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News conference following meetings of Customs Union Supreme Governing Body and Eurasian Economic Community Interstate Council

December 9, 2010

President of Kazakhstan Nursultan Nazarbayev: Members of the Interstate Council, ladies and gentlemen,

Today, during the EurAsEC Interstate Council meeting at the heads-of-state level, we looked into a large number of issues concerning the main trends in developing the Eurasian Economic Community, the Customs Union, and EurAsEC’s Common Economic Space. In just ten years, we have achieved a great deal.

During the EurAsEC Interstate Council meeting, we examined the outcomes of the Customs Union’s first year and our progress in forming a legal foundation for the Common Economic Space.

I would like to note that the Customs Union between our three states has now been functioning for a year. When it was created, our goal was to eliminate barriers to mutual trade, create joint businesses, and make investing into our nations’ economies more attractive. All of this is already happening.

Our nations’ businesses reacted enthusiastically. For example, exports from Kazakhstan to Russia grew by 38 per cent, and exports to Belarus grew 2.5-fold. I think that these states can say the same with regard to Kazakhstan. Businesses received a 50-day grace for payment of import VAT and excise taxes. The cost of cargo declaration has been reduced by 70 euro. This is a significant support for our nations’ businesses.

The Kazakhstani side, and indeed, all of us, are satisfied with today’s work. We signed the Protocol on Amendments to the Agreement on the Customs Union Commission, and approved the structure of the Expert Council within the Customs Union framework.

A very important outcome of our meeting was the adoption of many agreements on the legal framework for the Common Economic Space – an agreement on coordinated principles of monetary policy, the creation of financial markets’ conditions, and an agreement on macroeconomic policy. We worked on the agreements concerning regulation of natural monopolies, oil and gas, agriculture, competition, trade in industrial subsidy services, and intellectual property.

Now, our experts should undertake all the necessary intrastate procedures for these documents to enter into force, so that the Common Economic Space starts functioning from January 1, 2012. Then, we will coordinate our economic policies, ensure the free movement of capital, services, and labour, and provide Common Economic Space member states with access to infrastructure.

Based on the outcomes of the meetings, we adopted a declaration on the formation of the Common Economic Space between the Republic of Belarus, Kazakhstan, and the Russian Federation. This declaration will be circulated through the media. In the declaration, we confirmed that we have done an enormous amount of work with our experts, that during this time, we travelled a long way toward our goals, and that the adoption of these documents brings us closer to the creation of the Eurasian economic union of states. This space will start functioning from January 1, 2012 and will be open for other states to join.

As for the outcomes of the entire pentalateral EurAsEC talks, we adopted important documents in this format as well. In particular, we signed an agreement on access to courts for economic entities within EurAsEC; we also confirmed the list of events for the 2011–2013.

Today we also chose the next EurAsEC Interstate Council chairperson: President of the Russian Federation Dmitry Medvedev. The next Interstate Council meeting at the heads-of-state level will be held next year (in the second half of the year) in the Russian Federation.

We are determined to continue this work. The enormous work carried out within the framework of the Customs Union and the creation of the Common Economic Space is recognised by other states around the world.

This year, in order to ensure the Customs Union’s legal standing on the international arena, our three nations have begun talks with New Zealand and member states of the European Free Trade Association, which includes Switzerland, Norway, Lichtenstein, and Iceland, in order to establish a free trade zone for the free movement of goods and services.

The signing of such documents and the beginning of talks with these nations means that the Union is being recognised there as an international trade operator. This is a major achievement for all our nations. All the integration processes that were taking place in the CIS – which we spoke about throughout all those years – as well as the Customs Union and Common Economic Space, are now materialising in practice.

We now fully desire to make this Union and this space interesting, and we are open to all interested states. These interested states will need to undergo the same procedures that we ourselves underwent.

President of Russia Dmitry Medvedev: Ladies and gentlemen,

Overall, I think that we worked very well today.

I am not going to repeat everything that Mr Nazarbayev has already said. Indeed, we have achieved a lot recently.

I would like to begin my opening remarks by thanking everyone who participated in preparing the enormous number of documents – documents that were examined by the Supreme Governing Body of the Customs Union and the EurAsEC Interstate Council.

This work was unprecedented in its complexity and intensity. I mentioned to my colleagues that we met in Minsk just over a year ago and agreed to work quickly. But I will tell you honestly, I had some doubts on whether we would be able to move that rapidly. After all, many of our partners in the European Union took significantly longer to prepare corresponding documents. Granted, EurAsEC itself is already marking its tenth anniversary. But nevertheless, this intensive, work in regulatory development was done very quickly. Thus, I would like to thank everyone who participated in preparing these documents – first and foremost, from the governments of Kazakhstan, Belarus and the Russian Federation. They truly helped us to make highly important decisions today.

