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Interview with the Chairman of the board of the EEC Viktor Khristenko with the magazine "Ogonyok"

Interview with the Chairman of the board of the EEC Viktor Khristenko with the magazine "Ogonyok"

9/28/2015

The current crisis has added a wide range of difficulties to the economic agenda: one day it's national currency fever, another day the domestic market protection policy duties are in a mess, then there are exacerbated disputes over commodity headings, even between close partners. In this context, some people began to talk about the "doubtful necessity" of the integration. Is it really all such doom and gloom? Ogonyok magazine got the lowdown from the Chairman of the Board of the Eurasian Economic Commission, Viktor Khristenko.

- Mr Khristenko, times are hard now for the economy, finances, and the social sphere. What is the easiest way to survive in such conditions: alone or in an integrated community?

From the layman's point of view, it seems that it is easier to survive alone. But if you think long-term, it becomes clear that a "solitary voyage" and its bonuses are illusions. In the modern world, it is impossible to survive or be heard if you're alone. Everybody tries to find such a site, such a group which would allow them to implement their own projects to the fullest extent. Nobody, even the country "You-Know-Who", tries to act without temporary or permanent allies in order to implement their own opinion or project these days.

- Are you talking about China?

- I am talking about our overseas friends. Even such a large country with a powerful economy like the USA cannot make a difference alone, though it may intensely influence a situation. Today's crisis is not simply an economic or financial one. From my point of view we are witnessing the crisis of globalisation, the crisis of the global model which currently in force. Such a problem can not be solved offhandedly. It cannot be encapsulated within the framework of combating derivatives. This is about the future image of the world, and there is no agreement among the players. New centres have been formed, which are not satisfied with their position within the global system, their opportunity to influence adopted decisions by way of the existing institutes. And the "frame" that has existed since 1945 in form of international institutes in its current form does not meet the challenges of our time. That is why the tendency towards regionalisation is an attempt to find the answer to these challenges, a variant which makes it possible to seek out new cooperation formats.

- But there are several associations in every region.. How can one choose?

- Different organisations and associations have different foundations. One should skilfully combine the formats. SCO (Shanghai Cooperation Organisation.— "О"), BRICS (Brazil, Russia, India, China, South Africa.— "О"), EAEU (Eurasian Economic Union)...

- Now the effectiveness of the coordination of efforts within the BRICS framework is in doubt,...

- There is not a single country or association which would not be facing difficulties right now. Though BRICS was formed on economic recovery and the situation has changed since then, there are no grounds for pessimistic forecasts in my opinion. You understand, there are global institutes such as the WTO, the IMF and others. The rules for the functioning of these institutes were determined long ago in a well-known centre. The centre is getting diffused, and no matter what anyone may wish, real multipolarity is emerging. That is why groups of players with a close understanding of their goals are looking for formats for the joint formulation of their interests, including changed to the old rules of the game within the framework of global institutes, because it gives them a chance for something more than, say, the status of the 165th member of the WTO. Another track is unfolding simultaneously. The active formation of a system of preferential trade and economic treaties between countries on a global scale. This is also some kind of attempt to face global challenges. The Eurasian Economic Union is trying to follow the trend. For example, we have recently concluded a Treaty on a Free Trade Zone with Vietnam.

- That is a strange choice...

- Not at all. Vietnam is a sort of a hub, an intersection in the region. It is a large country with a population of 90 mln. people, with great potential in a number of sectors, we can enter the neighbouring countries' markets through developing relations with this country. It is a precedent for us. This is the first full-scale agreement on a free trade zone of the EAEU as a union with third countries. None of the EAEU countries has previously had similar experience.

- What is unique about this experience?

- The Treaty promotes trade and investments. The document introduces a duty-free regime and at the same time brings the reciprocal interests into balance, on the one hand, opening access to the market on a large number of commodity items and, on the other hand, creating preferences for large-scale investment projects. We are developing this vector. Similar treaties are currently being negotiated with Israel, India and Egypt. Latin American associations and individual countries in the region are displaying an interest, which has been even more fuelled by the sanctions from the EU and the USA.

- But it is the EU which is still the key trade partner of Russia.

