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BUSINESS & ECONOMICS

MOSCOW PRESSING TO CREATE UNITED ECONOMIC SPACE

Sergei Blagov 9/09/03

Russian leaders continue to press for the establishment of a "United Economic Space (UES)," comprising Russia, Belarus, Kazakhstan and Ukraine. According to Moscow’s vision, this core group of former Soviet republics would rely on the Russian ruble to facilitate trade and continued development. The other potential UES participants, however, do not share Russia’s enthusiasm for the project.

Moscow appears to hold out hope that a UES framework agreement could be signed at the next CIS summit, due to be held in Yalta, Ukraine, on September 19. "It seems to me that the current blueprint is mutually acceptable as it fits the interests of all four states," the official RIA news agency quoted Russian President Vladimir Putin as saying after a September 2 meeting with Ukrainian leader Leonid Kuchma.

Other leaders of potential UES members sound less upbeat about the group’s viability. Kuchma, for example, sounded tentative in assessing the prospects for a UES agreement. "I think we have reasons to state that we must move towards the signing," he was quoted by RIA. Meanwhile, Kazakhstan’s Nursultan Nazarbayev has stressed that the UES should not replace the CIS’s political component, and should instead concentrate solely on promoting economic integration.

The leaders of Russia, Belarus, Ukraine and Kazakhstan reached a tentative agreement to create the UES at a summit meeting last February. [For background see the Eurasia Insight archives]. At that time, they envisioned that a framework agreement would be ready for signing by September.

During the summer, Russian officials have been relentlessly upbeat on the UES project. Russian Deputy Prime Minister Viktor Khristenko went so far as to compare the UES with the European Union. On August 28, the Russian government approved its version of a blueprint to launch the UES as a new organization of regional integration. On the same day, Russian Prime Minister Mikhail Kasyanov casually mentioned that the UES would require a "supra-national" governing body.

Such talk has alarmed Ukraine and Kazakhstan, both of which are wary of Russian efforts to reestablish "a soft empire." On August 28, for instance, Ukrainian Foreign Minister Anatoly Zlenko rejected the notion that Kyiv would agree to the creation of "supra-national" structures under UES auspices. He also reportedly made clear that Kiev is unlikely to accept other Russian initiatives, such as customs union and the single currency.

Some analysts believe that Moscow’s efforts to forge the UES may follow the pattern established by the Eurasian Economic Community (EEC), a broader initiative launched in 2001 that sought to promote free trade among CIS states. [For background see the Eurasia Insight archive]. At present, EEC development plans are stalled. In late 2002, Kasyanov expressed hope that the EEC would adopt the Russian ruble as a common currency but since then little progress has been made toward that end.

The fact that Russia continues to record a sizeable trade surplus with its CIS neighbors is a major factor in encouraging Moscow to advocate a "ruble zone" among UES and EEC members. Yet, the notion of a single currency reportedly faces opposition even from Russia’s closest ally, Belarus. On September 2, Belarusian leader Alexander Lukashenka sent Putin a formal note that "reflected Belarus’ position on the substance of this [single currency] issue," according to a report by the Interfax news agency. The note came in response to Putin’s earlier plea that Belarus agree to adopt the Russian ruble in the near future. Details of Lukashenka’s letter have not been released, but in late August the Belarussian leader criticized the Russian single currency plan.

Editor�s Note: Sergei Blagov is a Moscow-based specialist in CIS political affairs.

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