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Home / Analyses / Analysis by Victor Chirila: If Republic of Moldova would join the Customs Union Russia – Belarus-Kazakhstan. Info-Prim Neo. 18.06.2012.
Analysis by Victor Chirila: If Republic of Moldova would join the Customs Union Russia – Belarus-Kazakhstan. Info-Prim Neo. 18.06.2012.
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18.06.2012

{Analysis written by Victor Chirila for Info-Prim Neo}

If the Republic of Moldova would join the Customs Union Russia-Belarus-Kazakhstan, its apologists assure us that we’ll have a good life, we’ll benefit from cheap gas and our wine will flow freely to the Russian market and Transnistria issue will be finally resolved. These promises/arguments are compelling for many of those 57% of Moldovans who, according to the latest Public Opinion Barometer, are ready to vote for the integration of our country into the Customs Union.  It sounds like a sweet mermaid song, in particular, for that part of our society that still is nostalgic for "proletarian welfare" of the defunct USSR. 

Moldovan Customs Union mermaids do not say, however, that the "cheap gas" has a price anyway, which is not negligible at all. Belarus, for example, got a reduced price for natural gas imported from Russia, only after Lukashenko gave up to Gasprom the total control of natural gas pipelines. The Minsk leader made this concession to prevent the bankruptcy of the Belarus economy, in this way rescuing its (anti-democratic) regime from an eventual collapse.

Also are overlooked the less fairy parts of the "success story" that is called the Customs Union Russia-Belarus-Kazakhstan.  It is true that during the first two years of its existence the volume of trade between the three countries has grown annually by over 30%, largely due to increased imports from Russia by the Kazakh and Belarus economic agents. Despite of this, in 2011, Kazakhstan's trade within Customs Union represented only 18.2% of its total foreign trade. In the case of Russia, this proportion was 7.5 % and of Belarus 46.4%, which means that  only Belarus economy is mainly oriented to the Customs  Union market.

At the same time, the economic advantages are far from being equitable. In the case of Kazakhstan, joining the Customs Union has led to an increase of the common customs tariff from 6.2% to 10.2%, prices of food products (sugar, oil, groats, milk, meat) increased 2 times and of gasoline and diesel by 29% and 34%, respectively.  Customs duties on imports of technical equipment and raw materials on the Western market increased by 10-20% and 20% respectively, thus causing higher prices for products manufactured with equipment and raw materials from the West. Also, the taxes on imported cars have increased as much as 30-40 times. In addition, although it is part of the Customs Union and Common Economic Space, Kazakhstan has no access directly to the natural gas pipeline on the territory of Russia, which is still controlled exclusively by Gazprom.  Under these conditions, Kazakh companies do not have the possibility to participate directly, without Gazprom intermediation in export operations of natural gas extracted in Kazakhstan. 

They promise us that the Customs Union will solve the Transnistrian problem, but intentionally say nothing how it will be resolved. Customs Union apologists keep quiet on this issue not at all accidently. The answer is obvious since November 2003, when they sealed the Kozak memorandum, but did not have the courage to implement having the fear of an eminent popular revolution. We know very well what the Kozak memorandum included: the preservation of Russian troops on the territory of our country for at least 20 years, confederation, transnistrization and the gradual annihilation of the Republic of Moldova as an independent and sovereign state. Otherwise, this would be the true price that we would have to pay in order to get from the Customs Union, better said Russia, the long-coveted "cheap gas" and "settlement" of the Transnistrian problem.

On the other hand, is the "cheap gas" the quintessence of a modern, functional, prosperous market economy and of a democratic society that provides equal rights and opportunities for all its members? Can "Cheap gas" replace the freedom of the press, freedom of Assembly, independence of Justice, free and fair elections, respect for fundamental human rights, the principle of the rule of law, anti-corruption, de-monopolization  of our economy, transparency in decision making and ensure real economic competition? Are these values less important for the development of our country? For the apologists of the Republic of Moldova’s accession to the Russia-Belarus-Kazakhstan Customs Union these questions seem to be irrelevant, yet, in order to assess fully the advantages and disadvantages of the latter, we cannot make abstraction of the democratic governance model and the economic offer provided by this Union. 
                 
[Democratic Offer]

Analyzed from this perspective, the Customs Union is a club of states with authoritarian systems of Government: a democracy controlled by the Kremlin in Russia, Europe's last dictatorship in Belarus; and an enlightened authoritarianism with a President for life in Kazakhstan. According to Freedom House Reports on freedom in the world and states in transition, those 3 states are noted by having serious weaknesses in all chapters assessing the state of democracy, namely: freedom and fairness of the electoral process; freedom and the role of civil society; independent media; the quality of democratic governance at the national and local levels; independence of the judiciary and fight against corruption. As a result of these exhaustive assessments carried out by independent experts, Freedom House gave those 3 countries the status of Not Free Countries, which means that in Russia, Belarus and Kazakhstan political rights and civil liberties are absent or systematically violated by the authorities. 

