Economic Relations between Kazakhstan and Russia

signed. The sides agreed that tariff and quantitative restrictions on

mutual trade will be lifted through the setting up of fully identical

systems of regulation of external economic links, unconditional guarantees

for effective joint protection of the external borders of the member states

of the Customs Union, and establishment of identical trade procedures,

common customs tariffs, and measures for non-tariff regulation with respect

to third countries. It was stressed that the development of foreign

economic links will be promoted by the stage-by-stage formation of a

clearing union to ensure continuous clearing on the basis of mutual

convertibility of national currencies and formation of an effective payment

system.

An agreement was reached to render state support to the development of

direct links and cooperation between enterprises, to the establishment of

financial-industrial groups, formation of favorable conditions for mutual

access and protection of investment, and acquiring real estate,

Measures were outlined for the formation of a common

scientific/technological space for a more rational utilization of the

available intellectual, scientific, and technical potential.

State delegations headed by deputy heads of governments take part in

regular monthly sittings of the commission. These sessions consider the

implementation of agreements, analyze the state of affairs in the practical

formation of the customs union, and coordinate joint measures.

At the same time each side set up its own national sections of the

intergovernmental commission on the customs union. Five groups were set up

in the framework of each national commission to cover the following areas:

1. Creation of the Customs Union. Solving tasks in the realization of a

mechanism for the establishment, of a. free trade zone; working out

normative acts for the unification of currency, financial, and general

legislation; preparing proposals for the introduction of unified procedures

for foreign trade regulation and an identical customs tariff, for

coordinating a unified procedure of customs control, for working out an

agreement on unified management of customs services, and so on.

2. Harmonization of legislative systems to coordinate the legal basis

of agreements with agreements already achieved and to eliminate

discrepancies in the economic legislative systems of the states, and to

solve other issues.

3. Realization of the provisions of treaties; of friendship,

cooperation, and mutual assistance; preparation of draft agreements and

documents on freedom of movement, citizens' legal status, conversion,

mutual debts of enterprises, and on military cooperation.

4. The development of production and enterprise. Taking coordinated

measures for economic reforms, preparing agreements on scientific and

technological cooperation, investment activity, state support of

enterprises participating in joint financial-industrial groups.

5. In the area of finances and payment relations: the organization of

work on providing regular quotations for the national currencies, on the

setting up of a network of currency exchange points, on concluding an

inter bank agreement on mutual access to domestic markets of authorized

banks, on working out a common mechanism for currency regulation and

control, on unification of taxes and their size, on the methodology of

price formation, and so on.

Practically all issues have been resolved in. the framework of the

three countries on non-tariff regulation of foreign trade activity; work

on the unification of normative legal acts in this area has been

completed. The partners came to an agreement on the procedure for

registering contracts on exports of strategically important commodities.

Work is being completed on the establishment of unified operation

modes in trading with countries and on re export of commodities.

Apart from bilateral agreements, the Customs: Union also relies on a

number of multilateral agreements and conventions adopted by the CIS

Countries, including The Foundations of Customs Legislation, A Unified

Methodology for the Customs Statistics on Foreign Trade, On the Movement of

CIS Countries' Citizens Through Their Territories Without Visas, On

Guarantees for the Rights of Individuals Belonging to National Minorities,

On the Establishment of a Unified System of Air Defense of CIS Member

States, and On Legal Aid and Legal Relations in Civil, Family, and Criminal

Cases.

Thus the main principle on which the Customs Union is founded is the

existence of a unified customs territory and a uniform mechanism for

regulating the economy, based on unified legislation.

Toward the end of 1995, significant changes occurred in the trade and

economic relations of Kazakhstan and Russia. The agreement was revised on

trade and economic relations; the emphasis was made on the development of

direct links between producers, which resulted in a considerable increase

in the exchange of products. In 1995, trade between Kazakhstan and Russia

amounted to $319 billion, or 54 percent of the total volume of the

republic’s trades, an increase of 55.4 percent on the same period in the

previous year. Exports amounted to $2.1 billion, which made up 42 percent

of the total volume of Kazakhstan export; exceeding the 1994 figures by a

factor of 1.5. Imports reached the $1.8 billion mark, or 49 percent of all

imports, exceeding the 1994 imports by 66 percent.

Work on the formation of the Customs Union can thus be seen as one of

the main achievements in the field of economic integration of Kazakhstan

and Russia. A breakthrough was achieved in the establishment of a common

market. The three countries established a unified customs zone and

eliminated controls at their internal borders. Close businesslike links

were established between the customs services.

The Customs Union brings tangible results to each of its members. The

overall volume of trade between the CIS countries outside the Customs Union

continued to fall, while the lifting of custom barriers enabled Kazakhstan,

Russia, and Byelorussia to considerably increase commodity circulation.

In October 1995, the heads of the governments of Russia, Kazakhstan,

and Byelorussia issued a joint appeal to the governments of CIS member

states to join the triple union. Running somewhat ahead of the story, let

us note that in March 1996 Kyrgyzstan joined the customs union.

At the same time progress in the development of bilateral economic

relations is checked by a number of problems, notably by chronic nonpayment

of mutual debts. Kazakhstan's debt for electric power received from Russia

grew almost threefold in 1995. In turn, Russia owed a large sum to

Kazakhstan for the coal from Ekibastuz.

Serious possibilities are sometimes missed for successful cooperation

between enterprises in the fuel and energy complex, in metallurgy, and

other branches of the economy of Kazakhstan and Russia. Close production

links became established between the Orskneftegazsintez JSC and the

Aktyubinskneft JSC, which form the Orenburg JSC. Early in 1995, the

management of these associations conducted mutual consultations and decided

that a joint oil company must be set up.

In Russia, the formation of financial-industrial groups went on at an

increasing pace. The results of their work in 1995 show that integration of

industrial and banking capital had a positive impact on economic

development.

Further effective economic cooperation between Kazaklistan and Russia

calls for systematic analysis and work on a mechanism of control over the

implementation of bilateral Kazaklistani-Russian treaties and agreements.

The following tasks should in our view be singled out in the field of

economic cooperation between Kazaklistan and Russia that are of mutual

interest and call for coordinated decisions of the governments:

a) Stabilization of export of raw materials and subsequent increase in

it as a basis for the growth of currency earnings for the

modernization of production;

b) Diversification of exports;

c) Additional currency and investment resources for restructuring the

economy;

d) Support for active trading policy on CIS countries' potential

markets;

e) Moderate protectionism in relation to newly created import-replacing

production lines.

Under these conditions the two countries will have to solve new

problems in economic integration in the framework of the Customs Union and

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