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CIS: Russian, Ukrainian, Kazakh Parliaments Ratify Treaty On Single Economic Space

  • Askold Krushelnycky

The lower houses of the Ukrainian, Russian, and Kazakh parliaments have ratified an agreement on the formation of an economic union that Belarus is also expected to join.

Prague, 21 April 2004 (RFE/RL) -- The lower houses of the Ukrainian, Russian, and Kazakh parliaments have ratified a treaty that envisages a Single Economic Space (SES) in which regulation of their economies would be shared and trade tariffs abolished to ensure the free movement of goods, services, capital, and labor.

The treaty also calls for common foreign trade, tax, credit rules, and jointly forged financial policies, with the possibility of an eventual common currency.

The SES is initially seen as a four-state body that will also include Belarus. The presidents of all four countries agreed to the formation of the SES last fall.

Belarus's President Alyaksandr Lukashenka has been a keen proponent of the plan and formerly made his country's ratification conditional on Ukraine joining. Lukashenka has had a number of quarrels with Russian President Vladimir Putin in the last year, but his administration says it will decide on membership soon.

While the Ukrainian prime minister says the Single Economic Space will improve the country's chances of joining the European Union, others believe it will do exactly the opposite.
The lower house of Kazakhstan's parliament, the Mazhilis, overwhelmingly ratified the treaty earlier today.

Russia's State Duma ratified the agreement yesterday almost without dissent, with 408 of its 450 lawmakers voting in favor.

Russian Foreign Minister Sergei Lavrov, speaking in Moscow yesterday, praised the SES ratification.

"These treaties and agreements on the Single Economic Space serve both our interests and Ukraine's interests," Lavrov said. "They will help our countries get closer together, not move apart."

State Duma Speaker Boris Gryzlov pointed out what he said were some of its benefits.

"There is no doubt that the creation of a Single Economic Space will lead to a considerable improvement in trade and capital flow," Gryzlov said. "It will help us initiate new processes in the economies of the two countries."

In Ukraine yesterday, the treaty was passed with 265 votes in the 450-seat parliament. It was supported by an alliance of pro-presidential deputies and by the Communist Party, which favors closer ties with Russia. Members of the pro-reform opposition, as well as the Socialists, voted against it, saying it will lead to a loss of economic sovereignty.

Ukrainian Prime Minister Viktor Yanukovych praised the agreement, saying Russia is Ukraine's strategic partner and predicting trade in goods and services between Kyiv and Moscow will increase to $20 billion this year from a 2003 turnover of less than $16 billion.

He said the SES deal "paves the path for bringing the Ukrainian economy [to] a qualitatively new level of development."

Ukraine says the deal with Russia is necessary to counter its exclusion from European Union expansion on 1 May, when 10 new members join. Three of Ukraine's former communist neighbors -- Poland, Hungary, and Slovakia -- are joining, and Ukraine fears it will be stuck on the wrong side of a new economic "Iron Curtain."

Prime Minister Yanukovych said entry into the SES "will increase Ukraine's competitiveness on world markets and provide for accession in the European Union under new conditions."

Ukrainian critics of the deal say Kyiv's involvement in the SES will do precisely the opposite, however. They say Ukraine's efforts to join the EU or the World Trade Organization will be hampered by making all the adjustments necessary to fulfill its obligations under the SES.

Serhiy Shevchuk, a member of Ukraine's National Democratic Party and of the parliamentary committee on integration into the European Union, said: "Strategically, this has only negative connotations in so far as -- just to mention one other aspect -- Ukraine's aspirations to join the World Trade Organization. We've already signed more than 20 protocols with important countries. We're close to membership [in the WTO], and they could let us into this international trading organization. But we have signed this ratification of an agreement that includes a provision about a unified approach to WTO entry. This essentially means 'God forbid that Ukraine enters before Belarus or Russia.'"

Western diplomats and institutions have warned that SES membership could potentially cause difficulties for Ukraine. U.S. Ambassador to Ukraine John Herbst and the first deputy managing director of the International Monetary Fund, Anne Krueger, have said SES membership could complicate EU integration and Kyiv's accession to the WTO.

However, last summer an EU representative in Kyiv, Steffen Kovmand, said that although he hadn't been shown details of the agreement, there was nothing to indicate that the EU had any reason to worry over its relationship with Ukraine.

Other Ukrainian deputies have said SES membership imperils Ukraine's sovereignty. Oleh Tyahnebok, a member of the country's largest opposition party, Our Ukraine, said after yesterday's vote: "What actually took place today was a surrender of Ukraine's national interests. Ukraine signed what could be called a second Soviet treaty, and we are faced with the real possibility of losing our economic sovereignty because this document is not about a zone of free trade -- it's a loss of our borders, a loss of our customs barriers. Accordingly, Ukraine can be deprived of its economic independence when there will be a massive influx of Russian capital in an uncontrolled way. Therefore, I regard the ratified treaty about Ukraine's entry into the [Single Economic Space] was a betrayal of Ukraine's national interests."

He and others opposed to the treaty say that, under its terms, Russia will inevitably dominate key decisions because voting rights are proportional to the economic strength of the four member states. Russia's GDP totaled $346 billion in 2002, while Ukraine's was $41 billion, Belarus's $14 billion, and Kazakhstan's $6 billion.

Shevchuk of Ukraine's National Democratic Party said, "Decisions of the SES executive body will be made on the basis of the proportionate strength of the members' economies. That allows Ukraine, in the best circumstances, 16 percent, but probably 10 percent, and Russia will have more than half the voting rights. That means that Ukraine will have the right to agree, to disagree, or to sit in silence, and any of these options will yield the same result because decisions will be made only by the Russian side. This is what's called a division along fraternal lines."

Ukrainian Prime Minister Yanukovych said Ukraine will only comply with SES regulations that do not contradict the constitution. He does not rule out the possibility that other former Soviet republics will join the new economic union.

The Russian and Ukrainian parliaments also yesterday ratified two controversial treaties on delineating the border and sharing control over the Sea of Azov and the Kerch Strait.
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