Common Economic Space-Out
// The Leaders of Four Countries Failed to Achieve a Livadiysky Palace Revolution
The Summit
Yesterday at Livadiysky Palace near Yalta the leaders of Russia, Belarus, Kazakhstan, and Ukraine held a summit devoted to the process of establishing a common economic space (CES). As a result, in the opinion of Kommersant special correspondent Andrei Kolesnikov, the idea of a single economic space turned into an unachievable dream of it.
First thing in the morning I wanted to know if Russian President Vladimir Putin and Belarussian President Aleksandr Lukashenko had been able to agree on anything the day before or if they were still friends. They rather listlessly tried to make an impression at least on the journalists if not on each other. It seemed to me that nothing had worked out for them. But in the heat of the moment I could have been mistaken.
Firmly resolved to find out what had happened the day before, when I arrived at Livadiysky Palace in the morning where they were already awaiting the heads of state, I went over to the Belarussian President's press secretary Natalya Petkevich.
– Did they agree on anything yesterday? – I asked straight out.
– Of course! – she exclaimed.
– On what?
– You'll find out in due time.
– Did they really decide on anything specific?
– Absolutely!
– On gas prices?
– Why just prices? As if they had nothing else to talk about. Besides, yesterday Aleksandr Grigorevich told you personally that Belarus has no problems with gas. It's your problem (see yesterday's edition of Kommersant – Kommersant).
– Wait a minute,” I said in some confusion. “You're the ones who want to buy our gas at our domestic prices.”
– You don't understand everything,” Ms. Petkevich told me.
– Then tell me. Otherwise everyone will think that no one at this summit can agree with anyone on anything.”
– No, I won't tell you. It's too early for your interpretation.”
Meanwhile President of Ukraine Leonid Kuchma was approaching the entrance to the palace. As he passed the journalists he tossed off the remark:
– We made good progress.”
Then he went into the building, leaving me to puzzle over exactly what he had managed to do here.
The fact is that Leonid Kuchma had not been in such an optimistic mood before this. Yesterday, as he was leaving his Zarya residence for a breath of fresh air after a meeting with Vladimir Putin, he caught sight of President of Kazakhstan Nursultan Nazarbaev bored with waiting his turn and rushed over to him like a brother. Then waving his hand at his hand at his residence, he complained:
– It's such a whorehouse, fuck it….”
Nursultan Nazarbaev sympathized with his companion's problems (even though there was nothing he could do). The President of Kazakhstan did his best to console his colleague, while the latter uttered cries from time to time and threw up his hands:
– But why us?!”
Mr. Nazarbaev replied that there was no need to despair but to work, and that rather than accepting 61 documents at the summit it was better to reduce everything to one common document…
– Well if we convince them tomorrow that we didn't simply sign things, then we're really starting to get somewhere… Everything else will fine,” the President of Kazakhstan said.
It would be interesting to know what he meant. In any event, Mr. Kuchma gradually calmed down and even relaxed a bit.
Then when the President of Ukraine arrived at Livadiysky Palace the next morning, he was already saying he'd done something. What exactly had happened late last evening while the leaders of the four countries were having dinner?
After analyzing what President Kuchma had said, I suddenly came to the discouraging conclusion: nothing. The phrase “we made good progress” actually meant, “we made a big splash”.
In the meantime, the presidents of Kazakhstan and Belarus arrived at the palace (neither said anything about what they had done or about tone at the palace). The three of them had already been waiting for the Russian president for quite a while, although it was known that he had left on time.
A high-ranking source told me what was happening with the Russian president at that moment. He was on his way through the residence grounds towards Livadiysky Palace.
– Then I suddenly saw the President of Russia's motorcade heading straight for me at high speed. I froze right there: this is a dead-end road! I had just come from there myself! But I'd got lost. Why were they taking him that way? What for? The summit's not that bad!”
