The presidents of Russia, Belarus and Kazakhstan have signed the Agreement on the establishment of the Eurasian Economic Union which will become effective as of 1 January 2015. The process was initiated in 2011 during the first summit of the Council where the officials adopted the joint declaration for economic integration.
At the end of May, the presidents of Russia (Vladimir Putin), Belarus (Alexander Lukashenko) and Kazakhstan (NursultanNazarbayev) signed the Agreement on the establishment of the Eurasian Economic Union. The three countries will form an attractive and strong economic centre, while setting up an important regional market.
By signing the Treaty, the three countries have officially approved the establishment of one of the largest integrated economic unions in the world. With a population of 170 million (ranked 7th in the world), the union is one of the largest consumption markets. At the same time, it account for a quarter of all mineral resources worth USD 40 Trillion.
“The Eurasian Economic Union will operate based on universal, transparent and clear principles including the principles of the World Trade Organisation. This document will take our countries to a new level of integration which stipulates a well-coordinated economic cooperation”, Russian President Vladimir Putin declared.
“Together, we began to put this noble idea into practice. In the last five years alone, Kazakhstan’s trade with the other Customs Union member states grew by 88%, reaching nearly USD 24 Billion. Export to our Eurasian integration partner states increased by 63% to USD 6 Billion. These are not abstract figures. They represent hundreds of companies and enterprises, and new lines of cooperation between partners in Kazakhstan, Russia and Belarus”, Kazakhstan President NursultanNazarbayev declared.
“The establishment of the Customs Union, of the Common Economic Space and finally of the Eurasian Union has been a long and complicated process, but by common efforts, the Eurasian integration is marked by the signing of the Treaty. Belarus will shape its objectives within the system and our priorities are well-known. Within the Union, we will approach the problems related to economic cooperation and trade to make all processes efficient”, declared Alexander Lukashenko, the President of Belarus.
In order to develop a synchronized legal framework, the leaders of the three countries have decided to codify the regulations and laws of the Customs Union and of the Common Economic Space for the Treaty signed for the Eurasian Economic Union. This measure will optimise the applicability of the agreements between the member states in several sectors such as finances, industry, trade and investments, transport and energy.
The document establishing the UTLC was signed
The mutual benefits of this integration are proven: economic connections between the three countries are extended and the structure of the commercial activity is improved helping the union consolidate its position in the global market. Over the past three years, trade in the Customs Union has increased by 50% (USD 23 Billion). In 2013, trade amounted to USD 66.2 Billion. Regarding the trade of the Russian Federation, Belarus and Kazakhstan (together) are ranking third, after the EU and China. “By comparison, our trade with the EU is worth USD 440 Billion, while that with China, USD 87 Billion. Regarding the economic volumes, Belarus and Kazakhstan are smaller than the two economic giants, yet their trade with Russia ranks third. This means that we have reached this level due to the integration”, believes Putin.
The geographical position of the union makes the establishment of the transport and logistics routes possible, not just at regional level, but also globally and can attract a large part of the trade from Europe to Asia. These aspects are the foundation of competitiveness and dynamic development within the union.
In this context, the development of an integrated transport system becomes essential for the three countries. For example, the share of railway traffic from China through the Common Economic Space will increase ten-fold after the establishment of the united transport and logistics company, declared DanialAkhmetov, Minister of Energy and Infrastructure of the Eurasian Economic Commission.
Positive results include the supply of efficient and integrated services at the level of the entire logistics chain, but also the increase of revenues from track access charges that could amount to more than USD 1.5 Billion. Moreover, 43,000 jobs will be created.
The joint company, United Transport and Logistics Company (UTLC), will be established this year and will be the greatest project for the integration of the transport system within the Common Economic Space. Russia, Belarus and Kazakhstan have already become partners in the establishment of the operator, the document regulating the set-up being approved behind the closed doors of the Council of the Eurasian Economic Union (in Astana), ItarTass quoted RZD President Vladimir Yakunin as saying. Through this agreement, the three railway companies become partners and the contribution of each party will be determined in conformity with the market value of the properties brought to the company and it is estimated at an equal share of 33% each. RZD’s business plan estimates that UTLC’s freight volume will exceed 4 million TEUs by 2020, while the contribution to the common GDP is estimated at USD 11.3 Billion (around USD 5 Billion for Russia, USD 5.3 Billion for Kazakhstan and USD 1 Billion for Belarus).
