Implications of CIS Free Trade Zone Expansion in Central Asia

18.01.2014 Author: Ian Carver

bigThe last week of 2013 saw Uzbekistan – the most populous Central Asian nation – become the latest country to join the CIS free trade zone, a bloc encompassing former Soviet states Russia, Belarus, Ukraine, Armenia, Moldova, Kyrgyzstan, Kazakhstan and Tajikistan. The decision furthers Moscow’s efforts at economic integration in a region marred by ethnic divisions and political disputes over borders and scare resources. In light of these realities, Uzbekistan’s inclusion in the trade bloc could also pave the way for cooperation with Russia in the area of security. This would mark a U-turn for Tashkent in its relations with Moscow and would come at a time when Central Asia is bracing for the anticipated fallout from the US military drawdown in neighboring Afghanistan by the end of 2014.

The Commonwealth for Independent States was created at the end of 1991 as part of an effort to hold together the remnants of the Soviet Union. The former Soviet space has since experienced extensive economic transformation and political realignment both towards and away and from existing Moscow backed integration projects. The Baltic States Estonia, Latvia and Lithuania immediately opted for closer ties with Western political and economic structures, facilitated in part based on their proximity, while the Republic of Georgia dropped out of the CIS following the 2008 Russian-Georgian crisis that culminated in a war over the tiny breakaway region of South Ossetia.

In an attempt to bolster integration among this loose association of states, in 1994 leaders of the CIS agreed to establish a free trade zone, which would eliminate import and export duties on a wide range of products among other preferential trade terms. After years of unsuccessful negotiations over the terms of the trade zone, the CIS Free Trade Agreement finally came into force in 2011 when eight of the eleven remaining CIS states signed the agreement. At the time, only CIS members Azerbaijan, Turkmenistan and Uzbekistan had held back from signing the trade agreement.

Uzbek President Islam Karimov’s decision to ratify the agreement on December 28, 2013 marks a reversal for the bloc, which has long struggled with internal cohesion among member states. More importantly, this occurred in a country that has historically been wary of Russian-backed integration frameworks. The CIS free trade area is just one of many instruments that Moscow has utilized in the past to retain/expand influence in its “near abroad”. More recently-established trade blocs such as the Eurasia Customs Union of Russia, Belarus and Kazakhstan have received far more attention in recent months, especially in Ukraine.

Within the security realm, Moscow has been fostering regional cooperation within the CIS community through the Collective Security Treaty Organization (CSTO), a modern counterweight to NATO, but with less ambitious objectives. In 2012, Uzbekistan suspended its membership with CSTO due to disagreements over the alliance’s plans to strengthen military cooperation among member states and strategic designs for Afghanistan. Uzbekistan has long been one of the most independent of the former Soviet states within Central Asia, and the move clearly indicated the Tashkent’s intention to remain open to closer security ties with other outside powers, such as China and the United States. This was reflected in a March 2013 visit by Uzbek Foreign Minister Abdulaziz Komilov to the United States amid reported rumors that Uzbekistan was seeking to bring its military in line with NATO standards.

Balancing foreign relations among global powers is a strategy pursued by other former Soviet republics, such as Ukraine and Azerbaijan. But such a policy has had mixed results, and will be increasingly difficult for Uzbekistan considering Russia’s existing influence in the country along with Moscow’s growing ties with other countries in the region.

Although less integrated with Russia compared with other Central Asian states (with the exception of Turkmenistan), Uzbekistan still relies on the Russian market for much of its agricultural output and natural gas exports, with overall economic turnover between the countries in 2012 exceeding $7 billion. Moreover, nearly 8 percent of Uzbekistan’s population (2.52 million) works in Russia, sending home upwards of $5.7 billion in remittances annually (equal to about 11 percent of the country’s gross domestic product). Maintaining access to this market will be increasingly important for Uzbekistan given its rapidly growing population and dearth in domestic employment opportunities.

Currently estimated around 30 million, Uzbekistan’s population is most densely concentrated in the eastern Fergana Valley, a relatively small but highly fertile and productive region shared with neighboring Kyrgyzstan and Tajikistan (by Soviet design to maximize interdependence). Scare resources, especially water, and border disputes have contributed to near constant tension along the borders, often including deadly clashes amid alleged border incursions and land grabs. Hostilities in the Kyrgyz city of Osh between ethnic Kyrgyz and Uzbeks following a 2010 revolution in the Kyrgyz capital Bishkek further strained relations between the two countries. Disputes over the supply of Uzbek gas to Tajikistan have also been common in recent years.

Russia has since augmented its military presence in Kyrgyzstan and has established outposts in Tajikistan along the country’s porous 1,300 kilometer long border with Afghanistan to curtail the flow of drugs out of Afghanistan which is at record levels. In terms of bilateral trade, both countries have announced their intention to join the Eurasia Customs Union, considered a precursor to the Eurasia Union. Modeled partly on the European Union, the Eurasia Union project represents the most advanced attempt at integration within the region since the establishment of the Soviet Union. Beyond harmonizing tariff and customs controls, the union is expected to form a single market for agricultural goods, industrial cooperation, enable a single transport and communication system and provide a visa free regime among citizens of member states, among other benefits. As a key pillar within this developing union, the CIS free trade zone will provide Uzbekistan access to cheaper goods and investments, leading to increased productivity and local jobs.

On the regional level, Tashkent’s decision to join the CIS free trade zone will not only provide a framework for the country to resolve long-standing disputes with its neighbors. It could provide an opening for increased regional cooperation in combating the flow of terrorists, narcotics and weapons from Afghanistan. While Uzbekistan is unlikely to rejoin the Russian-led CTSO in the nearest future, the need for such cooperation with Russia and its regional partners will be all the more apparent as the inherently unstable Central Asia region prepares for a potential spillover of violence in the wake of the US withdrawal from Afghanistan.  

Ian Carver, communications specialist and freelance journalist, that has worked extensively in the Caucasus, the Middle East and Central Asia, exclusively for the online magazine “New Eastern Outlook”.