It was a dark time for Kazakhstan, with businesses closing and unemployment and prices soaring. Nazarbayev’s hope was that economic integration would help stabilize the situation.
His idea lay dormant until Russian President Vladimir Putin seized on it more than a decade later as a way to achieve a cherished personal goal: recreating the Soviet Union.
Putin’s ploy was to create a common economic community that could then be turned into a common political bloc, as had happened with the European Union. His intent was for Russia, of course, to head both the economic and political organizations.
Excited about this possibility, Putin became more of a champion of an integrated economic community than Nazarbayev — and his prodding led to the birth of the Eurasian Economic Union on Jan. 1, 2015.
The founding members were Russia, Kazakhstan and Belarus, but Putin wanted all former Soviet countries to join.
In pitching membership to the non-believers, the Kremlin put on its best carnival-barker uniform to try to sell the snake oil: Join the EEU, it promised, and your economies and standard of living will jump.
So how has the EEU, which now includes Armenia and Kyrgyzstan, worked so far?
The verdict is still out because recessions in the bloc’s oil titans, Russia and Kazakhstan, have disrupted their economies — and fallout from Russia’s tailspin has also hurt Armenia and Kyrgyzstan’s economies.
But preliminary indications are that the only country the EEU has helped is — surprise! — Russia.
Kazakhstan is a case in point.
About 15 years ago the country began convincing foreign automakers to open assembly operations in Kazakhstan. The hope was that one day the companies would not just assemble imported components into finished cars but would open full-fledged manufacturing operations.
Kazakhstan convinced several auto makers to open assembly operations, and its sales of domestically produced cars soared.
The EEU allowed Russia to send much cheaper Ladas across the Kazakhstan border tariff-free, however, eating into Kazakhstan’s domestic and export sales.
Those sales have now plummeted.
In addition, Russia imposed on its EEU partners its own, much-higher tariff regimen on 90 percent of the goods the members import from countries outside the bloc.
The result was that prices in Kazakhstan shot up on food, clothing, electronics and other goods imported from China, the West and elsewhere.
The EEU also decimated whole import industries in Kazakhstan. One was the importing and selling of used cars from the United States, Europe, Japan and Korea.
The Russian-dictated tariff on used cars from overseas — 100 percent — made them so expensive that importing them was no longer worth it.
Belarus joined the EEU largely because Moscow promised that, if it did, Russia would continue selling it oil and gas at hefty price discounts.
Belarus has a stronger economy than Kazakhstan’s because it actually makes things — machine tools and farm equipment, for example — but it has no domestic fuel resources so it must rely on imports to keep its economy humming.
Belarus’ entry into the EEU appears to have produced no major benefits for its economy, but it has made Minsk more vulnerable to Russian political pressure.
The Kremlin has been twisting Belarus’ arm to let it have an air base in Belarus — pressure that Belarusian President Alexander Lukashenko has resisted but may be unable to ward off much longer.
Armenia was two months away from signing an association treaty with the European Union — a step toward full membership — when Putin summoned Armenian President Serzh Sargsyan to Moscow in September 2013.
Putin’s arm-twisting led to Sargsyan announcing the very next day that Armenia would be joining the EEU instead of the EU. It did so on Jan. 2, 2015, the day after the original founders formed the union.
Armenia is one of the poorest countries in the former Soviet Union, and much of its citizenry knew the EU was a better deal. So widespread public protests greeted Sargsyan’s cave-in to the Kremlin.
As happened in Kazakhstan, prices of imported goods in Armenia jumped because Armenian import tariffs were much lower than the tariffs Russia imposed on the EEU.
In addition, by going with the EEU, Armenia gave up being in a trade bloc — the EU — with a market seven times larger than the EEU’s.
A big chuck of Kyrgyzstan’s economy before it joined the EEU was based on re-exporting Chinese goods to other countries in the former Soviet Union.
Many entrepreneurs took advantage of Kyrgyzstan’s low tariffs to import Chinese products, mark them up, then re-export them to Kazakhstan, for example.
The higher import tariffs that Russia imposed on EEU members led to duties on Kyrgyzstan’s re-exported products jumping in Kazakhstan, a major market for Kyrgyzstan. Because the higher duties made it harder for re-exported products to compete, Kyrgyzstan gambled that it would be better off joining the EEU than staying out.
As with the other members, however, EEU membership has not only failed to help Kyrgyzstan, but decimated its re-export business.
Whether the EEU helps any of the member countries besides Russia over the long run remains to be seen.
It may be some time for the Russian and Kazakhstan economies to rebound from the funk they are in due to today’s low oil prices.
When they do bounce back, their economic spark may rev up the economies of the other EEU members as well.
But from the start the EEU was an organization heavily skewed in favor of Russia, so the other EEU members may find that it will always be more hype than payoff.
Armine Sahakyan is a human rights activist based in Armenia. Follow her on Twitter at: www.twitter.com/ArmineSahakyann