In all three countries, freedom of the press is limited and corruption is systemic and almost uncontainable.  According to the index of Press Freedom of the Reporters without Borders Organization, which comprises 178 countries, Russia, Belarus and Kazakhstan are placed on 142, 168 and 154, alongside Uganda (139), Gambia (141), Afghanistan (150), Rwanda (156) and Somalia (164). As for corruption, according to the Corruption Perception Index 2009–2011 "published by Transparency International, they are among the most corrupt countries in the world, Russia and Belarus occupying the position 143, being surpassed by Sierra Leone, Niger and Pakistan (134), and Kazakhstan ranked 120, being ahead of Mali (118), Senegal (112), Tanzania (100). This gloomy finding is sustained also by Worldwide Governance Indicators of the World Bank, which is positioning Russia, Belarus and Kazakhstan among the countries with the lowest indices of corruption control, namely: 12.9%, 23% and 15.3%.  For comparison, the indexes of corruption control of Bulgaria and Romania, the most criticized EU Member States in combating corruption, are 52.2% and, respectively, 53.6%, being on the 86 and respectively 75 places on the list of the most corrupt countries in the world published by Transparency International.

[ Economic Offer] 

According to 2011data, the Customs Union Russia-Belarus-Kazakhstan represents a market of 165 million consumers and an economy which has:
• a total GDP of $ 2,74 trillion and per capita of $ 14,866;
• a foreign trade worth $ 1,021 trillion;
• annual internal investment of $ 603 billion or 22% of GDP;
• a stock of domestic credit in the amount of $ 854 billion;
• a volume of annual expenditures for research and development of new technologies in the amount of approximately $ 15,3 billion;
• a volume of foreign direct investments in the states of the Customs Union of $ 435,38 billion;
• a volume of direct foreign investment, carried out in particular by Russia and Kazakhstan, of $ 330,86 billion. 

The above figures are impressive, however, but in order to understand better the extent of the Customs Union bid, they must be compared with similar data in the EU, to which the Republic of Moldova has proposed itself to join politically and economically. Thus, unlike the Customs Union, EU represents a market of 503 million consumers and an economy which has:
• a total GDP of $ 15,39 trillion and per capita of $ 34,000;
• a foreign trade worth $ 3,791 trillion;
• annual internal investment in the amount of $ 2,88 trillion, or 18.7% of GDP;
• a volume of internal loans of $ 29 trillion;
• a volume of annual expenditures for research and development of new technologies in the amount of $ 239,7 billion;
• a volume of foreign direct investments in the EU countries of about $ 7,972 trillion;
• a volume of direct investment abroad carried out by EU Member States in the amount of $ 9,524 trillion.

Therefore, in comparison with the EU, Customs Union economic offer includes:
1. a market of consumers three times smaller;
2. a total GDP of 5,6 times smaller, and the per capita 2 times smaller;
3. a foreign trade volume of 3,7 times smaller;
4. domestic investment of 4,7 times smaller;
5. a stock of domestic credit of 34 times smaller;
6. a volume of annual expenditures for research and development of new
technologies of 15,6 times smaller;
7. a volume of foreign direct investment smaller by 18 times;
8. a volume of direct investment abroad of 28,7 times lower.

At the same time, unlike the single economic space of the EU, which is a multi-centric one and, thus, it prevents the economic and political domination of the EU by one country, the Customs Union is dominated exclusively by the Russian Federation.  The data speak s for itself without additional comments:
• at least 83,6% of Customs Union's population are Russian citizens, and to this figure is also added at least 3,1% of Russian countrymen who live in Belarus and Kazakhstan;
• 86.8% of the Customs Union’s GDP is produced by the Russian Federation;
• 79,2% of the Customs Union’s foreign trade volume goes to Russia;
• 93,4% of the Customs Union’s  foreign exchange reserves are Russia’s;
• 65.2% of the Customs Union’s internal trade goes to Russia;
• 57% of the voting rights within the Commission of the Customs Union goes to Russia, as for Belarus and Kazakhstan, they have 21,5% each. 

By the way, the Customs Union is the cornerstone of the future Eurasian Union, which is going to be launched in 2015, or, taking into account the above parameters, volens-nolens, you ask yourself, what kind of Union will this be, Eurasian or Eur-Russian?

