The EEU Debate in Kazakhstan: Issues of Economic Development and National Sovereignty

Nazarbaev’s agency in pushing Kazakhstan towards the EEU is indisputable, yet it is only part of the story. There is a broad national consensus in the country on the advisability of this move based on rational cost-benefit analysis. The public debate on the EEU is quite robust, open and multifaceted. politicians, experts, journalists and civil society activists continuously analyse the pros and contras of Eurasian integration, with the three discursive threads of economic welfare, sovereignty and international relations being particularly prominent (Berkutova 2014).

The process of integration under the auspices of the cU and sEs must have ticked the right boxes as the people of Kazakhstan have shown considerable enthusiasm towards it, leaving other member states behind (Table 12.1).

A survey conducted several months after the official launch of the EEU in 2015 found that 87.4 % of Kazakhstanis approved of it, and that they were rather well informed about the complex processes of economic integration (Sadvokasova 2015, pp. 7-8).

Nazarbaev’s key message for his domestic audience has been that deepening economic integration is an objective necessity for the country’s development. In his January 2014 state of the nation address, he identified Kazakhstan’s participation in the EEU as an organic part of the country’s ascent to the list of top 30 most developed nations in the world by 2050 (Nazarbaev 2014a). Shortly after, he even quantified the expected medium-term benefits of the EEU: “According to our estimates, by 2030 this integration will yield the three participants additional GDp growth of25 percent and extra US$600 bn or more” (Nazarbaev 2014b). Later in the year, the president’s Nur Otan political party, using analytical reports from

Table 12.1 Public attitude towards the common market (CU + SES) in Belarus, Kazakhstan and Russia

Source: Poll conducted in May 2014. Adapted from Evraziiskii bank razvitiia (2014, p. 98).

government agencies and media surveys, published a handy booklet explaining in an accessible manner the economic gains the EEU will bring to Kazakhstan (Nur Otan 2014). According to its subtitle, the booklet provided answers to “twenty questions that Kazakhstanis most frequently ask”. A summary of particularly salient benefits distilled from the FAQs is as follows:

• 1. Benefits for Kazakhstan’s business: unfettered access to a giant market of 153 mn people; a share in the annual US$198 bn bonanza of state procurement in Russia and Belarus; colossal savings in using partners’ transport infrastructure such as railways and pipelines (15 % of Kazakhstan’s export transited through the Russian rail system in 2013).
• 2. Benefits for ordinary citizens: better consumer protection thanks to stringent technical regulations (e.g. the minimum content of meat in locally produced sausages will go up from 5 to 60 %); new jobs created via joint ventures; freedom to work anywhere with skills and qualifications fully recognised. There will be no influx of labour migrants into Kazakhstan as Russia with its 1.8 mn vacancies will continue to be the main destination country for them.
• 3. Benefits for industrialisation: Kazakhstan needs to industrialise, and a moderate (and temporary) rise in import tariffs within the CU has created appropriate conditions for import-substitution industrialisation. The flow of foreign direct investment from all sources has not suffered, but was redirected away from the resource sector towards manufacturing, with about half going to the latter now.
• 4. Better structure of trade: the share of manufactured and value-added goods in Kazakhstan’s exports to the EEU states is much higher than in its external trade dominated by minerals. Eventually, Kazakhstani-manufactured goods will become competitive in the international market, too.

Other arguments proffered by pro-integration economists include references to Kazakhstan’s receipts from the CU’s consolidated customs revenue outpacing its actual value of imports (Dodonov 2012, p. 64); protection from predatory behaviour by transnational corporations (Berentaev 2012, p. 19); the exponential growth of Kazakhstani-Russian small and medium joint ventures, especially in the border areas, which generated employment and expanded the tax base (Ianovskaia 2015) and the dizzying prospect of a corporate alliance or even merger between

Kazakhstani and Russian hydrocarbon giants (KazMunaiGaz and Gazprom/Transneft) that will cause global competitors to tremble (Shabarova 2014, p. 94).

The official line on the issue of sovereignty is straightforward and unequivocal, and is broadcast daily to the point of saturation. In Nazarbaev’s words, “we are not going to give away our hard-won freedom to anybody. If regional alliances start to inflict damage on our state interests, we will immediately leave such an organization. The union we are moving towards consists entirely of economic integration” (quoted in Sarmurzina 2013). His foreign minister also stayed on message: “There may be no associations whatsoever with our Soviet past. This is not a step backwards. We are reaching a new level of equal economic partnership whereas our independence remains unshakable ... I can state for sure that the EEU politicization is not happening and there is no threat to Kazakhstan’s sovereignty” (Idrisov 2014). Nazarbaev’s routine statement in August 2014 that his country would withdraw from the organisation if the EEU Treaty’s clauses are not properly implemented, and Kazakhstan’ s interests suffer as a result (Nazarbaev 2014c), looked like a sensational scoop only to the Western media galvanised into a fresh bout of Putinophobia by the events in Ukraine (Farchy 2014).

