Wednesday, 02 April 2014

Ukraine Crisis and Putin's Post-CIS Integration Plans

Published in Analytical Articles

By Richard Weitz (04/02/2014 issue of the CACI Analyst)

Although Russia continues to participate in the Commonwealth of Independent States (CIS), the reluctance of Ukraine and other members to support deep integration within that framework has led the Russian government under Vladimir Putin to focus Moscow’s integration efforts on other institutions. Now Russia’s military moves against Crimea have presented both opportunities and challenges for Putin’s post-CIS integration agenda.

 BACKGROUND: In his first decade in power, Putin has focused on achieving deeper cooperation among a small number of the most pro-Moscow CIS members. For instance, in 2002, Russia joined with Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan to create a military alliance, the Collective Security Treaty Organization (CSTO), to supplement the modest security cooperation within the CIS. Since then, the CSTO members have been developing their laws, institutions, and capabilities. The organization has adopted a peacekeeping doctrine, created a rapid reaction force, and the means to mobilize larger multinational armies under the CSTO’s command in wartime. The organization’s missions have included fighting terrorists, guerrillas and drug traffickers as well as deterring large-scale attacks against its members. Cooperation has also included Russia’s selling arms to its allies at discounted prices and an agreement that all countries must consent to any one member’s hosting foreign military bases on its territory. Russian diplomatic efforts related to the CSTO have focused on overcoming NATO’s opposition to mutual cooperation, which is preventing the CIS from achieving its goal of enjoying equal status with NATO.

A similar pattern of narrower-but-deeper integration has been taking place in the economic realm. In 2000, after the CIS proved unable to achieve deep economic integration or an effective customs union, Russia joined with Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan to create a Eurasian Economic Community (EurAsEC), with a more ambitious integration agenda than the CIS. The EurAsEC has sought to align the economic and trade policies of its members by reducing their tariffs, taxes, duties and other barriers to economic exchanges. It aims to eventually create a free trade zone, a common system of external tariffs, a common energy market, and a customs union. Like the CSTO, the EurAsEC was controlled by Moscow, with Russia enjoying more votes than any other member.

But it was only in 2007 that some of EurAsEC’s members - Russia, Belarus, and Kazakhstan – overcame their diverging economic policies and alignments, committing to realize a Customs Union (CU). In 2010, they established a uniform external tariff and abolished most internal duties and customs controls between their countries, creating the free movement of goods. Citizens of one member can also enter another with only their internal passports. In May 2011, the CU members integrated the rules of the World Trade Organization with those of the Customs Union. On January 1, 2012, they created a Single Economic Space within the CU framework. By 2015, CU members expect to see the free movement of goods, capital, services and people across the three countries.

Most recently, Putin has been leading efforts to create a “Eurasian Union” among the former Soviet republics. The essential idea is that the three members would coordinate their foreign, economic, and other policies much more extensively and deeply than in the CU or CIS. In addition to pursuing deeper economic and political integration within the Eurasian Union, Putin has sought wider membership for the organization than in the trilateral Customs Union; to include countries like Ukraine that had declined to enter the CU. Russia has employed both positive and negative measures to induce other countries to join these projects. Positive incentives have included pledges of loans and energy, while negative pressures have included natural gas cutoffs and the exploitation of frozen conflicts.

IMPLICATIONS: Although not normally classified as a “frozen conflict,” Russia’s deft occupation and annexation of Crimea has achieved the same goal of warning other countries against defying Moscow. Russian policy makers had previously relied on targeted energy assistance and cultivating various elites to keep Ukraine from moving toward the West. The failure of Russia’s soft-power strategy in Ukraine became evident with the Maidan revolution against the country’s Moscow-leaning leadership. Even after annexing Crimea, Russia has sought to keep open the threat of further military action in eastern Ukraine to deter Ukraine’s new pro-Western leaders from seeking NATO membership or taking other actions that threaten Russia’s regional agenda. Sustaining the conflict also exploits Europeans’ reluctance to offer NATO or EU membership to a country with an active territorial dispute. Moscow has pursued similar policies, with much success, toward Georgia, Azerbaijan, and Moldova.

The Crimean conquest could intimidate other Soviet republics to avoid overtly challenging Russia’s integration plans. Although neither government welcomed Moscow’s move, the leaders of both Belarus and Kazakhstan have declined to condemn Russia’s actions. In an emergency March 5 meeting, the three presidents agreed not to postpone their planned May 1 signing of a new treaty launching the Eurasian Union next year.

Meanwhile, Armenia and Kyrgyzstan persist in expressing interest in joining the Customs Union and eventually the Eurasian Union. In September 2013, under Russian pressure, Armenia turned down an association agreement with the European Union, opting instead for the Customs Union with Belarus, Russia and Kazakhstan because of Armenia’s reliance on Russia in many sectors, including energy, security, and trade. The road map for Armenia’s membership in the Customs Union and the Single Economic Space was signed on December 24. Armenia’s deputy foreign minister has said that Yerevan will be ready to join the Customs Union by mid-April. At the March 5 meeting, Putin said that the three members were ready to start the preparations for Armenia’s joining the Eurasian Union.

The impoverished and isolated Kyrgyz Republic, having accepted Russian demands to end the lease on Manas Air Base, needs whatever economic help Russia can provide. Kyrgyzstan joins with Kazakhstan in seeking to relax restrictions on labor migration to Russia (Tajikistan is also deeply dependent on migrant remittances) and in wanting to balance China’s growing economic presence in Central Asia by strengthening their economic ties with Russia. Fears about how the Western military withdrawal from Afghanistan might adversely affect regional security dynamics have even kept traditionally reluctant Uzbekistan and Turkmenistan attentive to Moscow’s regional concerns.

But Kyrgyzstan’s economic development may be too weak to allow it to join the Customs Union and the Single Economic Space anytime soon. The Kyrgyz consider their integration roadmap unrealistically rapid and demand large subsidies and other benefits from Russia before joining. Conversely, Kazakhstan’s oil and gas wealth mean it already receives substantial foreign direct investment by Western countries. The Kazakhs share with Azerbaijan, Georgia, and Turkey an interest in ensuring that some Caspian Sea energy resources reach European markets via the South Caucasus. Kazakhstani leaders oppose giving the Eurasian Union many political powers. None of these countries wants to encourage further Russian irredentism. The former Soviet republics, even those whose leaders did not initially seek independence, jealously guard their sovereignty and autonomy and have repeatedly outmaneuvered empire builders in Moscow.

CONCLUSIONS: By choosing to occupy and annex Crimea, Russia has accepted the burden of promoting the region’s economic recovery even as the crisis and resulting Western sanctions have devalued the ruble, crashed the stock market, and caused extensive capital flight. These economic blows against Russia invariably harm Belarus and Kazakhstan. Even before the Ukraine crisis, Kazakhstan’s central bank had to devalue the national currency, the tenge, by more than twenty percent to match the declining value of the ruble, which the Russian authorities had managed. This will likely decrease Kazakhstan’s interest in establishing a currency union any time soon. Invading and occupying neighbors’ lands does not enhance Russia’s soft power, imposes enormous burdens on the economy of Russia and its partners, and distracts Russian elites from making the union a more attractive enterprise.

AUTHOR’S BIO: Dr. Richard Weitz is a Senior Fellow and Director of the Center for Political-Military Analysis at the Hudson Institute.

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