Members of the Commonwealth of Independent States (CIS) are revising their trade and economic priorities in favor of non-CIS countries, thus cutting inter-CIS trade. Russia has increased trade with partners outside the CIS by 150% and only by 100% with member states in the past few years. Overall, Russia's trade with the CIS went down from 18.2% to 15.2% of the total.
According to customs data, Russia's foreign trade totaled $339.8 billion in 2005, including $288.2 billion with non-CIS countries (a growth of 37.2%) and $51.6 billion with the member states (+9.3%).
Border trade accounts for a substantial share of overall trade in industrialized countries. The United States' northern neighbor, Canada, accounts for 19% of its foreign trade, and its southern neighbor, Mexico, for 12%.
Russia's biggest CIS neighbors - Kazakhstan, Belarus and Ukraine - account for 2.8%, 4.6% and 5.9% of its foreign trade, respectively.
The reason for redirecting economic ties to the West, China and other non-CIS countries is simple. American companies have invested about $6 billion in the economy of Kazakhstan, while Russia has provided only $105.7 million, or nearly 60 times less. In the next 10 years, the U.S. intends to invest about $200 billion in Kazakhstan, including about 80% of the sum total in oil and gas production.
In this way other countries are taking over Russia's potential place in the oil and gas sector of Kazakhstan. Pro-Western lobbies supported by international economic and financial unions and institutions are very active in many CIS states. Logically, they are lobbying for the interests of Western companies to the detriment of Russian ones.
The future integration of the CIS states will be greatly influenced by their accession to the World Trade Organization (WTO). As of now, Armenia, Georgia, Moldova and Kyrgyzstan are the only CIS members in the WTO. The other CIS states (with the exception of Turkmenistan and Tajikistan) have filed accession requests and are holding negotiations.
WTO membership can facilitate national producers' entry into Western markets. But the CIS states will have to take measures to improve the quality of their output and make it more competitive, as well as to restructure production.
In accordance with the principle of compliance with the provisions of the agreements that form the legal foundation of the WTO, aspiring countries must adjust their legislation to WTO norms and rules, especially as regards the regulation of international trade and the position of imports on the national markets. In other words, accession to the WTO calls for overhauling national legislation and the terms of international treaties within the CIS.
The member states will have to specify the principles of their foreign trade because they are closely connected in many areas (most-favored-nation status, withdrawals, the terms of mutual control, introduction of obligatory dispute-settlement procedures, responsibility for compliance with contractual obligations, pricing policy, and subsidies).
There are some factors that can promote the integration of the CIS, including the experience of coexistence within common borders, the intermingling of cultures, as well as specialized monopolies whose output is in high demand in the CIS, primarily fuel and energy ones. Other vital factors are transport, mutual trade, the remaining production ties, and migration policies.
The benefits of membership depend on a balanced regard for the interests of member states. The interests of Armenia, Belarus, Georgia, Kyrgyzstan, Moldova and Tajikistan lie in the fuel and energy sector, agribusiness and defense industries. Azerbaijan, Kazakhstan, Russia, Turkmenistan and Uzbekistan mostly focus on the creation of a transport infrastructure, notably for the delivery of energy, as well as the development of Caspian resources.
The countries that depend on the fuel and energy sector should develop relations with the oil, gas and electricity transit states of the CIS. They should draw on global experience to coordinate preferential prices for energy and transit.
On the whole, there are more uniting than dividing factors in the CIS.
Russia, which is crucial for the effective development of the CIS, should serve as an example through sustainable economic growth, thus creating a socially oriented state with high living standards. It should probably use economic concessions more widely with a view to subsequent geopolitical gains.
However, Russia seems to be more charitable with regard to non-CIS countries. It has written off the debts of Syria ($10 billion), Algeria ($4.7 billion) and Iraq ($10 billion), and is prepared to "forgive" Afghanistan a $10 billion debt. But its debt policy towards the CIS states is changing from charitable to pragmatic.
The United Kingdom continues to work energetically with the former members of the British Empire. It has a Foreign and Commonwealth Office that handles economic and political relations with the former colonies and dominions. The national budget has a separate item for financial assistance to the former members of the British Commonwealth.
Russia needs the CIS geopolitically, politically, economically and socially, because it will always have special relations with the member states. These relations should rest on the principles of mutual benefit and reasonable financial assistance. If Russia uses its ability to promote effective integration wisely, the CIS will not just survive its current tribulations, but will also develop as fast as other advanced global organizations.
Professor Vyacheslav Vashanov is head of the Center of the Economy of the Commonwealth of Independent States.
The opinions expressed in this article are those of the author and may not necessarily represent the opinions of the editorial board.
