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Back to the (free trade) USSR

Vladimir Putin's initiative to form an EU-style free trade bloc between Russia, Belarus and Kazakhstan has got businesspeople in all three countries psyched, but ordinary citizens are wary about whether the "mini-Soviet Union" will lead to greater economic and political freedom.

Last week, Putin hosted trilateral talks at Moscow's plush Ritz Carlton hotel on the final countdown toward a Single Economic Space, due to start in Jan 2012 ­ and a new Eurasian Economic Union a year afterward.

From July 1, customs checks disappeared from the borders and passengers were only subject to passport checks without having to pay customs duties. From January goods, services, workers and cash will pass unhindered between the three states.

But trouble is already emerging, with a hike in prices for fuel and some imported goods ­ like foreign second-hand cars ­ in Kazakhstan and Belarus pushing workers in certain industries to protest the free trade zone.

New Soviet Union?

The political leaders at the Ritz Carlton did not shy away from the idea that the bloc was a smaller successor to, or even step toward restoring, the Soviet Union.

"In essence, for the first time since the breakup of the Soviet Union the first step has been made in restoring the natural economic and trade ties on the post-Soviet space," Putin told an audience of businessmen and officials from the three countries.

Aside from free trade, the union would answer to a commission, while an independent court would resolve disputes between businesses and enterprises in the three states.

"We are hoping to sign as early as next year a declaration about the formation of the Eurasian Economic Union, which can and must start operating as early as 2013," Putin told journalists on the sidelines of the forum.

Pavel Borodin, the secretary of the Russia-Belarus Union ­ was blunter.

"This is the basis of restoring post-Soviet space," he told journalists. "We are one people, we have lived, we live and we continue living together. In essence, we have one country, and we cannot escape that."

Asked if he specifically meant the restoration of the USSR, he said, "Absolutely."

The key driver of integration appeared to be natural resources.

Belarusian Prime Minister Mikhail Myasnikovich urged businessmen to invest in his country's privatization campaign ­ clearly an attempt to revive its stalled economy.

Borodin noted that Kazakhstan has over 3 trillion cubic meters of gas reserves, adding that a free-trade Eurasian Economic Union would give Russia better access to those resources.

Price hikes?

The reciprocal effect would be giving businesses in Kazakhstan and Belarus greater access to the Russian market. But rising prices on fuel and other sectors have left experts doubting whether there will be any positive trickle-down effect for workers in the three countries.

"This is a multi-vector policy in favor of transnational corporations," opposition leader Ainur Kurmanov, who heads the Socialist Movement Kazakhstan, told The Moscow News in a telephone interview. "The country is turning into a resource colony."

At issue are import tariffs. Relatively high in Russia, with the adoption of a common economic space, they will take effect on the outer borders of Kazakhstan and Belarus as well.

The formation of the Customs Union "has led to additional tariffs on imported cars and certain other products. This is sparking inflation," Kurmanov said. "But salaries are not increasing. This is fueling strikes and protests."

Dozens of activists of the Kazakh Rukh Pen Tyl organization protested the Customs Union in front of the Russian consulate in Almaty on July 1, blaming economic difficulties on the new integration policies.

But some local analysts say the economic problems are not necessarily connected.

"The fact that a few thousand cars did not pass customs is a single incident, it is not ref lective of the situation as a whole," Kazakh economist Kanat Berentayev told The Moscow News. "Rising fuel costs have been artificially linked to the customs union, but they are in fact a result of our government's policies."

The main problem is that integration is being rushed, he said. "The political decisions were taken, but technical issues were not addressed. There is no legal basis."

One of the results is that an otherwise beneficial union is being interpreted in some circles as a loss of sovereignty, Berentayev said.

Entrepreneurs upbeat With state officials touting the economic union as a chance to increase competition both among businessmen and among bureaucrats, entrepreneurs sounded positive about the upcoming Single Economic Space.

"These problems are appearing because we've only just started," Yerkebulan Ilyassov, development director at the Astana-based Alageum Electric Company, told The Moscow News on the sidelines of the Ritz Carlton forum. "There are more advantages than disadvantages."

Some experts were more skeptical, however.

"There will be advantages of the customs union, but they will not be felt for several years," Alexei Portansky, a Moscow-based trade expert at the Higher School of Economics, told The Moscow News.

"Faster cross-border transport for vehicles" will be a good thing, but it will take time for its benefits to start being felt, he said.

Ilyassov, the Kazakh electricity executive, said he didn't fear a return of the Soviet Union, however.

"The union is not after the hegemony of power," he said. "Take the European Union ­ we accepted it."

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