It was later learned that the traffic controller had given the motorcade the wrong directions (the controller himself claimed they had misunderstood him). As a result, Vladimir Putin joined his colleagues very late. The meeting started five minutes later. Leonid Kuchma opened it. He acknowledged that not everything was going smoothly with implementation of the CES, and that included Ukraine. However, he said, more than 100 documents had already been prepared that needed to be signed in order to form the CES. He thought it should start with the formation of a full-scale free trade zone without exceptions or restrictions. This required signing only 13 documents.
Leonid Kuchma clearly wanted to be remembered as a person exemplifying a constructive approach to solving difficult problems. Thus, he talked about the need to use the experience of the analogous Latin American organization MERCOSUR (Mercado Comun del Sur, the South American common market).
– The other day,” Leonid Kuchma emphasized, “I had a meeting with President of Brazil Lula da Silva, who expressed interest in establishing a dialog between MERCOSUR and CES.”
It was as if he wanted to say, “see how much I'm doing for our poor CES? I met Lula da Silva, and he was interested, even though there's not even a trace of a CES. What are you doing?”
No on appreciated it. President of Belarus Aleksandr Lukashenko said something completely different. He was not interested in forming a free economic zone but a World Trade Organization. Let's join hands my friends so we don't disappear one at a timethis seemed to be his main point at first glance. All countries understand that they need to join the WTO, he said, and if they do this separately, there will be no end of trouble. Is it worth it for one of the four countries to join if it can't even agree on anything with three other countries without WTO sanctions.
– All four of us need to reach an agreement now, and, this is very important Leonid Danilovich, we need to reach an agreement right now,” Mr. Lukashenko said. “If we don't, it will be the start of a hopeless task.”
The President of Belarus was clearly hoping that along with undoubted “entrants” like Ukraine and Russia, they might accept Belarus “for good measure”.
Mr. Putin spoke next. He firmly supported Mr. Lukashenko:
– I agree with Aleksandr Grigorevich that we need to prepare the appropriate draft documents, and I think that by 2005 or 2006 we will able to come to constructive agreements.”
Never mind that at first glance this phrase sounded like a mockery of the President of Belarus and all his ideas. It is far more important that there should not be any fundamental disagreements between our two countries, and a dialog will further our potential, as the president stressed.
President of Kazakhstan Nursultan Nazarbaev said that the four presidents had been “rushing about all four capitals for thirteen months.”
– We've ratified the agreements. That's great. The task now is to keep this work from coming to nothing.”
They were all so afraid it would all come to nothing that it was absolutely clear that there was a very great danger of this.
– It seems we all have different priorities. We've been applying the term “different-speed operations,” Mr Nazarbaev admitted. “I don't know if there's any sense in this. The speed has to be the same for everyone. We have to work out nearly 100 agreements.”
It was as if the leaders of the four countries had agreed to drive sane journalists crazy. Each president gave startlingly different figures for the number of agreements they had to sign to keep the process from becoming a hopeless task. These numbers varied from one (Mr. Putin proposed adopting a common constitution) to one hundred (Mr. Nazarbaev's suggestion). It seemed to me they understood that this was not the limit.
The President of Kazakhstan proposed to start the talks with setting up a customs union and then following with a transportation union, although Mr. Kuchma had just said that first they had to agree on a free economic zone and not a customs union.
– Otherwise, I don't understand what we'll do next,” said Mr. Nazarbaev, raising his voice.
The negotiations began behind closed doors. It was clear that if these self-assured people remained “themselves” the people of our countries, frozen in anticipation of their leaders' decision, might as well forget about a common economic space.
Two hours later the presidents emerged from Livadiysky Palace. In these situations protocol usually demands that you smile whether you want to or not. But none of the four even attempted to smile. Mr. Nazarbaev said that the deputy prime ministers of the four counties had been instructed to prepare a package of documents by September, when a meeting of the leaders of the “four” would take place in Astana, the capital of Kazakhstan. This time the number of documents had increased to 110.
Mr. Nazarbaev said again that first they had to set up a customs union. And Mr. Putin repeated that the first package of documents could be signed at the beginning of 2006.
