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| EEU: Armenia joining new economic grouping amid vague mechanisms of interaction |
| Moscow, 03.01.2015 |
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| Armenia will become a full member of the Eurasian Economic Union (EEU), an emerging trade bloc of Russia, Belarus and Kazakhstan. The EEU will be launched on January 1 and not all mechanisms of cooperation among the member states have yet been determined. Experts expect a number of inconsistencies and uncoordinated actions as the EEU starts functioning and this, in turn, may lead to deterioration of the economic situation or even some dysfunction in the Union.
Armenian officials give assurances that they have managed to negotiate a list of nearly 800 names of goods, for which the customs duties in Armenia will be raised not immediately, but gradually within a few years. However, experts say that this list does not include a whole range of consumer goods and prices for these goods in Armenia are certain to go up next year.
This is due to the fact that the uniform customs rates in the EEU at present are much higher than those in Armenia today and the increase in duties will lead to a rise in prices for those goods.
The customs duties collected in the member states will go to a common Eurasian fund from which each country will get its share then. Armenia will receive 1.13 percent of the total fund, which, according to various estimates, may be in the range of $180 million to $300 million a year. Now Armenia receives about $90 million from its own customs duties. However, the figure will largely depend on the volume of trade in the EEU, which has been consistently falling in the Customs Union of Russia, Belarus and Kazakhstan during the past two years. It is not excluded either that Armenia will not even get these expected additional revenues if trade continues to fall.
Besides, companies working in the EEU will get the priority right to supply goods for public procurement in Armenia. In other words, if Armenia wants to purchase, for example, medicines for public needs, it will have to seek these medicines in the EEU territory first even if there are higher-quality and less expensive analogues outside the common customs space.
By the way, in 2016 the EEU member states intend to establish a common pharmaceutical market, and in 2019 – a common electrical power market. It remains unclear how Armenia, which has no common land borders with the other EEU members, will work in this market. By 2025, the EEU plans to establish a single financial market and a single currency, which will be tentatively called altyn.
Remarkably, with only a few days before its official entry into the EEU, Armenia has not yet concluded a corresponding agreement with Georgia on the transit of goods – not to Russia, but to the EEU. Armenia has no common border with the EEU and will be forced to transit its goods through Georgia. Between Armenia and Georgia, there is a free trade regime, but the road is almost not functioning due to climatic conditions, there is no rail link and communication via the Black Sea port of Poti is currently discontinued because of problems with the exchange rate of the Russian ruble.
The absence of common borders between Armenia and the rest of the EEU member states negates the assumptions that there may be a drastic increase in the exports from Armenia to the 170-million-strong Eurasian market. The free trade regime with EEU countries exists even today, and the export of Armenian goods to Russia is already at its maximum capacity.
It is more likely that exports and imports with “third” countries will be reduced as foreign trade of EEU member countries will no longer be independent, but will be “coordinated”. It means that the customs duties and quotas for goods imported, say, from Europe will be determined not in Yerevan but in the Eurasian Commission.
Armenian experts do not hide the fact that membership in the EEU, instead of economic benefit, may bring serious losses for Armenia, especially that it is not yet clear how the Union will function in conditions of periodical contradictions between the presidents of its member states. For example, Belarus President Alexander Lukashenko has repeatedly criticized the state of cooperation between the member states. At a meeting of the Supreme Eurasian Economic Council in Moscow earlier this week he asked rhetorically whether there are real liberal trade terms and a favorable regime for national economies within the Common Economic Space today.
The presidents of Belarus and Kazakhstan insist on greater sovereignty for their national economies in the common Union, however, Russian President Vladimir Putin appears to be striving for recreating the economy of the Soviet times. And Armenia in this alliance is likely to be the “weakest link”. In the Eurasian Commission, where each member states will have 3 votes, Armenia will have only one vote during the first year of its membership, although there will be three Armenian members in the commission. Decisions are to be made by consensus, which means that in order to advance its opinion Armenia will have to obtain the consent of the other members of the Union, which in conditions of not quite friendly relations with at least two members, namely Belarus and Kazakhstan, it appears almost unrealistic.
Kyrgyzstan is expected to join the EEU in May.
By Naira Hayrumyan
ArmeniaNow correspondent |
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