According to BelTA, representatives of Belarus Government have declared that so far three phases for the set-up of the operator’s capital have been decided upon. The first step consisting of the establishment of the company and the share of each member has already been determined. Thus, RZD will have a non-monetary contribution in the form of TransContainer’s shares (50%+2 shares) and Russian Railways Logistics (100% – one shares), while Belarus Railways and KTZ will contribute with USD 1 Million each.
For the next two years, UTLC’s shares will be formed of the relevant shares of the railway companies (from Belarus and Kazakhstan), all permits will be obtained. Also, works to the business plan are underway, the source quoted by BelTA explained. “In the final stage of the company’s establishment, the three parties will equate shares on a parity basis, each with a 33.3% stake. Plans have been made so that 7 years will be required since the establishment of the company to reach this parity”, sources declared.
The project has been elaborated so as to permit, in an early stage, the transit of containers between China and EU by 2021, volumes reaching 1.1 million containers.
Other strategic projects of UTLC were discussed in May, especially the launch of transport services on the route EU-Belarus-Russia-Kazakhstan-Turkmenistan-the Persian Gulf. The project has been initiated by the Prime Minister of Belarus Mikhail Myasnikovich and includes Russia, Kazakhstan and Turkmenistan.
Two new future members of the Union
In May, President of Kyrgyzstan Almazbek Atambayev and President of Armenia, SerzhSargsyan participated to the reunion of the Eurasian Union Council, the two parties taking important steps towards accession. “Armenia and Kyrgyzstan are taking concrete steps to accede to the Treaty. Deepened Eurasian integration is in the interest of our nations and peoples. One of the main goals is to unite the opportunities of each of these nations for joint modernisation and increasing the competitiveness of our states. We need to take into account the experience of other integrated unions, first and foremost the EU. None of the participating nations should find itself subject to deindustrialisation, so that the national economy does not have a drop in the traditional industrial sectors or agriculture”, declared the Kazakh President.
In the accession process, Armenia and Kyrgyzstan are supported by the member countries of the Union as negotiations for the adoption of measures begin. “We have discussed about other partners who wish to join us, especially Kyrgyzstan. I believe there are great chances, although there are many things that should be done for the elaboration of required papers. We are ready to support Kyrgyzstan to complete all necessary steps to join the Union”, declared Vladimir Putin.
“Kyrgyzstan plans to become full-fledged member of the Customs Union by the end of the year. We will make out best to meet obligations and the document which stipulates the finalisation of preparing activities will be completed by the end of the year”, declared Prime Minister Djoomart Otorbaev during an interview for Itar-Tass.
The economic conditions of the country require the elimination of frontier barriers to establish the free-trade concept. The advantages include the significant improvement of the country’s investment environment. “Kyrgyzstan can open its economy for interested companies not just in the domestic market, but also in the markets of the Customs Unions countries”, added the Prime Minister.
At the beginning of the year, Kyrgyzstan and Russia concluded an agreement on the development of a joint programme for the accession of the country to the Customs Union, Minister of Economy of Kyrgyzstan Temir Sariyev announced. “The presidents of the two countries have agreed on the establishment of a working group headed by deputy prime ministers for the development of a programme that would support the accession of Kyrgyzstan to the Customs Union”, declared Sariyev. Kyrgyzstan authorities decided to access the Customs Union in the summer of 2011 and have submitted an official accession demand in 6 months.
In the case of Armenia, the process is in an advanced stage. In September, following the discussions with Armenian President, the President of Russia announced that Armenia would join the Customs Union and would adopt concrete measures to participate to the establishment of the Eurasian Economic Union.
The works jointly implemented with the institutions of Belarus, Kazakhstan and Russia, as well as with the Eurasian Economic Commission have allowed Armenia to elaborate an agreement through which it would access the Treaty for the Eurasian Economic Union. “Our interest in signing the Treaty is conditioned by a series of factors such as the membership plan for accession to the Eurasian Union as of January 2015. This deadline has already been established by both the private and the public sector. After accession, we have to adopt 200 regulations and to implement a series of systematic changes for which a minimum period of 6 months is required”, declared President of Armenia Serzh Sargsyan during the session of the Eurasian Economic Council in May.
Armenia’s accession to the Common Economic Space will create a favourable economic environment, will provide easy access to more markets and will set free-of-charge trade relationships. Moreover, the accession to the Customs Union will not restrict trade to third countries.
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