[Instead of Epilogue]

On 24 March 2005, the Republic of Moldova’s Parliament made public its statement on political partnership initiated in order to achieve country’s European integration objective. Through this document, supported also by the Communist Party, European integration has been declared as an official strategic objective of internal and foreign policy. Moreover, it was unanimously stated that further development of Moldova can be achieved only through the “consistent and irreversible promotion of the strategic course towards European integration ", and the signatory parties pledged to support:
• creating an independent judicial system, which corresponds to the norms and standards of the European Union;
• compliance with the rules and principles of democratic rule of law as a fundamental condition for any political and institutional reforms;
• development of functional market economy with a favorable investment climate;
• combating corruption and de-bureaucratization of the economic life ;
• harmonization of national legislation with European standards, etc.. . 

It has passed more than 7 years after that event, the Declaration and its commitments were forgotten, a good part of the "euro-optimists and pro-Europeans" have become since then euro-realists, euro-skeptics, euro-cynics, and, more recently, pro-Eurasians, trying to convince us that joining the Russia-Belarus-Kazakhstan Customs Union and Eurasian Union will bring us more prosperity, which lies in cheap gas and "flooding" Russian market with Moldovan wine. 

"The charming Eurasian dream" is appealing for many Moldovans. According to the Public Opinion Barometer (BOP), published in May by the Institute for public policy (IPP), if the next Sunday is going to be organized a referendum on the issue of the Republic of Moldova joining the Customs Union Russia-Belarus-Kazakhstan, 57% of people would vote for the country's integration in the European Union. This trend seems to not disturb the current pro-Europeans Government. They continue to do their job with calm and responsibility, recording new progresses in the dialogue and negotiations with the EU. However, paradoxically, the BOP data show that as we make more progress towards rapprochement with the EU, the number of euro-optimists is decreasing continuously. Over the past three years, the number of pro-Europeans has decreased by 10,9%: from 62,9% in November 2009 to 52% in April 2012.  Why? What are the causes of this paradox? Is it because of the recent global financial crisis or the endless crisis of the Euro Zone? Or we should blame the Eurasian Union, which doesn’t even exist?

Obviously, the external factors cannot be excluded. However, we cannot ignore the internal causes. First, we will highlight the lack of comprehensive, diverse, practical and systematic information about the various aspects of European integration, including the current difficulties. The public information about European integration is reduced to dry materials about negotiations, agreements, adopted laws, progress reports, statements, progress assessments, protocol meetings, regional meetings, etc.  It is a bureaucratized communication, which is also insipid, dull and without a definite purpose. Such communication does not help Moldovans to better understand what the EU is and what tangible/concrete benefits and opportunities European integration provides us. Three years ago, the EU has contributed financially to the development of such a communication strategy. Where is it? Why it is not applied? By the way, this is an eloquent example of how donor funds are used without any practical effect, simply, are cast into the wind.     

Secondly, citizens are tired of endless promises; they want to see that as we progress in dialogue and negotiations with the EU, reforms dictated by European integration improve the quality of their life. Discount prices on flight tickets to EU destinations are undoubtedly a success of our European integration  policy. Regrettably, the fundamental structural changes related to judiciary independence and efficiency, the reform of the Central Administration, de-monopolization of the economy, ensuring real economic competition goes slow. Or, actually, these are changes that will take us out from the category of the poorest and corrupt European states, on the success of these reforms depends our welfare, attractiveness and, finally, the legitimacy of European integration in relation to other options of country development.

However, unfortunately despite the progress, we continue to be the poorest country in Europe, with a GDP per capita of about $ 3400, which is 10 times lower than GDP per capita in the EU, over 5 times lower than GDP per capita in Croatia which will accede to the EU in 2013 and 4 times lower than GDP per capita in Bulgaria and Romania, which are considered to be among the poorest countries in the EU. Corruption, according to Freedom House and Transparency International reports remains a systemic problem deeply rooted in our public institutions. The corruption index rated by Freedom House experts remains unchanged for the Republic of Moldova since 2006: 6 points out of 7, seven representing the poorest performance. Moreover,  according to Freedom House Report on the freedom in the world, the Republic of Moldova remains steadily, already 20 years, in the category of Partly Free States. Until now, no state in Central and Eastern Europe has adhered to the EU with such performance parameters of democratic and economic governance. Will Republic of Moldova be an exception?  Maybe, but not for the EU.

[Victor Chirila, Executive Director, Foreign Policy Association of Moldova, for Info-Prim Neo]

 
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Home / Analyses / Analysis by Victor Chirila: If Republic of Moldova would join the Customs Union Russia – Belarus-Kazakhstan. Info-Prim Neo. 18.06.2012.
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