We were able to launch the mechanisms that, I believe, will have very serious results very soon.

For my part, I would like to thank my present colleagues – the President of Kazakhstan and the President of Belarus – for making it possible to exercise political will and be ready to sign these exceedingly important documents in a very short period of time. Yes, it was sometimes difficult; there were disputes, which were occasionally very heated and emotional. But ultimately, we agreed upon documents concerning the functioning of the Customs Union and documents determining a wide range of critical issues in our bilateral and trilateral relations, including well-known issues pertaining to customs duties on oil products and certain other matters.

I feel that this is very important. What’s most important is that in this situation, we demonstrated the necessary amount of political will to come to an agreement, keeping in mind that the effects of these agreements will not all be evident immediately; others will be manifested after some time, when we form the Eurasian Union and create a common market between the participating states.

The President of Kazakhstan just talked about the interest that has been expressed toward the Customs Union, and consequently, the Common Economic Space and future Eurasian Union, by a number of integration associations. They are truly interested in creating corresponding free trade zones with us. This implies a qualitative change in the situation. Our integration union, our association, is emerging and is being recognised by most economic players – serious economic players – as an independent, self-sufficient, and very important partner in trade and investment. Indeed, that is exactly what we have been striving for, and this topic was the subject of the economic declaration we passed today, where we made note of the progress and final goal that we have set for ourselves: the creation of the Eurasian Union.

I think that we can be satisfied with today’s work. It is certainly a step forward. I want to once again thank my colleagues and the teams representing Kazakhstan, Belarus and Russia for their work.

President of Belarus Alexander Lukashenko: Friends,

Everything has already been said really on the matters that we addressed at our meetings today.

But I want to talk about one thing that directly concerns not only Russia and Kazakhstan, but above all Belarus. After all, Russia and Kazakhstan are both large, wealthy countries rich in fossil fuels. This is all wonderful of course, and I mean this in a good sense…

Dmitry Medvedev: I understand.

Alexander Lukashenko: Of course we took a very cautious line towards many issues that I spoke about often, but this caution was not strategic in nature, rather, these concerns, or perhaps prejudices, were about issues we could face now and in the future.

Today we have established the Common Economic Space. We have signed all 17 documents laying its foundation, but signing these agreements required us to first settle the misunderstandings that were spoiling our relations. To sign these agreements we first had to resolve today’s problems. This concerned the issue of customs duties between Belarus, Russia and Kazakhstan, for example, customs duties on the oil products and oil supplied to Belarus, which the Russian President mentioned just before. Such duties were imposed in the past.

I want to thank all Russians and the Russian leadership for organising a meeting between the Belarusian and Russian delegations, headed by our countries’ respective heads of state, here at the Kremlin, to settle these issues before the Customs Union meeting began. In other words, we cleared the way to signing all 17 documents on the Common Economic Space. This was extremely important for Belarus because our country very much needed to end this system of customs duties on the oil we import, in particular from Russia. We have now ended internal customs duties on petroleum products, and also very important, have lifted duties on delivery of Russian raw materials for our petrochemical plants.

But the biggest result is that companies from Kazakhstan, Russia, and above all Belarus – and this is very important for us – can now compete freely within the customs space in our three countries. This is a big step forward. We need to remember that despite the various problems we faced this year, trade between Russia and Belarus grew by around 50 percent, and trade between Belarus and Kazakhstan increased by a similar figure. I am sure that trade between Kazakhstan and Russia will also post equally good results. In other words, we have seen trade really bounce back after the severe economic crisis.

We promised to draft common agreements on the Common Economic Space, and we will ratify them. I assure my partners once again that we in Belarus will do this earlier than in Russia and Kazakhstan.

Mr Medvedev said that Russia also has no problems in this regard, and I am sure that Kazakhstan too will ratify these documents very soon and they will take effect, but the Belarusians will most definitely do this by January 1.

Mr Medvedev said just now that by establishing the Common Economic Space we also need to prepare ourselves legally and psychologically for entering a new stage in building our relations, for building what he called the ‘Eurasian Union’. I fully support this idea. Belarus, its experts and its leaders, will work actively on this. I think that in the coming six months we can settle the various issues and establish this Eurasian Union, which would be a strong grouping in this part of the world.

