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article imageRussia clinches economic union with Belarus, Kazakhstan

By Dana Rysmukhamedova (AFP)     May 29, 2014 in World

Russian President Vladimir Putin on Thursday signed a deal creating an economic union with ex-Soviet states Belarus and Kazakhstan, with Ukraine conspicuously absent after it turned its back on Moscow.

"Russia, Belarus and Kazakhstan are going over to a fundamentally new level of cooperation," Putin said at the signing ceremony in the Kazakh capital of Astana.

The newly created Eurasian Economic Union will come into force on January 1, 2015. It guarantees free circulations of goods, services, capital and the work force and means that the members have to agree on certain areas of economic policy.

Trade turnover between the three countries in 2013 amounted to $66.2 billion, Putin said.

The project is hugely symbolic for Putin, who in 2005 called the breakup of the Soviet Union "the biggest geopolitical disaster" of the 20th century.

"The agreement signed really has epoch-making historic significance," Putin said,

"This strengthens the competitiveness of our countries in the world economy."

Two other ex-Soviet states, Armenia and Kyrgyzstan, are on track to join the union, Putin said.

But the union crucially failed to secure the participation of Ukraine, a country of 46 million with a potentially strong industrial sector.

(From right) Russian President Vladimir Putin shakes hands with his Kazakh counterpart Nursultan Naz...
(From right) Russian President Vladimir Putin shakes hands with his Kazakh counterpart Nursultan Nazarbayev and Belarussian counterpart Alexander Lukashenko during a regular meeting of the Supreme Eurasian Economic Council in Astana on May 29, 2014
Michael Klimentyev, Ria Novosti Pool/AFP

"We lost some along the way: I mean Ukraine," Belarussian President Alexander Lukashenko acknowledged at the signing ceremony.

"I am sure that sooner or later the Ukrainian leadership will realise where its fortune lies."

However this is seen as unlikely under Ukraine's newly elected president, pro-Western billionaire Petro Poroshenko, who campaigned on a pledge to hasten European integration, thwarting Moscow's ambitions.

"Ukraine will not enter this union. That is a blow to the Eurasian Economic Union," said political analyst Alexei Makarkin at the Center for Political Technologies in Moscow.

Ukraine plunged into an unprecedented crisis last November when then-President Viktor Yanukovych pulled out of signing an Association Agreement with the European Union.

Putin then threw Ukraine a $15 billion dollar lifeline and slashed its gas bill in exchange for staying within Moscow's sphere of influence with the expectation being that it would ultimately join the union.

But months of street protests led to Yanukovych's ouster and the installation of pro-Western leaders determined to steer the country out of Moscow's orbit.

- 'Heated discussions' -

The alliance will follow a much looser Eurasian Customs Union that Russia formed with the two ex-Soviet nations in 2010 in an effort to build up a free trade rival to the 28-nation EU bloc.

Russian President Vladimir Putin (R) is welcomed by Prime Minister of Kazakhstan Karim Massimov upon...
Russian President Vladimir Putin (R) is welcomed by Prime Minister of Kazakhstan Karim Massimov upon his arrival in Astana, Kazakhstan, on May 29, 2014
Michael Klimentyev, Pool/AFP

Putin hinted that discussions had been far from smooth with Belarus and Kazakhstan's strongmen leaders.

"It was hard to come to agreement on all these questions up to this moment," Putin said. "I don't want to say there were rows, but still there were heated arguments, heated discussions."

He stressed that union did not mean the members were handing over their sovereignty.

"It's important that the handing over of certain powers to the supra-national organs of the union does not cause absolutely any harm to the sovereignty of our countries."

Nazarbayev also stressed: "This union is economic and does not affect the countries' sovereignty."

Both Kazakhstan and Belarus are "extremely cautious about political integration," said Makarkin, adding they wanted to reap economic benefits from the union, without weakening their highly centralised power structures.

"They don't want a single currency, citizenship and president but want to have a Russian market for their goods. Lukashenko and Nazarbayev didn't create their regimes in order to hand over their powers to Russia."

Kazakhstan is an energy-rich country but was forced to devalue its currency, the tenge, in February under pressure from Russia's slowing economy among other factors.

Belarus's cash-strapped economy has suffered recurring crises. It still based on Soviet principles and is closely controlled by the state with very little private sector activity.

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