Despite Pressure From Washington, Post-Soviet Integration Goes Ahead
Sep 19, 2003



The four largest post-Soviet economies have agreed to merge into a United Economic Space. The UES is likely to work eventually, but the integration will move slowly due to opposition from Washington.


The presidents of Russia, Ukraine, Belarus and Kazakhstan on Sept. 19 inked an agreement to create a new economic integration structure called the United Economic Space, or UES. The stated mission of the UES -- which will be modeled after the European rather than Soviet Union -- is to introduce and maintain a free flow of goods, services, capital and labor from within the member nations.

The leaders of the four founding countries expect the UES to help their struggling economies by facilitating ties and eliminating trade barriers. The UES likely will expand over time to include other former Soviet states. It also could serve to help prepare these countries economically for possible European Union membership in the long run.

Progress in the UES is likely to be slow and difficult, however, due to the disapproval of the United States and rancor among some of the member nations' elites. The integration process also will be hampered as the four states try to move forward with the initiative and yet stay in Washington's good graces.

Unlike its predecessors in the post-Soviet region, however, the UES integration is likely to work. The four largest and strongest economies in the region are combining forces. Although their economies are not in excellent shape, Russia and Kazakhstan have plenty of natural resources to share with Ukraine and Belarus. All four members produce goods and services that they can trade amongst themselves, whereas they have met barriers trading with Western nations due to high standards for imports.

This is the first integration structure in the post-Soviet region that eliminates customs, taxes and duties. The UES has pledged to work on significantly reducing other tariffs within the new organization as well. The founding states have appointed a group to oversee the enforcement of rules within the new structure. Eliminating barriers inside this geographically and culturally interconnected group of nations potentially could boost their business ties, trade and economic growth significantly.

The UES likely will serve as an engine for further integration within the post-Soviet region. Leaders of the four countries believe the new structure could prepare their economies for joining the World Trade Organization and even the European Union in the long run, by following the EU model, in which goods, services, people, and money flow relatively freely between member states. The EU began as a customs union and the Rome Treaty, which appear modest by modern standards of integration. Since no political or security strings are attached to the UES, the members will not face as much difficulty from bodies such as the EU that oppose this type of integration because it does not fit their model of political union.

Kazakhstan and Ukraine agreed to participate largely because the UES follows a European, not a Soviet, model. In fact, Astana -- not Moscow -- has led the push for this structure. Ukraine and Kazakhstan joined forces on this issue likely because their governments believe Moscow is moving closer to wanting integration into the EU. They share this goal, and thus see an alliance with Moscow as a potential benefit.

Washington, however, might make the going tough for the UES. U.S. Ambassador to Ukraine John Herbst discouraged Kiev from signing the agreement on Sept. 18. Stratfor sources say that at a press conference in Kiev, he said, "I think we must look carefully at the consequences of the steps that have been taken [to create the UES], and whether they fit in with Ukraine's desire to be integrated into the Euroatlantic community. It is in the interests of Ukraine not to have this integration complicated. The United States fully supports Ukraine's desire to become a member of the Euroatlantic community and join the global economic community. We closely cooperate with Ukraine's government in order to help it join the WTO."

Washington opposes the UES because it is easier for the United States to deal with its member states separately. If they are united, even only economically, they will become more of a force to be reckoned with. Washington prefers Russia to be a junior partner that does not present a real threat to its dominance; the UES stands to make Russia -- and the three other member states -- stronger. Washington might worry that one day this economic integration could lead to a political union of former Soviet states that could compete geopolitically with the United States.

Washington's disapproval encourages opposition movements within the four member states to resist as well. Among the four, the strongest protests have emerged in Ukraine. As a concession to the opposition, leaders have agreed that there will be no authoritative bodies that usurp the power of the individual countries' governments in the UES (a departure from the EU model), only regulatory bodies responsible for ensuring that the UES implementation goes forth. That will require members to sign and implement about 50 agreements over the next five to seven years.

The members of the new economic body all will try to move forward with integration, but at the same time to remain in Washington's good graces. Given the sheer geopolitical weight of the world's only superpower, no one can afford to ignore it. But however slowly and problematically, the integration of post-Soviet states has begun and will continue. These countries recognize their need for integration -- not only to ensure their own economic survival, but so that in time they might be accepted into other integration structures with developed nations.