The document discusses the establishment of the Eurasian Economic Union between Russia, Belarus, and Kazakhstan, which aims to integrate their economies and allow free movement of goods, services, capital, and people. Prime Minister Putin hopes this will strengthen economic and trade ties between the former Soviet states. The new union has caused some short-term operational difficulties for freight operators. Looking forward, the union may bring the countries closer economically and politically under Russian influence while expanding the market for Russian and local businesses.

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The re-birth of a nation?
The new Eurasian Economic Union
Prime Minister Vladimir Putin has announced the
establishment of the Eurasian Economic Union, the aim
of which is the complete integration of the economies of
Russia, Belarus and Kazakhstan by 2013 reports Alexander
Rogan.
“As early as next year we are hoping to sign a declaration Operators in the Russian far east have probably had the
about the formation of the Eurasian Economic Union, which greatest challenges with ships having to pull out of ports,
can and must start operating as early as 2013,” said Putin. unable to land containers as local customs follow edicts to
Created in the image of the original Common Market (a de the letter. The north western regions and Baltics have had
facto mini European Union) the Eurasian Economic Union their own difficulties but here at least customs have engaged
will allow the free movement of goods, services, capital and with operating authorities in an effort to smooth the flow of
people between Belarus, Kazakhstan and Russia. goods into the country.
Prime Minister Putin said that the new common market The harmonisation of taxes and duties has had no effect
will bring the former Soviet states closer, shield against on Russia as the two other nations have harmonised their
global economic crises and provide shelter for prospective codes with the Russians. This has meant that prices have
investment. increased in both Belarus and Kazakhstan as the respective
governments have brought their markets in line. Whilst the
“For the first time since the collapse of the Soviet Union, the full implementation of the changes will take some time,
first real step has been made towards restoring the natural some immediate effects were visible. The increase in the
economic and trade ties in the post-Soviet space,” he said. cost of imports led to Belarusians to try to clear customs
at border points on the Baltic and Polish frontiers with
The agreement marks the most recent phase of integration in expensive imports (cars etc.) before the new tariffs took
the economies of Russia, Belarus and Kazakhstan following effect. This caused a strain on the supply chain for finished
the customs union which went live on July 1 this year. vehicles and containerised freight as normal volumes spiked
dramatically.
Prime Minister Putin gave a clear indication of his wish to
join the World Trade Organization but “we don’t intend to On a purely personal note, I could be forgiven for thinking I
accelerate the process and we would not compromise our live in Belarus and not Russia, given the plethora of cars with
national interests in doing so.” It would appear that the Belarusian number plates I have seen driving the muscovite
Prime Minister is getting his house in order and establishing streets since July 1st. Entrepreneurial Russian citizens appear
his ground rules prior to any accession of the Russian $1.5 to be taking last minute advantage of the lower tax rates.
trillion economy, the largest outside the WTO.
Whilst the establishment of the common market between
The Belarus, Kazakh and Russian Customs Union legally Belarus, Kazakhstan and Russia is expected to give a boost
came into force on January 1 2010 and, practically, in July to local business it is widely mooted that the cross border
this year with the abolition of customs controls on the difficulties will continue for up to six months.
troika’s internal borders and the movement of customs to
the new external borders. As with many things in Russia it makes sense to take a holistic
view of these changes and consider the reasoning behind the
The new Union has caused operational difficulties for freight new common market and the ramifications of it. The new
operators with both overland and sea freight being delayed. integration plans give Prime Minister Putin the opportunity

2. of bringing former Soviet states closer to Russia, providing regional position. On the one hand the Union is promoting
security and easier access to markets. The removal of trade the benefit of business for all companies within the troika,
barriers brings both Belarus (population 9.5 million and whilst Prime Minister Putin is promising to make Russia the
GDP $130 billion) and Kazakhstan (population 15.5 million most favourable business environment amongst the three.
