Lukashenko determines Eurasia Economic Union roadmap

The Eurasian Economic Union has just started its first year, but Belarus President Aleksandr Lukashenko says there is no time to waste. On January 13 he stated a number of ambitious development goals, which analysts call useful, but largely unrealistic.

Among those goals are the move to a unified industrial and agricultural policy, unification of industrial cooperation, joint medications and medical equipment market, joint electricity, oil and gas products export as well as preparation of overall unified exports.

Analysts are saying that Belarus is trying to solve its own problems, one of which is search for new export markets.

When speaking about agricultural sector, according to former head of HSBN Kazakhstan Alikhan Kanapia, Lukashenko means that Belarus’ agricultural machinery sphere is much more developed, and he wants the Eurasia Economic Union countries to trade its products within the union.

“Currently Kazakh agricultural companies are buying Chinese and American machinery due to their high quality and guarantees, but Lukashenko is offering to focus on trade within the union only and to focus specifically on Belarussian products,” he says.

As a politician, Lukashenko needs to make loud statements, Kanapia says adding that, if the plan most likely doesn’t work out, Lukashenko will say that the executers didn’t do a good job, but if it works, he will say his plan was great.

“We should, of course, develop various industries, but this should be done in a market economy, not otherwise. But the heads of each of the union countries come from the soviet system, therefore the market economy principles don’t work here yet. On the other hand, one big plus for Belarus is that it managed to keep its industrial sector alive unlike Kazakhstan where most plants shut down,” Kanapia adds.

On the other hand, within the unified trade market, right now instead of cooperating the member countries are rather competing with each other, Kanapia says.
The “oil curse” is another problem that will prevent Lukashenko’s plans from execution, FINAM Investment Holding’s analyst Anton Soroko says.

Even though the oil prices are down now, the oil industry still brings profit, and in the second part of 2015 the oil prices will start going up again. And as long as the oil industry brings profit, Russia and Kazakhstan won’t pay much attention to developing other spheres, Soroko says.

“We at FINAM believe that oil prices will be back at $80/per barrel, the sales profits will be up in 2016-2017. In 2015 these countries will be looking at optimizing their costs in the meanwhile, but until the prices are really down, nobody is looking at developing other spheres,” Soroko says.

On the other hand, Soroko says it’s not correct to say that the Eurasian Economic Union is completely hopeless.

“Yes, the trade levels decreased, but this happened due to ruble default,” Soroko says, adding that when one of the countries has such a high currency devaluation, financial institutions don’t really want finance inter-country business deals.

“Even though right now there is competition between the members of the union, in future it’s possible to create a unified export market, because our countries won’t all be producing same products,” Sorok says.

Kazakh National Bank’s Chairman Adviser Olzhas Khudaiberdyev says, at this stage it’s early to predict how things will be developing, and it’s best to give the union two years.

“With all the currency devaluations, oil prices and the union being so young it’s hard to predict now. Let’s give it a couple of years,” he says.