Kyrgyzstan has officially applied to become
the next member of the Russia-led Customs Union, an institution designed to
entrench Russia's economic and political influence in its former Soviet
territory.
Russia is using the union & expend its influence in its former
Soviet territory (current members are Russia, Belarus and Kazakhstan). In some
ways, Customs Union membership will hurt the Kyrgyz economy -- higher tariffs
will be imposed, and Kyrgyzstan will lose some autonomy in making foreign trade
decisions. However, abstaining from the Customs Union would be riskier than
joining because Moscow already has a great deal of leverage over Bishkek. Other
Central Asian countries -- Tajikistan, Turkmenistan and Uzbekistan may also
join the union.
Kyrgyzstan is reliant on imports. Kyrgyzstan is not economically
self-sufficient; it depends on Russia, China and its Central Asian neighbors to fulfill its basic
needs. Russia provides almost 34 percent of
Kyrgyzstan's imports -- and nearly 70 percent of its
petroleum -- and as Kyrgyzstan's main export recipient, purchases 17.3 percent of Kyrgyz exports.
China is another major trade partner. Kyrgyzstan imports
electronics, meats, clothing and produce, and exports 75 percent
of these inexpensive Chinese goods to other Central Asian countries and to
Russia since Bishkek is an important trading centre. (The price increase for
Chinese imports likely will even affect Kyrgyzstan's black market.) China sees
Kyrgyzstan as an important market because its role as a re-exporter creates a
trade corridor in Central Asia, but Kyrgyz participation in the Customs Union
would undermine the corridor's importance.
Uzbekistan sends natural gas to Kyrgyzstan's cities and its
northern and southern regions, and Kazakhstan provides 5-7 percent
of Kyrgyzstan's petroleum supplies.
As a member, Kyrgyzstan will have to use the union's average
tariff rate of 10.6 percent -- more than twice
Kyrgyzstan's current 5.1 percent tariff. Value-added
tax (VAT) will also increase with Customs Union membership; Kyrgyzstan's
current VAT rate is 12 percent, but the union's is 17
percent. These higher tariffs are meant to facilitate
trade within the union and make it more difficult to trade outside the bloc.
However, higher import fees mean higher prices for consumer goods, including
automobiles, medicines, computers and clothing, imported from non-Customs Union
member countries.
Customs Union membership will also affect Kyrgyzstan's freedom to
control its own foreign trade policies. Members of the bloc's governing body,
the Customs Union Commission, do not have an equal say in making decisions.
Currently, Russia has 57 percent of the votes, while
Kazakhstan and Belarus each have 21.5 percent.
Kyrgyzstan will have to check with other union members and get Russia's
approval before making policy decisions on foreign trade.
Kyrgyzstan's membership in the Customs Union could also jeopardize
its relationship with the World Trade Organization (WTO). Kyrgyzstan is the
only Central Asian country with WTO membership, but joining the Customs Union
would conflict with its responsibilities as a WTO member. The Kyrgyz government
knows that even if it joins the union in 2012 its membership will not activate
for another two to three years, so it has time to sort through the details and
come up with a solution to the dilemma. Bishkek could withdraw from the WTO or
ask for an adjustment of WTO rules (Russia was able to join the WTO despite
being in the Customs Union, though Kyrgyzstan's circumstances are different since
it was in the WTO first).
Russia also guarantees Kyrgyzstan's security. Kyrgyzstan is a
member of the Russia-led Collective Security Treaty Organization, and Russia
has several military installations on Kyrgyz soil -- including an airbase at
Kant for which Russia pays rent. Furthermore, many Kyrgyz workers in Russia
send home remittances, and Russia provides Kyrgyzstan with loans and grants.
Energy Politics
Perhaps the most obvious lever Russia has in Kyrgyzstan is energy.
In 2010, Russia increased tariffs for its fuel exports to Kyrgyzstan, which put
pressure on then-leader Kurmanbek Bakiyev,
who was ousted in a Russia-supported revolution. Current Kyrgyz President Almazbek Atambayev persuaded
Moscow to drop the tariffs, but there is nothing preventing Russia from
imposing tariffs again. As it has done with other countries, such as Ukraine,
Russia could even sever energy supplies retributively. However, if Bishkek
complies with Moscow's wishes and joins the Customs Union, Russia could offer
concessions instead, such as increased financial aid or lowered energy prices.
Central Asia's Likely Course
After Kyrgyzstan, the country most likely to join the Customs
Union is Tajikistan. Dushanbe already has expressed interest in the union, and its economic and security dependence on Moscow makes it easy
for Russia to persuade. However, Tajikistan has not yet started any official
processes to join the bloc, and Moscow has made it clear that Kyrgyzstan must
join first. Once it joins, Tajikistan will feel many of the same economic
effects of membership that Kyrgyzstan will experience, since both countries
have import-heavy economies.
When Kyrgyzstan and Tajikistan join the Customs Union, Uzbekistan
will find itself almost entirely surrounded by Customs Union members.
Uzbekistan thus far has shown no interest in joining the bloc; in fact, it has
criticized the union, calling it a method of politically motivated integration.
Uzbekistan's neighbor, Turkmenistan, has remained
quiet on the issue and previously has endured economic hardship just to preserve
its isolation and independence. While Kyrgyzstan and Tajikistan go through the
membership process, Turkmenistan and Uzbekistan will have time to resist the
union. But once the union closes in on them geographically, the last two
holdouts in Central Asia could become easier for Russia to pressure into
membership.
The Customs Union is one phase of Russia's plan to exert its
influence in its near abroad; the next phases are the
creation of a Common Economic Space and the Eurasian Union. Moscow does not
want to re-create the Soviet Union, as that entity proved infeasible. Rather,
it wants to build a system in which it can influence its former Soviet
republics without being responsible for the day-to-day domestic workings of
each state.