In an exclusive interview with ARKA news agency Viktor Spassky, the director of the Integration Development Department of the Eurasian Economic Commission, speaks about Armenia’s Eurasian integration process, economic advantages and risks stemming from its decision to join the Customs Union and to refuse to initial an association and deep and comprehensive free trade area agreements with the EU.
ARKA - Mr. Spassky, Armenian deputy foreign minister Shavarsh Kocharyan said recently that Yerevan would be ready sign the agreement on joining the Customs Union until early next February. Do you think Armenia will be able to accomplish all the procedures by that time and become one of the founders of the Eurasian Economic Union ?
V. Spassky - I would not like to speak about an exact time because Armenia will have to go through a set of procedures as stated by the heads of Russia, Kazakhstan and Belarus at their latest meeting in Minsk on 24th of October. Armenia and these three countries signed a memorandum defining the form of interaction and as far as I know everything goes according to the schedule. The presidents decided also that at the next meeting of the Eurasian Economic Commission’s board a task force should set up with representatives from Belarus. Kazakhstan, Russia and Armenia to draft a "road map" for Armenia’s accession and once it is ready, it should be implemented as quickly as possible, but the pace also depends on the Armenian side that should approve the entire regulatory framework. Some documents must be ratified by the parliament, others by the government and president. So, it is necessary to determine the number of documents to which Armenia will join. It is a common and concrete work. First and foremost , it is Armenia’s parliament that will have to do a serious amount of work.
ARKA - What kind of documents do you mean?
V. Spassky - I would divide the documents that needs to be conceptualized into two categories –one part should be incorporated into the bloc’s agreement, which must be signed by May 1, 2014, and the second part are regulations that are connected with the Customs Code and international agreements. There is some specificity for Armenia and once this work is done we can talk about real accession.
ARKA - What are the benefits and risks for Armenia stemming from its membership in the Customs Union.
V. Spassky - When talking about any economic integration process, it is necessary to consider all options. The first option - Armenia joins the Customs Union and the Common Economic Space. We must see which are the benefits for Armenia in this case. Under the second option Armenia joins another integration alliance. Then, we need to compare both options. This will allow analyzing and adopting the most feasible solutions that meet the aspirations of the Republic of Armenia. I am absolutely convinced that the first option is the best for Armenia - it really is a very interesting integration project, the first post- Soviet integration bloc in which absolutely all are equal. All the decisions are accepted at the highest level by consensus. The Eurasian Economic Commission has much in common with the European Commission, because the latter has gained serious experience. The commission takes into account the interests of all members regardless of their size, GDP and population number.
The highest level of the commission is made of three vice-premiers, who also adopt decisions by consensus. If someone is against no decisions are made. There is the permanent body –the board, composed of nine ministers - three from each country. Decisions are taken by 2/3 majority. A board’s decision may be revised by the supreme body - the Council that also adopts decisions by consensus. I want to emphasize that in this sense our commission differs from the European Commission. Therefore, in this respect the interests of Armenia will not be infringed in any way. Armenia will be a full member of the Customs Union, which has a total of 170 million inhabitants, while Armenia only 3.5 million
ARKA – But if Armenia had chosen the Association Agreement with the EU?
V. Spassky –An EU-associated member country has no rights, it has only obligations. Therefore, unlike the Customs Union, it is an asymmetric form of interaction. Frankly, I'm not familiar with the details of Armenia’s associated membership documents, but am well aware of Ukraine’s which were published a long time ago and anyone could explore them. I have been engaged in foreign economic affairs for 40 years, but I have never seen such an unequal international agreement .
Of course, decisions are made by sovereign states. But most importantly we are talking about economic integration and the Customs Union, the Eurasian Economic Space and the Eurasian Economic Union , on which we are currently working on are all purely economic projects. They have no politics-related issues’ they have only specific economic issues and the representatives of Armenia must understand what the membership gives economically.
ARKA - And what are the advantages of Customs Union’s membership?
