Academic journal article Harvard International Review

A Soviet Reunion: Toward a Single Economic Space

Academic journal article Harvard International Review

A Soviet Reunion: Toward a Single Economic Space

Article excerpt

When the Soviet Union dissolved 12 years ago, the Commonwealth of Independent States (CIS) formed as a loose coalition in its place. A significant step toward tightening the coalition was made at a summit at Yalta on September 19, 2003, aimed at establishing a Single Economic Space (SES) that would unify CIS markets in a way not seen since the Soviet Union's collapse. Belarus, Kazakhstan, Russia, and Ukraine spearheaded the initiative, calling for an economic union that would eliminate internal trade barriers and customs and establish a central trade commission with supreme trade authority over participating states. As with past attempts to form an economic union among former Soviet republics, the terms of the agreement have been subject to heated debate and the union finds opposition on many fronts. The establishment of the SES signals a willingness of CIS members to integrate their markets and participate in the international economy. Although there undoubtedly will be difficulties along the path to an economically unified CIS, the integration is necessary and must be seriously pursued to prevent the CIS members from lagging behind their Western European neighbors.

The proposal comes at a time when many states are about to accede to the World Trade Organization (VETO) and the European Union, and even more are being considered for these organizations. This is both a catalyzing and complicating factor for the creation of the SES. Western European markets have long been off-limits to the former Soviet republics. AS a number of Baltic and Eastern European states have sufficiently developed their markets to the standards of the European Union, the remaining republics are all the more ostracized. In order to develop their own markets and become more attractive to foreign investors, Russia and its non-EU neighbors must first find an alternative to trading with their western counterparts. However, lagging domestic markets and the scarcity of trading partners may prove the determining factors that make the SES more successful than past attempts to unify markets in the CIS.

If successful, the SES will bring attention to an area rich in resources but still largely inaccessible due to economic immobility: Open access to the region's energy resources will be the highlight of economic integration in Russia and Central Asia. Given the current instability in the Middle East, Central Asian energy markets may prove extremely attractive to foreign investment once the markets have been integrated. The integration process, however, will involve great risks, as the energy markets in participating countries are not equitable. Russia and Kazakhstan have much to gain, given their abundant resources and inexpensive methods of production. …

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