Tomorrow, June 28, the third Russian-Azerbaijani inter-regional forum "Russian-Azerbaijani dialogue - 2012" will be opened in Baku. The PoliticalScience Centre “North – South” has prepared a special analytical report "Prospects for economic cooperation between Azerbaijan and Russia in the conditions of formation of the Eurasian modernization project."
The report analyzes the prospects of cooperation between the Russian Federation and the Republic of Azerbaijan in the context of the development process of Eurasian integration. The most promising directions of cooperation between Russia and Azerbaijan are specially considered; the expediency of developing mutually-beneficial economic cooperation between the states of the Eurasian project and the Republic of Azerbaijan is proved.
The report was prepared by leading members of the Political Science Centre for development of scientific and educational ties with the countries of the Caucasus region "North – South", featuring well-known political scientists and economists from Russia and Azerbaijan.
We present to you an extract from this report.
Currently, the development of geopolitical and geoeconomic processes is influenced by two major interrelated trends - globalization and regionalization. The results of the global financial crisis of 2008-2009 proved that no country, no matter how powerful is its economic and political potential, can overcome global threats and challenges by itself. Therefore, one of the most important mechanisms of enhancing economic competitiveness, strengthening the political potential of modern states and ensuring their effective integration into world economic relations is regional integration. World practice shows many successful examples of such projects: Mercosur, the SCO, the EU, NAFTA, etc.
The post-Soviet region has become one of the centers of the most intense development of integration processes. The first decade of the 21st century has shown a trend of uniting the former Soviet republics on a new level: this has let them enhance not only their trade and production, but also cooperation and investment relations, as well as civil and human communication.
Meanwhile, the movement of post-Soviet countries on the road of integration was not easy or trouble free. In the early 1990s, the national elites of the newly-independent states often tried to make a complete break with the Soviet past and develop closer relations with non-regional players. However, these unsuccessful attempts by the post-Soviet states to overcome the serious consequences of the break-up of the USSR on their own, as well as the rapid development of negative processes in the economic, social and political spheres of the post-Soviet countries, clearly showed a failure of disintegration policy.
During the formation of national states on the territory of the CIS countries it became quite evident that the factor of economic feasibility was primarily important for the development of integration processes in the former Soviet Union. Therefore, it is the economy on many levels that has become the imperative and driving force of post-Soviet integration.
The CIS countries have attempted to give definite meaning to various economic projects and create effective economic institutions since the first years of independence. The most promising of these projects was the project of creating the Eurasian Economic Union, which was proposed by Kazakh President Nursultan Nazarbayev in March 1994, and later was reinterpreted and expanded in the working program of Russian President Vladimir Putin. The concept of economic unity of the Eurasian countries, formulated on the basis of speculations of Eurasian academics and supported by practical considerations, is the basis of the Eurasian strategy of Nazarbayev and Putin.
It should be noted that the Eurasian space has some powerful competitive advantages. First, it occupies an important geostrategic position, representing a kind of "corridor" between East and West. The consolidation of the potentials of Eurasian countries and the formation of an integrated transport system provides regional states with the possibility of performing a mediatory function in trade and economic cooperation between the European and Asian parts of the world. Secondly, the territory of Eurasia accounts for nearly one sixth of the Earth, with a population of 290 million people. Finally, the Eurasian region holds the most significant stocks of energy resourses.
The formation of the overall development strategy of Eurasian countries will promote the effective use of their competitive advantages. In this context, the economists and politicians of the post-Soviet states consider integration to be a key means of improving the competitiveness of the states and their effective modernization, as well as inclusion in the international community in a stronger position. Thus, Russian President Vladimir Putin said that the establishment of a Eurasian alliance will allow its participants to "take their deserved place in the complex world of the 21st century ... Together, the countries of Eurasia will be able to become leaders of growth, success and prosperity."
The practical realization of the Eurasian project is associated with the formation of a strong institutional framework. These institutions include the Eurasian Economic Community (EurAsEC), as well as the Customs Union (CU), created in 2010.
The first 17 agreements forming the basis of the Common Economic Space (CES) have taken effect since January 1, 2012. These agreements regulate a number of the key themes of economic convergence of the group of three, from the coordination of macroeconomic policy to labor migration. Accordingly, the conditions of the economic activities for members of the association of integration may become more privileged in the near future than for more distant states. The question of enlarging the list of the participating states of an integration association, especially among the CIS states, is currently on the agenda. In particular, Kyrgyzstan and Tajikistan are interested in joining the process of economic convergence.
The Eurasian integration project has several promising scenarios. Every form of its implementation, not even the full one, will allow us to observe the appearance of new instruments provoking the intensification of social and political progress in the former Soviet Union.
In this respect, the development of the optimal format of cooperation between Azerbaijan and the Eurasian countries has high relevance. Baku should take into account that over time the integration processes between Russia, Belarus and Kazakhstan will go to new frontiers, and it certainly will change not only the trade and economic realities of Azerbaijan in its relations with the leaders of the region, but also the social and political standards of the CIS as a whole.
Given that the majority of Azerbaijanis live on the territory of the new Eurasia and concentrate their business interests in the same region, Baku needs at least to watch the Russian initiatives, exploring their strengths and limitations and at best to consider the options of the most advantageous participation in the projects of Eurasian integration.