Mr. Lukashenko was the most somber-looking.
– We need to do something concrete so that everyone understands that our fortune lies here, in a common economic space,” he said almost entreatingly.
I understood: it had been a failure. Ahead of everyone lay a hopeless task, as Aleksandr Lukashenko correctly observed. While answering a question, Vladimir Putin suddenly appealed to the journalists, also nearly with entreaty:
– A lot depends on how you present this! We really need your support!”
I recalled what Mr. Nazarbaev had said to Mr. Kuchma yesterday at the Zarya residence: “Well if we convince them tomorrow that we didn't simply sign…”
They specifically meant journalists. They all understood this right at the start. They had no illusions except one: that they would succeed in convincing the Journalists.
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Vladimir Putin Leads His Colleagues in a Circle
The presidents of the four countries, Vladimir Putin, Leonid Kuchma, Aleksandr Lukashenko, and Nursultan Nazarbaev, signed an agreement on a common economic space in Yalta on September 19, 2003. The document was huge, with 116 articles incorporated into 22 sections, but it was declarative. It had to be supplemented with specific agreements. It followed from yesterday's meeting of the presidents that this was still a long way off. Eight months passed from the time the idea was approved (Presidents Putin, Kuchma, Lukashenko, and Nazarbaev agreed to set up the CES on February 23, 2003) to the signing of the agreement. After another eight monthsyesterday's summit was the first since September 2003not a single new agreement had appeared, even in draft form.
The leaders of the union into a common economic space already realized that making their idea a reality would not be easy. Vladimir Putin confirmed yesterday that, “our experts have selected a group of agreements from the 61 drafts” and “we've instructed the experts to try and single out what is most important within the framework of these 61 priority draft agreements.” “We'll know if they'll be able to do this by the next CES summit in Astana,” Mr. Putin said. The presidents agreed to hold the next summit on September 15, 2004. Yesterday, Mr. Putin's colleagues portrayed the progress of the CES somewhat differently than he did. According to Leonid Kuchma, they had agreed on nearly 80 international legal documents to be worked out before the end of 2004. Nevertheless, in Mr. Kuchma's opinion, the 13 agreements on establishing a free trade zone would be enough for the initial period. Strictly speaking, Ukraine has endorsed the CES (less willingly than the others) for this zone. The main advantage to Kiev here is that Russia will have to abolish restrictions on bilateral trade, and above all that Kiev will get the right to collect VAT on Russian energy resources in Ukraine. (VAT on oil and gas is currently paid in Russia). The matter concerns a prize of $1 billion annually.
At the same time, a Russian government official, who wished to remain anonymous, maintained that the disagreements between the CES members were too great. “Kazakhstan is interested in a reduction of the transport tariff load. Ukraine is interested in reducing the railway tariff load. Russia's key interests include establishing national investment conditions.” Aleksandr Lukashenko plainly had doubts about the future of the CES when he ingenuously said that, “if there are no concrete results from today's meeting, the CES runs the risk of turning into a structure like the CIS.”
Besides the CIS, the countries participating in yesterday's summit are involved in at least eight more various associations. For example, from 1996 until recently the idea of a union with Belarus was popular in Russia; but when it came to distributing Belarussian property and assigning the right of issue, the union collapsed. A customs union and free trade zone in the CIS were also established in 1995, but remain only on paper. In 1999, the presidents of the CIS countries even signed an agreement on a customs union and a common economic space. But it never came into effect, because they were unable to reach a consensus on the level of customs tariffs.
Nursultan Nazarbaev said yesterday that first of all a customs union had to be set up within the framework of the CES, moreover before the CES countries joined the WTO. “Otherwise I don't know what will happen next,” he said spreading his hands. To all appearances, the union-building process will continue. Especially since for the last 13 years each member country has been preparing a solid bureaucratic personnel reserve ready to undertake union building of any complexity.
Andrei Kolesnikov, Petr Netreba
All the Article in Russian as of May 25, 2004
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