— The EU is a very important partner for all the countries of our Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan, Russia.— "О"). I just thought: how would I have regarded the situation today if I had not had vast knowledge of the issue since the end of the 1990ies and had not known the things I know? Recently I was talking to one of my European colleagues. He informed with pleasure the groundbreaking news, that the head of one of the European countries mentioned the viability of strengthening economic contacts with the Eurasian Union "as soon as all this international situation is settled". For me, it sounded somewhat amusing as the idea is already 15 years old. Even as early as the beginning of the century, during the period of "romantic relations", that is, relations aimed at radiant future between Russia and the European Union, a model for the Russia - EU common economic space was formed. Now it sounds surprising. But these were not just words, documents were prepared which allowed for the possibility of the operation of not only a common economic but even a common energy space. Just imagine: In the sancta sanctorum, the most disputable and confrontational sphere, we discussed switching to unified norms which would regulate the relations in the energy sector. Back then Romano Prodi (former Chairman of the European Commission.—"O") had the idea to develop a kind of Russian-European Inter-Parliament Assembly for energy issues. If we had signed all these, there would not have been any EU "Energy Packages", nor second or third packages. By the way, all the negotiations were carried out with a view to the further participation of other countries of the then the EAEC in this project (the Eurasian Economic Community was created in 2000 - see the filler). All these were the links in one chain with the prospect of signing an all-inclusive agreement on free trade with the EU.

- What went wrong and when?

- Russia was to finish the negotiations on joining the WTO. We were waiting for this formality. There was the feeling that they were about to accept Russia and sign everything. But years went by... And the EU soon changed priorities - bets were placed on expansion of the EU, which would increase the number of its member states from 15 to 28 in the end. And it is known that widening the consensus always leads to difficulties in understanding the common goals. In 2005, the EU team changed. In 2008, there the economic crisis struck, and further on, things became even worse.

- One can not bring back the past, can one?

- In my opinion, this project is still relevant today. It is the willingness that matters. Generally speaking, only one thing has principally changed during these years: now the EAEU can act as partner from our side. This is a far larger economic space, harmonized enough with the EU in terms of regulations, which is better prepared for economic link-up than Russia was 10 years ago. The more so, taking into consideration that the European Union was the prototype for the Eurasian Union. In the modern world, there is no similar association with such deep integration as the EU. Europe which has bumped its head and made systematic errors is the best example of how one should, or sometimes should not, act.

- Do you mean the present situation in Europe? The experts are discussing what will become that very straw which will break the camel's back: financial and economic problems or the rush of migrants?

- When you are climbing the stairs and your foot slips, you must skip a few steps in order not to damage your nose. No stopping. As in the well-known idiom: the integration has a start, the integration has no end. It is quite understandable that after the situation in Greece there are more sceptics in European politics: common citizens, voters, of course, do not wish to live on the prospects of 10-15 years' time, they want it "here and now". For many politicians, it is simpler to do the public's bidding, though, ideally they must keep up the vision of long-term prospects. But it does not mean that the EU has proved its inefficiency. I believe in the EU prospects. Yes, there have been serious blunders, for example, in transferring to the common currency without the adoption of a common financial regulation system.

- And how do you act?

- We try to be consistent.

- Does it mean that it will take time for the rouble to become the regional currency?

- This issue is not on our agenda. The currency union is the highest point of economic integration. So far, only the EU has succeeded in it, and yet, as you know, the Euro is not used in all its member states. In any case, we have not made the first steps yet. Right now, we are discussing the issues of agreeing financial and currency policies. We shall be moving gradually. The single financial regulator will appear by 2025.

- It appears that the rouble and the tenge are competing: which currency can get cheaper...

- During the recent few years, none of the EAEU countries have avoided depreciation of their national currency. And every time the currency exchange rate decreases in one country and its goods increase in their marketability due to this, and actively move to neighbouring countries, complaints arise. They were expressed in turn to Minsk, Moscow and Astana. Apart from other things, the EAEU countries largely depend on the external market including prices for oil. Risks can be decreased only by way of an agreed currency policy, a dialogue among the countries' financial authorities is required. Such consultations with the participation of the Eurasian Economic Union have already begun. We must increase the volume of settlements made in national currencies: as of today, about 67-68 percent of trade turnover is conducted in roubles, and 1-1.5 percent in the national currencies of the EAEU Member States, 31-32 percent - in US Dollars and Euros. And the share of the latter currencies constitutes the potential for increasing settlements in national currencies.

- What is the degree of integration inside the EAEU now?

- We are moving step by step. In order to avoid that the integration building is swept away by the first hurricane, we need depth, we need a solid foundation. Of course, we can not say that we don't have any problems whatsoever, or that we have fulfilled all the plans by 100 percent. More over, we have already "skimmed off the first cream" of simplification and unification of the procedures, and the elimination of the borders. This was a benefit. But now, especially against the background of the worsening external boundary, one must even more actively engage in preparation of unified regulations, the elimination of exemptions and restrictions, barriers and obstacles for effective functioning of the common market. This will give extra incentive for the internal development of economies of the Member States of the Union. For example, the Customs Code currently in place contains more than one hundred rules referring to the domestic legislation. And this means a difference in "pressures" and stimuli to look for various non-economic and unlawful "loopholes". I very much hope that we shall be able to achieve a new version of the Code by the end of the year. As far as goods are concerned, now we are actively working on launching the common market of medicines and medical products starting from January 1, 2016. Our plans include a common electric energy market by 2019 and a common market of oil, oil and petroleum products, and gas by 2015.