At present, Azerbaijan's reliance on multi-vectoral manoeuvering and flexible pragmatic alliances according to its interests brings the maximum benefit. It is necessary to recognize the achievements of the Baku strategy: developing a complex network of bilateral relations, Azerbaijan compensates for the absence of its role in the more closely integrated alliances. But at the same time, we should admit that Baku prefers to be at a reasonable distance from integration with Russia, participating in those projects of Moscow where there is a meaningful result for the Azerbaijani side. Bear in mind that Azerbaijan actively cooperates with other CIS countries, often as a leader. Thus, it indirectly and sometimes directly intensifies Russian projects with neighboring countries.
The successful experience of Azerbaijan in relations with its partners, the leading position of Baku in dialogue with Minsk, Chisinau, and Bishkek, the serious prospects of Azerbaijani-Ukrainian relations - all of this matches the general atmosphere of post-Soviet integration, greatly adding to the energy of the Russian program. However, if we're talking about a new qualitative leap in Azerbaijan, its participation in the Eurasian projects (at least as a dialogue partner) is badly needed. At the same time, Baku is free from many constraints of a political and economic nature, which, for example, constrain Ukraine on the eve of Eurasian integration.
Thus, there is real background for the development of mutually-beneficial cooperation between the Eurasian states participating in the project and the Republic of Azerbaijan.
The implementation of the Eurasian Economic Project is multi-level and involves consistent implementation of several stages: the EurAsEC, the Customs Union and the Single Economic Space and the Eurasian Economic Union. The process of forming a fully-integrated union is not identical to the European experience, but there are a number of correspondences and parallels with the model of the European Union.
The first stage of the institutional embodiment of the idea of Eurasian integration was the creation of the Eurasian Economic Community (EurAsEC) in 2000 with the efforts of Russia, Kazakhstan, Belarus, Kyrgyzstan, Tajikistan and Uzbekistan (which suspended its membership in 2008). As part of the Eurasian Economic Community for 10 years of its existence, the organization had implemented specific economic projects, including:
- Creating a real free trade regime;
-Abolition of the practice of levying customs duties on goods manufactured on the territory of the countries of the Community in their mutual trade;
- Formation of the EurAsEC Anti-Crisis Fund;
- Construction of Eurasian transport routes, etc.
The result of the steps taken was, first of all, a growth in the bilateral trade of the countries participating in the Community. This figure more than tripled from 31 billion dollars in 2001 to 95.2 billion dollars in 2010. The share of mutual investments of the EurAsEC member states in the total amount of foreign investment increased from 7% in 2007 to 12% in 2010. Average gross domestic product (GDP) in the Eurasian Economic Community in 2010 compared to 2001 increased by 1.6 times, industrial production - by 1.5 times, investment in fixed capital - by 2.2 times.
The next stage of the implementation of the Eurasian integration project was the creation of the Customs Union in 2010, which included the three post-Soviet economies most similar to each other: Russia, Belarus and Kazakhstan. An important event of this period was the introduction of a unified customs tariff on imported goods, which included more than 11,000 units of the commodity nomenclature, and the adoption of the Single Commodity Nomenclature of Foreign Trade of the Customs Union (CU HS) and the Common Customs Tariff of the Customs Union (CU ETT). At the end of 2011, the trade turnover between Russia, Belarus and Kazakhstan increased by more than 36%, exceeding $100 billion and set the stage for increasing competition for capital and skilled labor.
Since 2012, the Common Economic Space (CES) has existed. In fact, it is the common market of Russia, Kazakhstan and Belarus. This form of closer integration of the post-Soviet countries includes such components as: coordinated economic policy, free movement of capital, free movement of services, free movement of labor and access to the infrastructure of the EEA member states. In the framework of the Single Economic Space, uniform mechanisms of economic regulation operate, and consistent policy of ensuring free movement of goods, services, capital and labor is undertaken. The transition to a higher level of integration interaction of the Eurasian countries demanded the formation of supranational institutions within the EEA; as a result, the Eurasian Economic Commission for Europe (ECE) as a regulatory body was created to ensure the conditions for the functioning and development of the Customs Union and Single Economic Space.
Currently, a working group for transforming the Interparliamentary Assembly of EurAsEC to the Eurasian Parliament is being created. These steps should help to strengthen inter-parliamentary dialogue between the participating countries of the Eurasian project at the time of the formation of the Eurasian Economic Union in 2015.
The feasibility of the Eurasian Economic project is based on a number of objective advantages:
1) Strengthening the common customs boundary will reduce the pressure of the external market in order to develop its own production of the CU and will provide an opportunity to better prepare for global competition after entry to the WTO.
2) Cooperation within the framework of the Customs Union will benefit the promotion of exports from the three states. According to experts, the development of Eurasian integration opens up access to a huge market of 170 million consumers and a total GDP of about $2 trillion to the countries of the union.
3) As for the businesses of the Eurasian countries, the elimination of customs borders is the formation of real conditions for industrial cooperation producing high-tech goods and creating a large-scale market with common rules of the game, which provides more efficient economic growth and welfare of the citizens of the EEA.
4) Increasing the efficiency of the transit potential. The absence of barriers at the internal borders contributes to the growth of freight. In the future, it will open equal access to infrastructure.
5) Economic modernization at the expense of innovative development stimulates the development of the social sphere, which in turn determines not only the welfare of the population, but also higher levels of education and culture among the citizens of the Eurasian countries.
6) The administrative approval system adopted in the EEA is democratic according to its form and pragmatic in its content and will effectively solve the problems facing the countries of the region.
In general, the main challenge for today's post-Soviet countries is the development of the innovative economy. This task requires the formation of an industrial intellectual property market, which in turn provides for the creation of a competitive manufacturing and sales market. In this regard, cooperation within the Eurasian project promotes the modernization development of the post-Soviet states.
