A-list message, [A-List] US Imperialism: FSU's 'United Economic Space'

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STRATFOR'S GLOBAL INTELLIGENCE REPORT
http://www.stratfor.com
19 September 2003

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Despite Pressure From Washington, Post-Soviet Integration Goes
Ahead

Summary

The four largest post-Soviet economies have agreed to merge into
a United Economic Space. The UES is likely to work eventually,
but the integration will move slowly due to opposition from
Washington.

Analysis

The presidents of Russia, Ukraine, Belarus and Kazakhstan on
Sept. 19 inked an agreement to create a new economic integration
structure called the United Economic Space, or UES. The stated
mission of the UES -- which will be modeled after the European
rather than Soviet Union -- is to introduce and maintain a free
flow of goods, services, capital and labor from within the member
nations.

The leaders of the four founding countries expect the UES to help
their struggling economies by facilitating ties and eliminating
trade barriers. The UES likely will expand over time to include
other former Soviet states. It also could serve to help prepare
these countries economically for possible European Union
membership in the long run.

Progress in the UES is likely to be slow and difficult, however,
due to the disapproval of the United States and rancor among some
of the member nations' elites. The integration process also will
be hampered as the four states try to move forward with the
initiative and yet stay in Washington's good graces.

Unlike its predecessors in the post-Soviet region, however, the
UES integration is likely to work. The four largest and strongest
economies in the region are combining forces. Although their
economies are not in excellent shape, Russia and Kazakhstan have
plenty of natural resources to share with Ukraine and Belarus.
All four members produce goods and services that they can trade
amongst themselves, whereas they have met barriers trading with
Western nations due to high standards for imports.

This is also the first integration structure in the post-Soviet
region that eliminates customs, taxes and duties. The UES also
has pledged to work on significantly reducing other tariffs
within the new organization. The founding states have appointed a
group to oversee the enforcement of rules within the new
structure. Eliminating barriers inside this geographically and
culturally interconnected group of nations potentially could
boost their business ties, trade and economic growth
significantly.

The UES likely will serve as an engine for further integration
within the post-Soviet region. Leaders of the four countries
believe the new structure could prepare their economies for
joining the World Trade Organization and even the European Union
in the long run, by following the EU model, in which goods,
services, people, and money flow relatively freely between member
states. The EU began as a customs union and the Rome Treaty,
which appear modest by modern standards of integration. Since no
political or security strings are attached to the UES, the
members will not face as much difficulty from bodies such as the
EU that oppose this type of integration because it does not fit
with their ideas of a political union.

Kazakhstan and Ukraine agreed to participate largely because the
UES follows a European, not a Soviet, model. In fact, Astana --
not Moscow -- has led the push for this structure. Ukraine and
Kazakhstan joined forces on this issue likely because their
governments believe Moscow is moving closer to wanting
integration into the EU. They share this goal, and thus see an
alliance with Moscow as a potential benefit.

Washington, however, might make the going tough for the UES. U.S.
Ambassador to Ukraine John Herbst, however, discouraged Kiev from
signing the agreement on Sept. 18. At a press conference in Kiev,
he reportedly said, "I think we must look carefully at the
consequences of the steps that have been taken [creating the
UES], and whether they fit in with Ukraine's desire to be
integrated into the Euroatlantic community. It is in the
interests of Ukraine not to have this integration complicated.
The United States fully supports Ukraine's desire to become a
member of the Euroatlantic community and join the global economic
community. We closely cooperate with Ukraine's government in
order to help it join the WTO."

Washington opposes the UES because it is easier for the United
States to deal with its member states separately. If they are
united, even only economically, they will pose more of a force to
be reckoned with. Washington prefers Russia to be a junior
partner that does not present a real threat to its dominance; the
UES stands to make Russia -- and the three other member states --
stronger. Washington might worry that one day this economic
integration could lead to a political union of former Soviet
states that could compete geopolitically with the United States.

Washington's disapproval encourages opposition movements within
the four member states to resist as well. Among the four, the
strongest protests have emerged in Ukraine. As a concession to
the opposition, leaders have agreed that there will be no
authoritative bodies that usurp the power of the individual
countries' governments in the UES (a departure from the EU
model), only regulatory bodies responsible for ensuring that the
UES implementation goes forth. That will require members to sign
and implement about 50 agreements for the next five to seven
years.

The members of the new economic body all will try to move forward
with integration, but at the same time to remain in Washington's
good graces. Given the sheer geopolitical weight of the world's
only superpower, no one can afford to ignore it. But however
slowly and problematically, the integration of post-Soviet states
has begun and will continue. These countries recognize their need
for integration -- not only to ensure their own economic
survival, but also so that in time they might be accepted into
other integration structures with developed nations.
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