V. Spassky - Economic integration includes four freedoms - freedom of movement of goods, services, capital and labor. For a proper assessment we need to consider actions in each direction. Let's start with clear things like the movement of goods. The statistics says that in January-September this year Armenian exports increased by 10 %; exports to Russia increased by 25%, while exports to EU dropped a little. Armenian exports to the Customs Union member countries are value-added products, while exports to EU are raw commodities with no added value. Armenian exports to Russia, Belarus and Kazakhstan are growing. Here is an example; Armenian exports to Kazakhstan are not large, but they doubled in ten months because of no customs borders within the bloc making shipment of goods easier. Armenian exports to Customs Union are made seventy percent of food products, including alcoholic beverages, which have all the grounds to grow.
ARKA – Could Armenia’s membership in the Customs Union bring more investments into its economy?
V. Spassky - If we look at real investments made so far in Armenia, I mean direct investment, and then 42 % are from Russia. When all the rules are exactly the same in Belarus, Kazakhstan, Russia and Armenia, the Russian businesses will invest more money in enterprises in these countries. For example, if money is invested into production of shoes, and we know that Armenia has good tradition in this field, then it can produce quality shoes not only for the Armenian market of 3.5 million people, but for more than 170 million of the Customs Union. However, investments may come not only from the territory of the Customs Union , but also from Armenian Diaspora.
ARKA - What can say about the situation in the labor market?
V. Spassky – Armenia’s migrant labor force is important for Armenia itself and Russia. This is a very serious matter, because being in a single bloc, migration flows will receive such benefits, which cannot be offered by any other trade bloc. For Armenia this is very significant, because now 85% of remittances come from the territory of the Russian Federation. This amount is 1.4 billion US dollars annually, according to your official statistics. It's more than Armenia’s entire annual export. Most importantly, families here getting this money ensure domestic demand. Part of that money is invested into small and medium business.
Besides, Russia needs qualified labor force. Armenia boasts of skilled construction labor force. There is also another freedom. When we talk about the integration component, we mean the harmonization of policies. For you, a coherent agricultural policy is of great interest. In May in Astana the presidents addressed specific issues of agro-industrial policy. In the case of Armenia’s membership in the Customs Union, it will participate in these matters and get involved in joint projects. You will take your niche and work consistently in this direction.
ARKA – In Armenia there is much talk about the lack of a common border. This is the main argument of the opponents of the Eurasian integration.
V. Spassky – You are right, but Armenia has no border either for European integration. For example, Greece joined the EU without a common land border.
ARKA – But Greece has sea.
V. Spassky - Well, here is another example. Let us remember the West Berlin that was an integral part of the EU. If someone seeks reservations - he will always find or invent the. Relatively speaking, it is necessary to determine the mode of operation. Train containers are sealed in Armenia and go through Georgia to Russia. Today we have such a regime with Kaliningrad region separated from Russia by Lithuania.
ARKA - What about possible preferences for Armenia because of absence of common borders ? And very often there is talk about Armenia's commitments to WTO.
V. Spassky – A good question. It is the question of yours and maybe our risks. Armenia has a very liberal (customs) regime and it's not bad. We also want to learn from you. But today Armenia employs weighted average import tariff of 2.9 % - 3 %. After Russia joined WTO last year we pledged to gradually reduce tariffs. Last year they were 9.5%, we have dropped them now to 7.02 %, and the rate goes down. This means after a while there will be no problems at all. Of course, we are not interested in European goods coming to Russia through Armenia with zero customs duty, and here we and the Armenian side should look into how to resolve this issue so that such products do not hit our market. On the other hand, we can ask the WTO to review import duties on some items. After Ukraine saw that joining WTO greatly reduced duties on imports it is going now to ask it to review many of them upwards. The WTO has a mechanism to address these issues. So we have to sit down and negotiate if there is a problem. There are no unsolvable problems.
ARKA – What about Nagorno -Karabakh, which is in a single customs area with Armenia?
V. Spassky - And could you tell me how this issue was to be solved gad Armenia signed the EU association agreement? Hence, this is a solvable issue too. As a person engaged in foreign economic affairs for several decades I am confident that the most unsolvable problems can be solved. -0 –