When giants fight, it’s the ants who die

After a 6 month hiatus, of all the exciting topics I considered for this first post – border conflict, energy crisis, construction boom, wedding season – I finally landed on: customs union! Yesssss.

This is the hottest topic in the Kyrgyz news right now. And why, you ask, is this so exciting? For one thing, this is the same trade union that sparked the current revolution in Ukraine – pro-Europe Ukrainians were so upset about potentially joining it that they staged sit-ins in the capital, which led to police crack downs, Ukrainian-Russian violence and the mess going on there today.

Possible members of the Eurasian Union, including President Almazbek Atambaev of Kyrgyzstan, 2nd from left.

Possible members of the Eurasian Union, including President Almazbek Atambaev of Kyrgyzstan, 2nd from left.

So some background: Kyrgyz politicians are debating whether to join the Eurasian Customs Union, a free trade zone that would unite the former Soviet states into a single area with free flow of goods, capital and labor (think EU … there would also be a Eurasian parliament, or so some say). For those who have signed on – Russia, Kazakhstan and Belarus – it goes into effect on January 1, 2015. If you’re so inclined, check out the union’s official site. Or this report from the EU or this Business Week article, both of which give some useful information but have clear and strong anti-Russia rhetoric.

Just about everyone agrees that the first 5 to 10 years of the union would be a disaster for Kyrgyzstan. None of its products are up to international standards, almost all of the current and potential members have stronger economies than KG. Even worse, union rules require members to impose uniform tariffs on goods imported from non-member states. So the cost of all sorts of basic products would shoot up (according to KG’s economic minister, cement and flour prices would go up 10%, eggs up 15%, sugar up 30%).

A side note for some local color: one of the biggest worries here isn’t the potential price hike for flour and sugar, but instead for Japanese cars. Tons of Kyrgyz buy cars directly from Japan because they’re super cheap. And they’re super cheap in part because their steering wheels are all on the right side … I assume that the Japanese, like the British, drive on the opposite side of the road from the rest of the world?

A photo from the Kyrgyz government's news website, suggesting that right-steering-wheeled cars may soon be banned here.

A photo from the Kyrgyz government’s news website, suggesting that right-steering-wheeled cars may soon be banned here.

Whatever the case, Kyrgyz drive in the right-hand lane, like in the U.S., so technically their steering wheels should be on the left. But given (1) that there’s no Kyrgyz regulations on steering wheels / car standards, (2) that there’s really no export market for right-side steering wheel cars, (3) that Japanese companies thus sell excess right-streering-wheel models for super cheap, therefore –> (4) tons and tons of Kyrgyz buy and drive cheap right-streering-wheel Japanese cars; there are some 127 thousand such cars in KG today. So when you’re driving here, you never really know if the other driver is sitting on the left or the right, and you may not be able to understand a thing on your dashboard (it’s all in Japanese … side note to the side note, the transportation ministry is talking about banning right-steering-wheeled cars. Good luck). But back to the tariff worries, which started this whole tangent. A basic car from Japan currently costs around $6,000. With tariffs, the price is expected to double at least.

More generally, Kyrgyzstan is expected to be flooded with foreign products either (1) sold at relatively high prices (due to tariffs mostly) or (2) from member states and of relatively poor quality, while locals can’t sell their goods to anyone (they’re not up to union standards, so not even union-member countries will buy them). People are talking about not being able to feed and clothe themselves, given that general price levels will rise and they’ll have less income.

The pro-union faction of the country – including the ruling political party and most large businesses – portend massive benefits after this initial shock. Bigger markets for Kyrgyz products once (if) they make it up to international standards.** Tariffs that may, with time, prompt the growth of domestic industry (by making foreign products relatively expensive). Most small farmers and the parties that represent them are freaking out. What I love about Kyrgyzstan, and what makes it stand out from so many of its neighbors, is that both factions are openly sparring over what to do.

Kyrgyz meat was banned from export to Kazakhstan and Russia in 2012, on the basis that it did not meet international standards. Many locals are worried that similar bans will undermine any potential benefits to Kyrgyzstan from joining the union.

Kyrgyz meat was banned from export to Kazakhstan and Russia in 2012, on the basis that it did not meet international standards. Many locals are worried that similar bans will undermine any potential benefits to Kyrgyzstan from joining the union.