On the whole, there is little appetite among the public and expert communities for the rapid expansion of the EEU’s supranational functions. Even ardent supporters of deeper economic integration believe that until all treaty objectives are fully implemented, the dilution of national sovereignty through such measures as the introduction of common currency is inadvisable. Dodonov (2013, p. 141) estimated that the process might take 20-30 years to reach the next stage.

The counter-narratives criticising Kazakhstan’s participation in the EEU can be loosely divided into two categories. On the one hand, there are experts, politicians and activists who put emphasis on the “geopolitical hole” into which the country is being dragged. Using the idioms of “neocolonialism” and “imperialism”, they follow the logic and methodology of mainstream Western discourse (cf Kadyrzhanov 2014; Yesdauletova and Yesdauletov 2014; a good primer can be found in Daly 2014). A recent example of this discourse was supplied by the chairman of the opposition AllNation Social-Democratic Party (OSDP), who published an open letter to the president warning him against closer cooperation with exploitative, nationalist and anti-Western Russia which could degenerate into the “integration of the oligarchies leading our countries to a historical dead end”

(Tuyakbai 2015). His proposed remedial action transcended the subject matter of the EEU: he called for the wholesale democratisation of Kazakhstan’s political system, independence of courts, local self-government and respect for citizens’ rights. This conflation of broader political issues and the specific cause of Eurasian integration may have undermined the opposition’s ability to mount efficient collective action on the latter and rally mass support. The EEU critics are very good at publicising their views on various media platforms, but in 2013 they utterly failed in their attempt to collect signatures for a referendum on integration, and their PR stunts such as the “Stop the Eurasian Virus” flash mob in May 2014 petered out amidst public indifference and internal acrimony (Rahmetova 2014). Towards the end of 2015, even OSDP switched its rhetoric from wholesale denunciation of the EEU to the imperative of greater parliamentary oversight and public scrutiny of the “equivocal Eurasianist processes” (Makushina 2015). While not particularly challenging to Nazarbaev, these activities have certainly kept the government on its toes and compelled it to engage in the incessant public awareness campaign as discussed above.

The second group of critics has focused on the economic aftershocks of transition to a common market. Increased competition from Russian and Belarusian companies, currency volatility, inflationary pressures and general nervousness about the new rules of the game have caused great concern among the business community and public in general who have called on the government for extra protection (Syzdykova 2013, pp. 13-14). The authorities responded with a raft of measures including temporary subsidisation of critical goods, currency interventions and an ambitious programme of support for small and medium enterprises (Lis 2014). Most significantly, the government has assiduously pursued redress against unfair practices by EEU partners using the organisation’s governing bodies and rules.

The outcomes have been impressive enough for one expert normally critical of Nazarbaev to concede that the authorities “have in fact taken the initiative from the hands of the opposition which had to weaken its anti- integrationist protestations for a while” (Chebotarev 2014, pp. 104-105). In late 2014, 78.7 % of Kazakhstanis believed that their country’s interests were adequately protected and taken into account in policy decisions within the CU and SES, as opposed to 44.5 % the year before (Makanov 2015, p. 366). In 2015, the SEEC and EEC promptly resolved about a dozen trade disputes among member states, including a major complaint by Belarus about Kazakhstan’s imminent accession to the WTO which required a compromise on more than a thousand tariff positions (Kirinitsiianov 2016).

Kazakhstan, whose hydrocarbon sector accounts for half of state budget revenue and 60 % of export income, was hit hard by the fall in oil prices starting in June 2014. Its GDP growth in 2015 was a paltry 1.2 %, down from 4.3 % in 2014. Recession in Russia and a slump in China’s demand did not help the situation. The Kazakh tenge was floated in 2015 and lost 85 % of its value by the end of year. The government position was that these adverse developments were manifestations of a crisis in the global capitalist economy of which Kazakhstan was now a part. Nazarbaev made the point that economic downturn was a cyclical phenomenon that would not last forever and added: “This has nothing to do with the Eurasian Economic Union. The EEU is our strategic direction, and we won’t digress from it” (quoted in Kasenova 2015). This sentiment appears to have been shared by the public, whose attitudes to the EEU did not register a catastrophic decline throughout 2015, and the business community in particular. A report published by Kazakhstan’s top NGO representing national entrepreneurs argued that the country’s participation in the EEU had proved beneficial to the economy’s real sector under conditions of crisis (Konurov 2016). It pointed to the following dynamics: while Kazakhstan’s overall foreign trade in 2015 fell by 37.1 %, its trade within the EEU contracted only by 28.6 %; the structure of Kazakhstani exports to the EEU was dominated by value-added goods rather than raw materials; privately owned small and medium companies successfully filled the consumer niches in Russia vacated by Western producers in areas such as poultry (annual growth of 141 %) and pharmaceuticals (annual growth of 93 %). The report concluded with an observation that without the EEU, Kazakhstan might continue indefinitely in its role as a “shabby petrol station” in the global division of capitalist labour.