Economic Relations between Kazakhstan and Russia

petrochemical products, as well as products of ferrous and non-ferrous

metallurgy.

Deliveries of ferrous metals (35.2 percent), copper and items made of

copper (15.1 percent) make up a considerable share of exports. Russian

enterprises are also the main consumers of Kazakhstan oil and petroleum

products, which amount to 40 percent of the exports of mineral products.

In 1994, Kazakhstan's imports of industrial and technical goods and of

consumer goods from the far and near abroad amounted to $3.4 billion; in

1995, the figure was $3.7 billion. The largest share of imports fell on

Russia - $1.3 billion and $1.8 billion respectively. Imports from Russia

covered 30 percent of the demand of households and the republic's

enterprises for raw materials, 70 percent of the demand for industrial

manufactured products (including 90 percent of the demand, for complex

household appliances), and more than 70 percent of the * demand for

products of the chemical and timber industries. Kazakhstan's imports from

Russia are dominated by electric; machines, equipment, mechanisms, and,

transport vehicles. Their share in over imports amounts to 70-percent.

There are also imports of considerable amounts of raw materials for the

foodstuffs industry and the foodstuffs themselves (10.2 percent), mineral

products and metals (10.1 percent), and other consumer goods (7.8 percent).

More than half of imported mineral products and non-ferrous metals come

from Russia.

The share of deliveries against convertible currency in the export-

import operations between Kazakhstan and Russia amounted to 6.5 percent of

the total volume of exports; the share of baiter operations was 32.6

percent; and the share of clearing and similar operations, 60.9 percent. In

this process, baiter deals did not as a rule result in a balanced and

equivalent exchange. Analyses of export-import barter deals in 1993-1995

shows that total exports were twice as large as imports of commodities. As

a result of these operations, considerable funds of Kazakhstan Commodity

producers annually stay in Russia.

On the whole, the results of economic development show that the

republic was close to achieving macroeconomic stabilization, that the

impact of market incentives increased, and that a new system of reference

points and motivations developed. The main problems of the critical period

of development were partially solved, but new ones emerged.

Harsh monetary and credit policies, liberalization of the domestic and

foreign markets promoted the formation in the republic of market mechanisms

for the regulations of the economy and for ensuring equal possibilities and

guarantees for all the agents of economic activity. In this situation the

possibility appeared of creating a common economic space covering

Kazakhstan and Russia, in which free circulation of commodities, capital,

and labor would be made possible.

The development of Kazakhstani-Russian relations between 1991 and 1995

showed that the two states adopted a great many documents covering a wide

range of economic issues.

The implementation of these agreements created favorable conditions for

establishing economic links between economic agents and for the development

of a common market that would be advantageous for the economic interests of

both Kazakhstan and Russia.

The relations between the two countries in the economic sphere

developed, against the background of improving multilateral cooperation:

within the CIS framework. The legal basis for this, process was the treaty

on the jetting-up of the CIS Economic Union signed on September 24, 1993.'

This document proclaimed as the main goal a voluntary, stage-by-stage re-

creation, on new, market principles of unified economic space, or common

market, with free circulation of commodities, services, capital, and labor.

On the basis of the treaty, a solid legal groundwork was created. On

October 21, 1994, an interstate economic committee was set up at a-session

of the council of CIS heads of state, and a memorandum on the main

directions of integration development of the Commonwealth of Independent

States was signed. These documents envisaged a stage-by-stage formation of

a customs union and the possibility of movement of different countries at

different speeds toward a unified economic space within the Economic Union.

A characteristic feature of the situation in the CIS is universal

recognition of the need for stepping up integration processes in the

economic interaction of CIS countries. It should be noted that, among CIS

countries, economic relations were most intense between Russia, Kazakhstan,

Ukraine, and Byelorussia, with 80 percent of commodity circulation within

the CIS taking place within these countries.

One of the basic documents on economic integration was an agreement on

a customs union between the Russian Federation, the Republic of Kazakhstan,

and the Republic of Belarus.1 Let us recall that on January 20, 1995 the

presidents of Kazakhstan and Russia, in their joint declaration on the

expansion and deepening of Kazakhstani-Russian cooperation, instructed

their governments to sign an agreement on the customs union. The heads of

governments of Kazakhstan, Russia, and Belarus signed this document.

The formation of the customs union was preceded by extensive

preparatory work aimed at harmonizing the legislative systems of the two

countries. A number of governmental and interdepartmental agreements,

protocols, and joint normative acts were signed, including those on free

trade, on a unified procedure for regulating foreign trade, on the re-

export of commodities, on the introduction of a unified procedure for non-

tariff regulation of trade with a coordinated nomenclature and volumes of

licensed and quoted commodities, on the establishment of a free trade zone,

on the unification and simplification of customs procedures, on

collaboration between customs services, on combating illegal drugs

trafficking, on the terms of maintenance of military facilities on the

territories of the two sides, and on joint security measures for the

protection of the external borders of the Customs Union. These agreements

covered a sufficiently wide range of issues, and they formed the basis for

further action.

The agreement on the setting up of the Customs Union was based on the

principles of unified customs territory of the member states of the Customs

Union and the existence of a uniform mechanism of economic regulation. It

is proposed to form the Customs Union in two stages. At the first stage,

tariffs and quantitative restrictions on mutual trade are lifted that are

envisaged in the agreement on a unified procedure for regulating foreign

trade activity of April 12, 1994; fully identical systems for regulating

foreign economic links, identical trade regulations, common customs tariffs

and non-tariff measures for regulating relations with third countries are

introduced. At this stage, work is envisaged on the unification of

legislation on foreign trade, customs, currency, finances, tax, and of

other laws bearing on foreign trade activities.

Agreements on the Customs Union envisage the possibility of

introduction of coordinated time restrictions on mutual trade in case of

shortages of commodities on the domestic market, acute payment deficit, and

other circumstances.

The countries assumed the obligation to establish unified control over

their customs organs and organize joint supervision of the movement of

commodities and transport vehicles on the borders. The procedures for such

supervision are regulated by agreements between the customs organs of the

states involved.

The agreement on the Customs Union is open to all other CIS member

states that will recognize the provisions of the agreement and express a

readiness to fulfill them in their entirety.

The joint statement was in effect an agreement on coordinated moves for

further realization of economic reform and creation of a uniform mechanism

for regulating the economies based on market principles. It set the task of

unification of legislation on foreign trade, customs, currency, finances,

prices, taxes, and other economic laws ensuring free development of

production links and of enterprise, as well as equal possibilities and

guarantees for economic agents of the three states.

In that document, the heads of the governments of the three states

noted the considerable progress in the creation of possibilities for a real

formation of a customs union on the basis of agreements and protocols

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