Is a trade war brewing between Russia and Kazakhstan?

Is a trade war brewing between Russia and Kazakhstan?

Russia and Kazakhstan officials claim there is no trade war between their two countries, but the behavior of the two governments follows a pattern of trade disputes between post-Soviet states in which imports are banned for alleged health and safety violations.

Russia and Kazakhstan deny there is a trade war between them – that is what officials from both Astana and Moscow have stated over the past several months.

Vladimir Putin’s spokesman Dmitry Peskov has claimed that such statements “are quite a big exaggeration,” while the governing organ of the Eurasian Economic Community (EAEC), which now unites Russia, Kazakhstan, Belarus, and Armenia, has rejected any suggestion of a trade war.

Moscow and Astana exchange first volleys in a trade war

The amount of seized goods on both sides thus far is not large, but the behavior of the two governments follows a pattern of trade disputes between post-Soviet states in which imports are banned for alleged health and safety violations.

It all began when Kazakhstan’s National Chamber of Entrepreneurs carried out investigations at the beginning of 2015 to determine how the Russian ruble’s devaluation had affected the competitiveness of domestic industries. Kazakh regulatory organs took action soon after, imposing a 45-day ban on Russian oil imports on March 5th. Five tons of Russian meat were confiscated, and Kazakh authorities claimed to have discovered bacteria in two tons of milk from their northern neighbor.

Russia has responded in kind, banning Kazakhstani milk, melons, and Kefir through the Federal Consumer Protection Service and claiming that banned dried fruit from the United States was entering through Kazakhstan.

In May, new safety and anti-pollution regulations for imported automobiles modeled on European standards which would limit Russian and Belarusian automobile access to the Kazakh market were introduced, while five tons of Kazakh cheese and 3500 eggs were confiscated by Russian authorities in June.

Underlying grievances remain with the EAEC

The inability of Kazakhstan’s domestic producers to compete with cheaper Russian and heavily subsidized Belarusian agricultural goods has been a complaint since the formation of the customs union.

The devaluation of the Russian ruble has made Russian imports even cheaper, further damaging Kazakhstan’s domestic industries, from automobiles to construction materials.

Specialists have noted that Kazakhstan could make its domestic industries more competitive if it devalued its currency by 30%, but there is little indication that President Nursultan Nazarbaev has any interest in doing so as he begins his fifth term in office, particularly since Kazakhstan’s tenge had already been devalued by 19% in 2014.

European agricultural imports are a sticking point

Russia and Belarus had already traded volleys in a mini trade war in the months following Russia’s decision to ban agricultural products from Europe.

European products continued to flow into Russia via Belarus, however, with Moscow claiming that the Belarusian government has not taken enough precautions to prevent the banned goods from flowing into the Eurasian economic space, in some cases allowing European goods to enter Russia with forged country-of-origin documents. The ban on European products has led to a flourishing black market for such goods.

Kyrgyzstan joined the Eurasian Economic Union in late May, while discussions surrounding the formation of a common currency for the trade bloc continue, a proposal that has found more favor in Russia than in Kazakhstan.

If trade disputes and import restrictions between Russia and other member-states continue, the Eurasian Economic Union’s plans for creating a common market will be placed further and further in doubt.

About Author

Luke Rodeheffer

Luke Rodeheffer is a cyberthreat researcher at Flashpoint in New York City. He holds an MA from Stanford University, where he was a FLAS Fellow for Turkish. Luke was previously a Fulbright Fellow in Ukraine and a research assistant at Koç University in Istanbul. You can follow him on Twitter @LukeRodeheffer