Russia Promises Kyrgyzstan $500m to Join Customs Union, Details Scarce
Russia has promised Kyrgyzstan $500 million in assistance to help the reluctant country’s preparations to join the Moscow-led Customs Union, an economic bloc that currently includes Belarus and Kazakhstan. As usual when numbers fly between Russian and Kyrgyz officials, details are scarce.
Russian Foreign Minister Sergei Lavrov said on August 11 that the funds (“details to be agreed upon”) will ensure “maximum comfort” for Bishkek during its journey into the common economic space. Few believe that Kyrgyzstan, which has long served as a conduit for cheap Chinese goods through Central Asia into Russia, has much to offer the protectionist trade bloc. But always eager to please Moscow, Kyrgyz President Almazbek Atambayev has been talking about membership since his inauguration in December 2011.
Lavrov’s announcement came while Atambayev was visiting Russia for a meeting with President Vladimir Putin.
Atambayev told Putin that Kyrgyzstan would enter the Customs Union by the end of the year (and the Eurasian Economic Union, when it is born in January), but noted the “difficulties” the country will face integrating with the more industrialized economies already in the bloc.
For almost a year now, Kyrgyz policymakers, notably Economics Minister Temir Sariev, have been putting figures on those “difficulties”—expected inflation and a rise in unemployment stemming from the decline in lucrative re-export trade from China. Last November, Sariev said Kyrgyzstan would require $200 million a year over six or seven years in the form of a “fund” to help readjust its re-export-dependent economy to the demands of the Customs Union.
Kyrgyzstan has never been shy in asking the Kremlin for money. By this May, Sariev’s request had crystallized into a $1.2 billion mix consisting of $500 million in grants, $500 million in credits and $200 million to complete “roadmap” preparations for accession into the union. Sariev said Russian officials had Okayed that sum, although none hurried to confirm it at the time. Also that month, Atambayev said Kyrgyzstan might not be ready for integration into the alliance until after 2015.
Since then, there have emerged mixed messages about who funds what fund and what the funds are for. Speaking on July 1, for instance, Atambayev said $100 million of a “Kyrgyz-Russian fund” would go toward providing Kyrgyz home-buyers with affordable mortgages; Sariev had previously stated that the bulk of the fund he had envisioned would be to create jobs and growth.
More recently, during a July 28 meeting between Kyrgyz and Kazakh officials, Kazakh media outlet Kursiv.kz reported that Astana would be joining Moscow in financing Kyrgyzstan’s entry, by providing Bishkek with up to $177 million for its roadmap. It is not clear whether the $200 million the report said Russia would contribute toward the same roadmap is part of the $500 million aid package Lavrov mentioned this week, or a bonus, as Sariev has suggested.
At any rate, Atambayev and Sariev appear to have played their hand fairly well, although that does not mean life is about to get any easier for impoverished and chronically instable Kyrgyzstan. The Kyrgyz government’s think-tank, the National Institute for Strategic Research, has predicted the Customs Union will mean serious teething pains and possible political unrest in the short term. Moreover, if Atambayev keeps his promise to join this year, related price rises may begin to hit just as the population is suffering what is expected to be a cold, dark winter brought on by gas and electricity shortages.
Having deferred membership for so long, it would be no surprise if Bishkek drags its heels just a little longer.
Chris Rickleton is a journalist based in Almaty.