How To Divide The EAEU Pie Now: When Will The Customs Duties be Revised?

Recently, the heads of government of the EAEU countries met in Almaty. Official press releases did not highlight one of the key problems of the union at the moment: quotas on customs duties. Orda.kz spoke with Kazakhstani economists and tried to understand what can be done.

According to the rules adopted in 2008, the EAEU countries distribute customs duties in the following proportions.

• Armenia – 1.220%;
• Belarus – 4.860%;
• Kazakhstan – 6.955%;
• Kyrgyzstan – 1.900%;
• Russia – 85.065%.

Quotas were agreed upon based on the size of the economies and the population of the states, but the outbreak of war in Ukraine shook things up. If earlier foreign goods and products came to Kazakhstan, Kyrgyzstan and Armenia through Russian exporters, now the situation is radically different. The official export of hundreds of goods from Western countries, Korea and Japan to the Russian Federation is banned. Even "friendly" China may not sell to Russia and Belarus in order not to fall under sanctions.

Kazakhstan in 2022 tripled the import of refrigerators, washing machines, and the need of Kazakhstani mothers for breast pumps increased by 633%, which, of course, does not look all that believable. All parallel imports go to isolated Russia. 

The current rules are as follows: even if all goods imported into the EAEU are exported to Kazakhstan, it will receive its 6.955% of the collected duties.

Kazakhstan's Position

At the end of January, member of the Board of the Eurasian Economic Commission (EEC) Bakytzhan Sagintayev, in an interview with the German publication DW, said:

"This topic has been raised since the middle of last year. Both Armenia and Kyrgyzstan have talked about this. We propose to develop a new methodology that allows you to automatically recalculate the standards depending on the current situation. But Russia and Belarus do not support this idea, saying that today it turns out that way, and tomorrow it will be different."

The heads of Armenia, Kazakhstan, and Kyrgyzstan voiced discontent at numerous EAEU meetings this year, but this fell on the Kremlin’s deaf ears. The economic and financial bloc of the Russian and Belarusian governments continue to pretend that nothing particular is happening. On March 18, the EAEU signed a temporary procedure for the transfer of customs duties, the essence of which is that between Russia and Belarus, customs duties are calculated in Russian rubles, Armenia, Kazakhstan and Kyrgyzstan carry out calculations, as stipulated by the agreement, in US dollars.

At the same time, the growth of supplies to Kazakhstan certainly increases the burden on our customs: more inspections, more paperwork, and more work. Yet the percentages are unchanged.

Imports from EU countries to Kazakhstan in six months, January-August 2022, increased by 12.4% and amounted to 4.2 billion dollars. Medicines, turbojet engines, gas turbines, computer equipment, pumps, fans, and cars took top positions.

Even Trade

Kazakhstani economist Andrey Chebotarev told Orda.kz that the losses of Russian imports in the summer of this year amounted to 50% at the end of the year. Some of the data is classified, but there are different estimates. The Ministry of Finance of Russia acknowledged losses at 20%. But it will not be so easy to change the proportion of the distribution of duties.

"There are several reasons. The first is political, any action in relation to the EAEU is now considered political. The second is that Russia will be somewhat against it. And the third, most important, is that fixing new proportions of duties requires approval by parliament. We do not have a parliament now, it physically exists, but it has been dissolved. There will be a new one after March. However, everything that needs to be submitted to the parliament and adopted there, everyone who has come across knows that this process, to put it mildly, is not fast,"

The expert is glad that Sagintayev raised this issue, since most of the year it was discussed not publicly, but “behind the scenes”. It looked as if "officials were holding their tongues."

"We should get our benefits from participating in the EAEU, and our benefit will be that imports to Russia have fallen, while ours have increased. And the issue of withdrawal from the EAEU is political, and this is not the present case. Yes, the EAEU was beneficial to Kazakhstan, it is still useful to us, but we must remember that the union is exclusively economic."

Financial analyst Rasul Rysmambetov says that now everyone is frozen in anticipation due to the escalation in the conflict between Russia and Ukraine and the new package of sanctions against Moscow.

"Everything is changing, the world is changing, and now 40% of duties can go to Kazakhstan. Otherwise, we won't be able to work it all out any further. Cargo at customs will be delayed for a month, [ed. or] two [ed. or] three. Judging by the trade parameters, the customs of Kyrgyzstan, Armenia and Kazakhstan are working for the Russian market. And whoever gets more tired gets more."

The analyst also draws attention to the fact that Russia has legalized parallel imports into the country, that is, imports that are in fact illegal. 

"Therefore, it can be concluded that they decline customs duties in our favor,"

Rysmambetov believes.

At the same time, if imports do not go through the EAEU countries, but to Russia directly, according to “quasi-legal schemes", then the common “piggy bank” of the EAEU does not receive income, which in the end should be divided among all members of the economic union.

Original Author: Maksim Skopin

DISCLAIMER: This is a translated piece. The text has been modified, the content is the same. For accuracy, please refer to the orignal article in Russian.