Policy Matters: The New Tripartite Customs Union and the Implications for Trade and Geopolitics

By Blake Marshall, Senior Vice President & Managing Director - Government Relations, The PBN Company, Washington DC

Prime Minister Vladimir Putin’s June 9 announcement that Russia will discontinue its World Trade Organization (WTO) negotiations in favor of a new Customs Union with Belarus and Kazakhstan took many by surprise, including high-ranking officials in Russia and trade negotiators in Europe and the United States.

Despite the fact that Putin’s decision appears to many to have come out of the blue, the notion of a three-country Customs Union has been under discussion for several years. While the withdrawal from WTO negotiations in favor of reapplication as a bloc is unconventional, it is consistent with Russia’s political and economic strategies on both a geopolitical and a regional level.  Several objectives seem to emerge from this stance:

• To advance the creation of a regional geopolitical and economic bloc to reshape the global post-crisis architecture (witness recent policies pertaining to CSTO rapid reaction forces and forward-looking designs for a regional reserve currency);
• To forestall the negative ramifications on domestic industries of entering the WTO at a time of economic crisis;
• To strengthen the negotiating stances of Russia, Belarus and Kazakhstan to eventually join the WTO as a larger regional bloc.

The relative weight of these factors is not yet clear, but it is apparent that the decision has created a state of unpredictability and confusion, one that holds wide-ranging ramifications for business and government.

The full pdf of this edition of Policy Matters can be downloaded here.

Possibly related posts:

1. Customs Union Update: Russia’s Average Tariff Burden Could Fall Under New Union
2. Having it Both Ways - Russia is Saying Yes to Both the WTO and the Customs Union
3. Treading Softly: Kazakhstan Weighs Up the Customs Union
4. The Customs Union Officially Exists
5. What a Difference a Day Makes: Russia’s WTO Accession Hits Surprise New Hurdle