In the end, I’m afraid I’m going to have to disappoint those who were hoping to see divisions and differences among us. Everything has turned out the opposite and we have worked well and achieved a real advance in our relations.

Question: I have a question for all three presidents. How will the Common Economic Space, the Customs Union and the Eurasian Economic Community help the countries in the post-Soviet region in their economic integration? 

Dmitry Medvedev: Essentially, we already answered this question in all we have just said, and our statements could be seen as also being answers to the questions that you had before the news conference began.

I simply want to bring it to the attention of all present that, despite the fact that these kinds of agreements are never easy to conclude and always involve plenty of debate and emotions, we have been brave enough to settle everything in a short time and in many cases have taken decisions that perhaps create some problems at the tactical level, but that at the strategic level will open a new stage in the cooperation between us. 

This is the position Russia has taken and we think this is the right position, because it is extremely important for future generations that we finally lay the foundations for real and true integration, the kind of integration that the Common Economic Space and the future Eurasian Union represent. This is real integration that brings with it new opportunities, the same kinds of opportunities that have benefited other countries that have established common markets and make coordinated economic decisions. This represents free movement for goods, services and people, no customs barriers, and a common policy. These are the benefits that this kind of integration offers us. Ultimately, this represents a new quality of life. 

We all see when we go to Europe, what benefits they have gained from their economic integration. Yes, they do have their problems too, of course, and different countries there have different economic development levels, but at least when problems do arise, which is the sad reality in economic life, they can work together to solve them.

The crisis has shown just how important many of the potential mechanisms can be. These mechanisms have helped a number of countries ensure the needed support for their common currency, the euro. Despite the current difficulties, I am sure that they will succeed in solving their problems. I think they will succeed because they have mechanisms that work and that have a direct impact on the living standards of the people living within this common market. This is our goal too. We want other countries to build respectful and mutually beneficial relations with our countries, and we want our market, our common market, to be attractive for other countries.

The examples that Mr Nazarbayev gave, that I gave, and that Mr Lukashenko has just mentioned, show that we can reach the kind of integration that will make us attractive for foreign partners. We can become clear and predictable countries with a common set of rules, and it is this that will ensure the mutual support and assistance that you are asking about.

Alexander Lukashenko: What will it give? You no doubt follow economic statistics too, and you see that the world is recovering now from the economic crisis. Many countries are happy to see even a small increase in GDP, if only 1–1.5 or 2 percent, but Kazakhstan, Russia, and Belarus expect GDP growth of 6–7 percent this year, and in Belarus we think we will have a result of around 8 percent. This is also thanks to our economic unity.

I just mentioned before that our trade increased by 50 percent. Can you name any other countries that have seen such a big jump in trade?

I already spoke about the benefits for the Belarusian economy, especially considering that we have settled the matter of duties on oil. Difficult negotiations are in process, but I think we will be able to settle the natural gas issue too.

Most important of all that today we have the chance to make use of our experience, our invaluable experience of life together as part of a single country in the past, and of cooperation within the CIS, which is about to turn twenty very soon, isn’t it?

The main thing is that this has formed a common mentality and outlook, and this is also something that we can use to our advantage.

Most important for all three countries is that this market we have established unites not 10 million, not 10–15 million, or even 140 million people, but a whole 170 million people, and this in itself is an invaluable asset. The benefits and advantages in what we are doing are therefore eminently clear. In economic terms this amounts to a country with 170 million people.

Question: I have a question for the President of Kazakhstan. What effect can Kazakhstan expect on January 1, 2012, and what is the difference between the Customs Union and the Common Economic Space that you have just agreed on?

Nursultan Nazarbayev: Let me say here with my colleagues present that, unfortunately, there has not been enough explanation in our countries of what exactly we are doing. People are always asking basic questions like what this will bring us, what results we can expect? Just look at the way the European Union moved towards integration. It took them 35 years to reach this point, but we have covered this ground in 10 years, because this is something that will benefit our countries.

People ask whether this will cost us any of our sovereignty or independence. This is absolutely not the case. Far from losing anything we will only gain from this integration. But at the same time, this kind of integration does involve making some concessions. We have agreed on a set of common rules that we signed today, including a rule that our countries must not run a budget deficit of more than three percent.

Furthermore, we set parameters for inflation too. In Kazakhstan, for example, we have the lowest rate of 6 percent, and we must not let inflation grow by more than half this figure, that is, reach more than 9 percent. This does set certain limits, but how will our economies live otherwise? 

I named a few figures, for example, in the past, the first declaration for goods crossing the border cost 50 euros, and then there was an additional cost of 20 euros. In other words, each businessperson paid 70 euros when crossing the border. VAT was deferred by 50 days. Now businesses have felt the benefits of our work and see that this money now remains in their own pockets.