and GDP $196 billion) closer to Russia and further away Facing the possibility that Russian companies may look to
from the world markets. Both countries were weakened by relocate to benefit from lower costs, Prime Minister Putin
the 2008/2009 financial crisis and were looking for financial said, “I do not rule out that we will face a real threat that some
stability. The shared Soviet-era infrastructure, Soviet design companies will be re-registered in Belarus or Kazakhstan. We
and the common geography that linked the economies of are perfectly aware of that. The Russian government will,
Russia, Belarus and Kazakhstan meant that the ratification therefore, try to create competitive conditions to attract
of the economic union was not difficult politically. business to Russia... This will already be the fourth stage
of integration of Russia, Belarus and Kazakhstan...We have
Belarus is in meltdown and underwriting its Russian loans every reason to believe that the Eurasian Economic Union
with strategic assets as the Russian government asserts will start working in 2013.”
greater control on its neighbour. Consumer prices in Belarus
rose 8.6% month-on-month in June, bringing the year-on- Against the back drop of Russian hegemony is the creation of
year price increase to 43.8%. a market of 160 plus million customers, before the Ukrainian
and central Asian state populations are considered. Given
The Kazakh banking sector is still in a weak state and would the desire by the Russian government to boost employment,
struggle to survive another crisis, despite the oil and gas attract inward investment and modernise Russian industry,
reserves. If a worst-case scenario led to a Kazakh default, the as seen by the Russian government Decree 166 and the huge
follow-on removal from international money markets would upswing in automotive production, the question could be
leave Kazakhstan with few financial alternatives outside the posed ‘where will the new product go?’
new customs union. That said, the Kazakhstan government
devalued the Kazakh currency to stabilise market pressures The answer is within the new Eurasian Economic Union.
and stimulated the market with a $19 billion injection.
Rising oil prices have revived the economy. Competition to
Russia may arise as the Kazakh government has started a
ambitious diversification programme, aimed at decreasing
SupplyChain
its dependency on natural resources by developing targeted automotive
sectors like transport, pharmaceuticals, telecommunications
and food processing.
conference
Are we seeing the beginning of a nation’s rebirth as Prime
20-21 September - Swissotel Moscow
Minister Putin brings former Soviet Union states back under
the influence of Russia? That Russia has stated its intention All eyes are once again on Russia as car sales forecasts
to help Kyrgyzstan (population 5.5 million and a GDP of $12 blossom. The Automotive Supply Chain Conference, Russia
billion) and Tajikistan (population 7.6 million and GDP of will allow delegates the opportunity to drive their businesses
$14.7 billion) join the Eurasian Economic Union shows that forward by listening to supply chain management and
Russia’s strategic interest is not totally economic. Kyrgyzstan logistics experts, networking with decision makers from
and Tajikistan are economically irrelevant; neither adding inside and outside the market and building relationships with
fiscal value to the EEU nor rewarding Russian markets. Both the resurgent manufacturing sector.
entertain US and Chinese influence, a long term regional
Russian bête noire and are drug smuggling routes from The Automotive Supply Chain Conference, Russia will
Central Asia to Russia. If the countries accede to the EEU, examine the ramifications of the new measures for all sectors
Russia could impose strict border controls and eliminate the of the industry. OEMs, component manufacturers and supply
rampant institutional corruption. chain service providers will all vie for the new opportunities
which domestic expansion will provide. Capacity, both
The next Russian target for the Union is Ukraine. Having a in manufacturing and transportation, may be an issue as
stronger economy than either Kyrgyzstan or Tajikistan, its will the never-ending confusion surrounding the Russian
strategic position and importance put it in the middle of a customs system. There will be increased demands on the
struggle between Russia and the European Union. Russia transportation infrastructure which will need to keep pace
would like to amplify its authority over Ukraine by having with the market growth.
it join the customs union. Whether or not this transpires, Find out more at www.automotivesupplychain.org
every advance by the customs union reinforces Russia’s