Which brings me to the far more interesting part of this debate (really, who gets hot over economic theory?): politics! The press, TV and political pundits are all over this one, and it’s getting heated. Anti-customs-union locals see this as a roundabout, neo-imperial reestablishment of the USSR. Russia would of course be part of the union and, with the strongest economy and most political weight by far, would be its big daddy. “It’s only a matter of time before we would turn back into the USSR,” said one of my Kyrgyz friends. “We’d become totally dependent on them again and then what could we do?”

Meanwhile, the leading Russian-language paper (Vechernii Bishkek) published an extensive pro-union commentary, in part mocking this fear of losing Kyrgyzstan’s “mythical” independence. “In our modern debt-ridden state?!” the paper scoffs, alluding to KG’s extensive debts to Russia, the US and EU members, debts which in many ways make it beholden to a fun-house of demanding wealthy donors. The paper quotes Russian President Putin as saying that, “We [Russia] understand that it won’t be easy … we are prepared to help, lend a hand, look at what we can do to make sure that Kyrgyzstan’s economy is ready” to join the union. The paper goes on to note approvingly of Russia’s already extensive support for KG’s infrastructure and industry, and a promised $200 million grant for KG’s “road map” (I assume this means for infrastructure and road improvement as opposed to $200 million for an actual map) in contemplation of KG entering the customs union.

Protesters organized a demonstration against joining the Eurasian Union in Bishkek in May, 2014.

Protesters organized a demonstration against joining the Eurasian Union in Bishkek in May, 2014.

Other editorial pages are filled with handwringing over customs-union-ignited revolution. If we join, the logic goes, the anti-union factions will start a popular revolution. Far fetched, you say? Recall that the spark that set off the Ukrainian revolution was ex-President Yanukovych’s rejection of a trade deal that would have brought Ukraine closer to the EU. In fact, Yanukovych was contemplating joining this same Eurasian Union that is now the hot topic in KG.

A Ukrainian cartoon from April, 2014, mocking Yanukovych for dragging Ukraine back into the Soviet Union by rejecting the EU deal in contemplation of joining the Eurasian Union instead.

A Ukrainian cartoon from April, 2014, mocking Yanukovych for dragging Ukraine back into the Soviet Union by rejecting the EU deal in contemplation of joining the Eurasian Union instead.

Pro-Western factions were so incensed that they set up protests in Maidan Square, which led to government-protester violence, which led to country-wide dissent, which led to revolution, which led to Crimea annexation/liberation (choose your viewpoint) and now the ongoing mess in Eastern Ukraine. People in all rungs of Kyrgyz society are well aware of this, and it raises the stakes of both voicing dissent and of trying to push through an agreement to join the union in spite of the majority’s dissent. [I haven’t seen any polls on how much of the population does and does not support joining the union, but the word on the street is that the majority does not support it].

Most politicians here say that a Maidan-like revolution could never happen in KG, but lots of people are talking about it and it’s hard to tell how much their assurances are wishful thinking. To my mind, with 2 popular revolutions in the past 15 years and a looming energy crisis this winter (more on that in a later post), the possibility of massive unrest doesn’t seem all that farfetched. This is a society divided – at least on this issue – along socio-economic lines, with the memory of the USSR still weighing heavily on how modern political decisions are framed and understood.

So with all that, what I want to know is what will happen to those farming families living on the edge, whose products aren’t up to union standards… I haven’t heard anything about how they’ll be worked into the union, or what nets may be put in place to support them if the worst really does happen (i.e. if the economic shock to KG is drastic). And more than the debate, it’s this silence that scares me.

The title of this post, by the way, is a wise old Kyrgyz saying.

** I should note: it’s not that Kyrgyz products are crappy. It’s that they’re mostly agricultural, produced on teeny tiny farms for local consumption. You don’t bother with pasteurization if you drink the milk 5 hours after you’ve milked the horse. Nor do you have your wool’s quality inspected, ranked and stamped if you’re selling to your neighbors, who are all experts on such things anyways. But if you’re producing on a large scale for international markets, you’re facing all sorts of additional requirements in terms of the product’s characteristics (i.e. pasteurization) and information dynamics (quality assurances based on uniform standards) and the fees that go along with such things. For a lot of subsistence farmers, these requirements are just too much to handle right now.

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