and tariffs. This will immediately create serious problems for Ukraine’s entering the WTO. How will the policy implemented by this, in fact, suprastate institution correspond with WTO principles? One can claim on end that it will be based upon these principles, but everything will depend on what will be the final tariff rates. The WTO principles are like a mill. You put wheat in it and get flour; you put rocks and you get sand. If Ukraine has problems with the WTO, in the future it will also have problems with creating a free trade zone with the EU. Thus, the strategic goal of joining the EU becomes nothing but a chimera.

“Entering into such economic space will to a significant extent mean a preserving of the Ukrainian economy’s technology level on its post- Soviet stage. Four countries have different potential, with Russia clearly dominating. This union is important for Moscow as an instrument for achieving its economic and political interests. I recall Yeltsin’s order On Russia’s Strategic Course towards the CIS Countries — Moscow’s attempt to reintegrate the post-Soviet space. This led to the post-Soviet periphery’s estrangement from Russia. President Putin displays a somewhat different policy. The idea of a single economic space is a characteristic example of achieving a strategic goal, reintegrating the post-Soviet space on the conditions answering Russia’s goals.

“The idea of creating a single economic space does not contain any mechanism for increasing the living standards in the member countries. So far, the subject is increasing the competitiveness of the four countries’ economy. However, this sounds like a declaration, because the competitiveness of this formation will be defined, to a big extent, by the opportunities of Russia’s economy. Russia wants to press through to the foreign markets as much of its product as possible. It is important for her that other countries’ economies attend to precisely Russian economy’s interests. Minimal tariffs for transporting energy carriers, upon which Russia’s economy is based, are also important. At that, there is no guarantee that member countries will obtain them at Russia’s domestic price. As it was demonstrated by the ten-years experience of creating a free trade zone in CIS, in the final account, everything rests on the issue of prices for Russian energy carriers. Russia doesn’t want to lift customs and have losses in national income. I don’t see any reasons for Russia to sponsor this union any more. There is only one condition under which Russia could make some concessions, though not complete ones: if other member countries relinquish their own defense and foreign policies and become Moscow’s satellites. However, even this doesn’t mean that Russia will make maximal concessions to its political vassals: recall the example of Belarus.”

Dmitry VYDRIN, director of the European Institute for Integration and Development:

“We often lack correct understanding of the procedure of creating large-scale international projects. The motive force in the forming of such alliances is not bureaucrats but elites. To implement such a project, a consolidated elite in each country is necessary. The French- German cooperation can serve as an example of such interaction. Until the critical mass of elites interested in establishing relations between the two countries appeared, all efforts of officials brought no result. Decisions are made not by state committees but by informal meetings of people possessing certain resources and personally interested in implementing the project. In Ukraine, there is no consolidated elite. It is dispersed in terms of their view on the interaction with the Eurasian zone, in part, with Russia. Thus, I don’t see any prospect for creating a single economic space unless the elite majority supporting it is formed. Now the Ukrainian elite will be divided one more time into the project’s supporters and opponents. As usual, there will be endless discussions, coordination, creating task forces and committees, etc. This is how dozens of projects have already come up to nothing.

“A project to create a single economic space for four states envisages many levels. I know that it is supposed to create single transport tariffs, for instance. This would be profitable for Ukraine. The tariffs in our country are higher than, say, in Russia. Thus, as a result of the tariff war, many transit goods traditionally transported via Ukraine now go through other countries. Take, for instance, Russian timber, which is now exported through Estonia. This is big profit, hundreds of millions dollars. However, since the project’s details weren’t made public and foreign policy remains in the lobby and is implemented on the level of bureaucrats instead of civil society or the aforementioned elites, we can’t discuss things we don’t know about.”

Mykhailo BRODSKY, leader of the Yabluko party:

“The Moscow statement is an attempt to liquidate Ukraine’s state sovereignty and turn it into Russia’s domestic market. Other countries’ economies will work by the rules dictated by Russia. The complete freedom of goods’ movement in the situation when Russia’s products are made on energy carriers several times cheaper than Ukrainian means only numerous bankruptcies and dramatic growth of unemployment. Earlier they have unthinkingly torn economic ties, but now they are trying to restore them even more blindly. One can speak about free goods’ movement only under two conditions: either Russia increases its domestic prices for energy carriers up to the world level, or it sells them to Ukraine at domestic prices. Putin will agree to neither.

“The conditions of our cooperation with Russia are such that sometimes it seems that we have just lost a war to Russia and now have to satisfy every victor’s demand. Last year Ukraine’s export to Russia shortened by approximately 12-15%, while Russia’s export to Ukraine increased by 6%. In this situation the only inspiring thing is the fact that losses in the Russian market make Ukrainians search for other markets, primarily European one, which is good for our economy.”