The Eurasian Economic Union, launched in January of this year and set to expand with the addition of Kyrgyzstan next month, should be a driving force of economic integration throughout the region. Trouble, however, has arisen between the EEU’s two largest economies.
Russia and Kazakhstan have been sparing since the union launched: swapping trade restrictions and disagreeing over a single currency. The trade war, if indeed it can be called such, stems directly from Kazakhstan dealing with the consequences of Russia’s looming recession. The crumbling of the ruble over the past year has flooded Kazakhstan with cheap Russian goods.
Kazakhstan’s consumer rights committee seized several kinds of Russian products over the past few months for “not meeting technical regulations.” Five tons of meat were seized by Kazakh authorities. Over two tons of milk, which Kazakh authorities say were tested and contained coliform bacteria, were also seized in March. Russia, for its part, stopped 60 tons of cheese at the border for “not meeting quality and safety requirements.”Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Russian media has taken up the “trade war” narrative though authorities on both sides deny it.
Interfax quoted Russian President Vladimir Putin’s spokesman Dmitry Peskov as commenting on talk of a trade war: “I think that it’s quite a big exaggeration, but I don’t have information about what exactly is going on.”
Kazakh statements also deny that authorities are targeting Russian imports, but experts disagree. Earlier this month, Eurasianet reported:
Outrage has been mounting for months in Kazakhstan over Russian imports swamping its markets. While the ruble has declined, Kazakhstan’s tenge has remained comparatively stable, thus making Russian imports in Kazakhstan a bargain.
These days, Russian goods are sometimes up to 30 percent cheaper than locally produced wares. This discrepancy is squeezing a broad array of economic sectors – from automakers to dairy producers, cattle farmers and confectioners. Some Kazakhstani manufacturers are warning that the crisis threatens to drive them out of business.
In the BBC Vladimir Osakovskiy, chief economist for Russia and CIS at the Bank of America Merrill Lynch, estimated that “the gap in prices on the same goods from Russia and Kazakhstan can be closed,” if Kazakhstan devalued its currency further. Kazakhstan, which has a GDP of $232 billion (Russia’s is $2.1 trillion, though in per capita terms the two are close), devalued its currency in February 2014. But newly re-elected Kazakh President Nursultan Nazarbaev has consistently rejected the idea.
Osakovskiy also commented that the restrictions being traded presently between Kazakhstan and Russia will not hinder overall economic integration in the union. Kazakh entrepreneurs are still worried, Gaziza Shakhanova, a managing director at Kaznex Invest agency, told the BBC that Moscow puts its domestic interests first and that Kazakhstan ought to do the same.
“In its race for imaginary advantages of the Eurasian Economic Union’s market, Kazakhstan may lose its domestic market.”