To be honest, it is Russia that carries the biggest burden in our integration efforts, and we should thank the Russian President and Government and everyone for the work they are doing for the sake of our future. But even in Russia’s case there are benefits to be gained too. Russia loses, for example, by abolishing customs duties on rail transport, but a 1.5-fold increase in rail freight would offset this loss completely. Russia loses by abolishing oil and gas transport duties, but the increase in volumes being transported will make up for this.

This is not the most important thing. The most important thing is that this integration has a strategic political dimension that looks to the future, because our security and defence of each other begins with the economy, with the market. This is the starting point for everything else.

There is also the question of competition. If we cannot compete in the common market our three countries form, how can we expect to compete on other countries’ markets? Some could say that Belarus will be flooded by Russian goods or Kazakhstani goods, say, and local producers will suffer, but let the local producers get to work then and compete. If our local producers cannot compete in this environment, how can we expect to develop further? This is an incentive for our producers to get themselves into shape and improve their business processes, cut costs, increase labour productivity. This is a real advantage, a precise and tangible benefit, but we need to explain all of this properly.

Our deputy prime ministers heading the groups working on these matters are now real experts in the area. Wake them in the middle of the night and they will be able to recite like their prayers all the figures related to this work. We need to explain all of this to our public, and I ask the media to please join this effort to properly explain all of this. We are sure that other CIS countries will become increasingly interested in joining this group. I already mentioned that other countries and entire groups are showing interest and have recognised our Customs Union and recognise the Common Economic Space.

I want to finish by saying just how important it is that we have established the conditions now for actually building this Eurasian Union that I spoke about 16 years ago within the walls of Moscow State University.

Question: I have a question for the President of Belarus.

You spoke about creating the Eurasian Economic Union now, and the declaration on the Common Economic Space states this as a goal towards which the three countries will work. But could you give some more detail on just how Belarus sees this Eurasian Economic Union? How will Belarus develop and build its relations with the European Union?

Alexander Lukashenko: You did not hear me quite right. I spoke more about the Eurasian Union – and I think the Presidents of Kazakhstan and Russia have just addressed this same matter too – in the sense that this is not just about the economy. The Russian President said just now too that although we have the Eurasian Economic Community, for example, we also coordinate our foreign policy activities too.

We have the CSTO, and all three of our countries are members of this organisation, in which we coordinate our military security. We coordinate our activities in all of the different areas needed for our economies. I said before that this goes beyond purely economic relations and represents a deeper level of integration. All three of us have said the same thing. 

As for the issue of how we will build our relations with the European Union, there are civilisation-based vectors and principles, and we will follow them.

My two colleagues rightly noted that the European Union is looking now at how to develop its relations with us. This is a two-way street after all, and we have no need to always be the ones fretting about how we are going to adapt to others, build our ties with others. Let others also think about how they are going to adapt to us, work with us. This is more important. All three of us have already said that this integration will make us stronger. Only the strong earn respect in this world. This union will make Belarus stronger.

I certainly hope that we can keep up the pace that we have set in establishing the Common Economic Space. If we keep moving at this pace and settle our differences, resolve the complex problems before us, I am sure that others will come to us and propose cooperation, and will think about how to organise cooperation with us. 

Nursultan Nazarbayev: I want to add that we discussed the matter of accession to the WTO. This process is underway, and the three countries in the Customs Union are coordinating the principles for our accession to this organisation.

But tell me, if we cannot achieve effective competition within our union, how do we expect to be able to compete with the entire world within the WTO? In this respect too the Customs Union and the Common Economic Space will unquestionably help us, without infringing on the sovereignty and independence of each member country. 

Dmitry Medvedev: I just want to add a couple of words and draw your attention to the declaration that the three of us signed today. It states that our new union and the Common Economic Space are open for other countries to join. We are therefore reaching out a hand of cooperation to our close neighbours and friends, creating conditions that will help them too to modernise their economies and improve ordinary people’s lives.

For a number of countries the main motivation to join the European Union was the desire to become part of a community of more highly developed economies. We can offer the same incentive to our partners, saying to them, reform your economies and develop, and we are ready to build a new economic union together with you. I think this is very important for our countries and for the countries potentially interested in joining this new economic community.

Alexander Lukashenko: If a European Union member or the whole group wants to join our union, as Mr Medvedev said, we will at least examine the application.

Dmitry Medvedev: Or offer collective membership for the European Union.

December 9, 2010