Factsheet: Kazakhstan and the Eurasian Economic Union

Introduction

On 29 May 2014, the leaders of Kazakhstan, Russia and Belarus will meet in Astana to sign the agreement establishing the Eurasian Economic Union (EEU).

The union, first proposed by President Nazarbayev over 20 years ago, builds on the work of the Customs Union (CU) and Common Economic Space (CES) to create a common market of over 170 million people. The union will further strengthen Kazakhstan’s economy, providing more and greater opportunities for domestic and foreign businesses.

Ahead of the creation of the union, there have been understandable questions over its role and the benefits to Kazakhstan. This factsheet provides basic information on the EEU and aims to address some of these issues.

Accession to the Eurasian Economic Union serves the economic interests of Kazakhstan

The EEU offers great economic potential to Kazakhstan’s economy, providing access to a common market of over 170 million people.

This common market has significant potential over the next two decades, with experts predicting a 25 per cent growth in the member states’ GDP by 2030, which equates to over US$600bn.

Since the creation of the CU and CES, trade between Russia, Kazakhstan and Belarus has increased by 47 per cent, exceeding US$24bn in 2013.

For Kazakhstan, membership of the CU and CES has seen trade turnover, exports and imports almost double between 2009 and 2013. In that time, turnover has gone from US$72bn to US$133bn, exports from US$43bn to US$83bn and imports from US$28bn to US$49bn.

According to the World Bank’s Ease of Doing Business Index, Kazakhstan is by far the easiest EEU market to do business in, making it the ideal choice for international businesses looking to access the high growth common market of the EEU. This will help attract foreign businesses and diversify Kazakhstan economy.

“The aim of the Eurasian Economic Union is not to create barriers against the rest of the world, but to improve our cooperation with other member states. Kazakhstan, Belarus, and Russia create the Union in a spirit of strategic partnership and friendship. The economic integration will considerably increase economic capabilities of all countries”

President Nazarbayev

Foreign Direct Investment into Kazakhstan has increased significantly under the CU and CES. Between 2009 and 2012, FDI amounted to US$99bn – over 50 per cent of the total FDI into Kazakhstan since independence in 1991. FDI reached more than US$18bn in the first nine months of 2013.

Table 1. Trade volumes of the Republic of Kazakhstan (US$ billion)

The EEU is an economic not political union

The Commission of the EEU, the supranational body established to promote integration, is strictly regulated by the agreements between member states. Its powers relate exclusively to economic issues.

The Commission of the EEU does not have any supranational authority over the respective Heads of State and Kazakhstan will not support the creation of any supranational political bodies, such as an EEU Parliament.

The structure of the EEU Commission and its ruling council means that no single state can dominate the decision making process. Resolutions are based on the decision of the majority of the Council but each state has a veto on the process. In this case the issue is brought up to the level of the Head of States where the decision is made by consensus.

Kazakhstan believes there is currently no necessity to expand the role or operations of the Eurasian Economic Commission and that its work should be

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2009 2013

Total foreign tradeturnover of theRepublic of Kazakhstan

Export fromKazakhstan

Import to Kazakhstan

Trade volume b/wKazakhstan and CUmembers

“Any union must base on the principles of economic pragmatism, voluntarism, equality, non-interference in the internal affairs of each other, respect of the sovereignty and inviolability of the borders”

President Nazarbayev

clearly evaluated to ensure it effectively fulfills its remit and delivers for all member states and their citizens.

Kazakhstan’s accession to the EEUwill not affect bilateral relations with other countries or multilateral agreements

The EEU will have no impact on Kazakhstan’s other bilateral or international relations or agreements, nor its integration into other organizations. The EEU preserves the sovereignty of each member state.

The EEU is aimed at facilitating trade, both within the organization and with outside partners – not to act as a barrier.Kazakhstan strongly supports the proposal tocreate a free trade zone between the EEU and the European Union.

The success of the CU and the CES is dependent on strong relationships with Europe, Asia and other regional bodies and countries. Kazakhstan sees great potential in its strategic location between Europe, Russia, Asia and the Middle East and will continue to promote these ties.

The EEU does not affect Kazakhstan’s ambitions to further integrateinto the global economic community, including accession to the World Trade Organization (WTO) and Organization for Economic Co-operation and Development (OECD).

“The creation of our economic union is not a frozen tenet. We are to face many challenges in the future. The choice to integrate is not a magic wand that guarantees miracles.”

President Nazarbayev

“There is no and will not be a return to the past – this is our unanimous and unequivocal position. We do not move backwards, but head forwards to reap the clear benefits of integration, as demonstrated by other organizations around the world”

President Nazarbayev