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Russia forms 'epoch-making' trading bloc with Belarus and Kazakhstan

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Russia forms 'epoch-making' trading bloc with Belarus and Kazakhstan
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The presidents of Russia, Belarus and Kazakhstan have signed a deal to create a vast trading bloc, hoping that it will challenge the economic might of rival economic zones such as the US, the EU and China.

Russian President Vladimir Putin hailed its “epoch-making significance” as the trio met for the signing of the treaty in the Kazakh capital, Astana.

He has also said that the formation of the bloc did not mean that Russia was trying to rebuild the Soviet Union.

The treaty forging the Eurasian Economic Union will come into force in January once it has passed the formality of being approved by the three former Soviet republics’ parliaments.

There were supposed to be four flags shown on the banks of giant TV screens at the signing ceremony held in Kazakhstan’s oil-funded boomtown capital Astana, but the yellow and blue of Ukraine was missing undermined Russian President Vladimir Putin’s dream of drawing the former Communist states closer together.

Kazakhstan’s President Nursultan Nazarbayev stressed this was about trade, not politics: “The union is economic and doesn’t touch on questions of independence, the political sovereignty of the states taking part in the integration process.”

Moscow admits the new alliance will cost it dear. Russia’s Deputy Finance Minister Sergei Shatalov said Belarus and Kazakhstan received about $6 billion (4.4 billion euros) annually from Russia in direct and indirect support, and said that could increase by $30 billion (22 billion euros) if all trade restrictions were lifted in 2015.

But Russia’s Putin thinks it is worth it. He told the audience in Astana: “The mutual-benefit of the integration process is already proving itself in practice: the economic cooperation of Russia, Belarus and Kazakhstan is widening; the structure of trade is developing, the proportion of high-technical goods is expanding in the general structure; the competitive edge of our countries in the world economy is getting stronger.”

With a population of 170 million, the countries in the Eurasian Economic Union have combined GDP the equivalent of 1.7 trillion euros.

By comparison the European Union has 505 million people and their economies total 13 trillion euros.

But Kazakhstan and Russia have one-fifth of the world’s natural gas reserves and 15 percent of global oil reserves.

The creation of a common energy market is for the future, but the new union reinforces Putin’s drive to show Russia that will not be isolated by sanctions, a message he underlined by reaching a 300 billion euro gas supply deal with China last week.

The Eurasian Economic Union – which follows years of tense and difficult negotiations – guarantees the free transit of goods, services, capital and workforces and coordinates policy for the members’ financial systems, but it stops short of introducing a single currency.

Independent analysts have said the trio’s hopes of economically rivalling the European Union, United States or China are unrealistic, even when the single market starts operating fully.