We are simultaneously working on an agreed policy in industry, and this includes about 20 priority areas, in agriculture, and on the formation of a common services market. The latter exceeds the commodity market in terms of volume and therefore is more difficult to regulate. We are trying to make supranational regulations more effective than the national ones. In this case there is a chance to break beyond the boundaries of sector-wide and national lobbyism and to change those things which have failed at the national level for the better.

We are glad that the "path" for making decisions at the current integration stage is much shorter than the common one; in fact, presidents act as lawmakers. Though there is huge responsibility for the preparation of decisions.

- The drop in oil prices has influenced the economies of the EAEU Member States. But how did the existence of the Union complicate the process? By the way, did Astana or Minsk express dissatisfaction with the Kremlin's policy which lead to sanctions?

- The Russian economy is very large and very important for the Eurasian region. That is why, regardless of the existence of the Union, the current trend in the Russian economy, be it growing or descending, greatly influences the economies of the neighbouring countries in any circumstances. Sanctions against Russia, even without the EAEU, would impact everybody. One should not feed on illusions like: if one waves a magic stick to destroy the Union, someone else will be better off. In our case everybody understands that too well. That is why no attempts to revise the formats of participation in the EAEU are made. But the Union gives the opportunity for minimizing the negative consequences of the sanctions as it expands the internal market and makes its regulation more effective. Decreasing transaction costs in external and mutual trade, the withdrawal of migrants from the "grey" zone", the liberalization of large sectors of services (transport, construction, finance, energy) and, consequently, increasing competitiveness, all these factors are able to make the Union's common market the driver for economy.

- If everybody has won, why did the President of Belarus Alexander Lukashenko start such active friendship with Europe?

- Going back to the project of the common economic space of the EU and the EAEU, I think that our associations have a natural interest to each other, if we disregard the current circumstances. We can not escape from each other, even from a purely geographical point of view. Various special regimes and sanctions are harmful for everybody. That is why, when two parties fail to agree one wants to look for the "third party interest" of the winning party.

- Are you talking about China again?

- No, again, I am not talking about China. Certainly, the current situation will make us review everything. In the conditions when intensity is decreasing in the Western track, activity will increase in the South-Eastern direction, in the direction of the Asia-Pacific, a dynamically growing world region. And it is already happening. By the way, we are negotiating a trade and economic treaty with China.

- What is, in your opinion, the margin of safety of regional unions?

- The world is becoming multi-polar, and the politics still rules the economy, and not vice versa. There is struggle between the old formats, various "G"s - G7, G8, - and the new emerging formats. The existing formats do not meet the challenge of the times, but they are still sought-after as there are no other ones. But other formats are searched for. For the time being, various players are finding answers for themselves in regional associations. Nowadays, everybody is looking for partners in order to promote one's interests in the global sites. The future will depend on the effectiveness of the internal structure of integration associations and on the effectiveness of communications between them. It is within this dialogue that the public face of the future world order will be born. And the current global crisis will last as long as how much time is needed for the development and approval of the revised global architecture.

Interviewed by Svetlana Sukhova

Together and instead

For reference:

The Fate of the Integrated Economic Institutes in CIS territory is not Simple

This year is an anniversary year - the 15th anniversary of integration quest. The Eurasian Economic Community (EAEC) as an international organisation was created in 2000. At the start, it was composed of Belarus, Kazakhstan, Kyrgyzstan, Russia and Tajikistan. Armenia, Moldova and Ukraine had observer status. There were no supranational executive bodies. The structure was liquidated in 2014 in connection with the transfer of all the rights, projects as well as the site for actual activities to the Eurasian Economic Union (EAEU).

It has its own history. Firstly, the Customs Union and the Common Economic Space were created (since 2010 composed of Belarus, Kazakhstan and Russia). In 2012, for the first time in the history of the post-USSR states, a supranational executive body with vast authority - the Eurasian Economic Commission - was created. Therefore, the European Economic Union (EAEU) is an international organisation created on the basis of the Customs Union and the Common Economic Space of Belarus, Kazakhstan and Russia.

The Treaty on the Union entered into force starting from January 1, 2016. Armenia and Kyrgyzstan joined the EAEU. The phase of the Eurasian Economic Union means the transfer to a common market with the realization of the freedom of movement of goods, services, capitals and workforce, as well as the formation and implementation of agreed policies in key economic sectors: transport, industry, energy, agroindustrial sector, etc.

The Eurasian Economic Commission performs the function of the coordinator in the work for the EAEU development, in fact it is a prototype of the "Eurasian Government".