BACKGROUND: The CES is an ambitious project, aimed at maximizing Moscow’s political and economic power. The CES is multi-phase agreement, which proclaims that each member state will be able to control the speed of integration. However, the goal is ambitious: the free economic space should be completed in 5-7 years whereas the EU took over five decades to construct. The first phase will coordinate customs duties and harmonize trade legislation and custom regulations. The second phase aims at lifting current trade barriers exemptions and creating a customs union. In the third phase, “internal customs boundaries will be liquidated, a common customs boundary will be formed, and a supra-national regulating institution will start functioning through member countries’ voluntary assignment of functions”, Interfax quoted the agreement. As with the EU, the Russian-led quartet is aspiring to produce a single powerhouse economic zone that would generate growth and foreign investment. However, this agreement did not come to fruition easily. Elites in Belarus and Ukraine have reservations about re-integrating with Russia and sacrifice their national sovereignty. Similarly, their counterparts in Georgia, Armenia and Azerbaijan, as well as in Uzbekistan, who tasted the forbidden fruit of independence, would rather make often lucrative economic decisions themselves ad hoc, and not delegate them to an anonymous “supra-national body” on New Arbat. While the leaders of the signatory nations had been meeting frequently to review the drafts, fissures had emerged even prior to the signing ceremony. A point of contention between Russian President Vladimir Putin and Presidents Leonid Kuchma of Ukraine and Aleksandr Lukashenko of Belarus was the juxtaposition of future membership in the EU and WTO vis-à-vis their membership in the CES. “The Ukrainian parliament will not vote on this agreement in its current form,” a senior Ukrainian diplomat who requested anonymity said, commenting on the agreement. Before the Yalta conference, Ukrainian Justice Minister Alexander Lavrinovich, announced that some articles of the draft agreement were in violation of the Ukrainian constitution, which prohibits the assigning of any national powers to a supra-national entity. Similar restrictions exist in constitutions of other post-Soviet states. Moreover, parliaments in several countries, such as Georgia, are unlikely to ratify participation in such a supra-national body only 12 years after gaining independence. Yet, according to Vyacheslav Nikonov, President of the Politika Foundation in Moscow and grandson of Stalin’s Prime Minister Vyacheslav Molotov, writing in Pravda, the general support for Ukraine joining the free economic space was considerable. Both the United Social Democratic Party and the Working Ukraine Party were in full support of joining the free economic space. These two parties shared the opinion that joining this free economic zone would not deter Ukraine’s chances for eventually entering the EU. On the other hand, Ukrainian national-democrats led by former Prime Minister Viktor Yushchenko have threatened to stymie ratification. Kazakhstani President Nursultan Nazarbayev flatly stated that the “club” will be closed and should not accept any new members, while Putin would like to have an open admission policy – with himself as a gatekeeper. Nazarbayev understands that with the exception of Belarus, most of the “winners” in the CIS are joining the new zone, and he wants to keep the poor cousins out. Putin, on the other hand, understands the leverage Russia will receive as the “majority stakeholder” in the new economic bloc, and will be willing to wield clout vis-à-vis Central Asian and the three states of the Caucasus.

IMPLICATIONS: The accord, if implemented, will marginalize CIS countries such as Georgia, Armenia, and Kyrgyzstan, who are WTO members. Analysts are at a loss how WTO regulations can be reconciled with those of the CES. And it will be run by “supra-national regulatory bodies,” likely to be based in Moscow, which no doubt will be Russian-dominated. Central Asian and Caucasian leaders view Putin’s new “zone” with understandable suspicion. Potential candidates for Putin’s club were all present in Yalta. Ten out of the twelve CIS presidents were present; ailing President Heydar Aliyev was represented by his son, Prime Minister Ilham Aliyev, who went on to be elected President on October 15. President Saparmurad Niyazov Turkmenbashi of Turkmenistan was noticeable in his absence. Ilham Aliev, Georgian President Eduard Shevardnadze and Armenian president Kocharyan praised the economic union. They could not act otherwise: as in the case of Central America and the United States, over a million each of Azerbaijanis, Armenians, and Georgians are employed in Russia as guest workers and support families back home to the tune of double digits of the national GDP, allegedly up to a third in certain cases. The further closure of borders would be a massive blow to South Caucasian economies which are dependent on Russia in terms of trade and railroad links. And a customs union, allowing the free movement of goods, will encourage foreign investment in CES – a market of 214 million consumers, and not located in small and unstable markets such as the South Caucasian states. U.S. officials expressed concern about the new body. Reportedly, last minute maneuvers by U.S. Ambassador to Kyiv, John Herbst caused Vladimir Putin’s ire on the eve of the Camp David summit with George W. Bush. U.S. officials have grounds for concern, as they seek to prevent the emergence of a new Russian-dominated entity in Eurasia. Their policy responses were limited, however, since Washington needed Russian support on the U.N. Security Iraq peacekeeping resolution and in the war on terrorism. Thus, the U.S. is likely to acquiesce with the emergence of the new Eurasian economic bloc.

CONCLUSIONS: The four-way summit took place in Yalta, a highly symbolic venue, where in 1945 President Franklin D. Roosevelt and the British Prime Minister Winston Churchill abandoned Central Europeans to the mercies of “Uncle Joe” Stalin. If successful, the new entity may replace the historic Romanov and communist empires. The dreams of the czars and the commissars, of one empire stretching eleven time zones from Brest to Vladivostok, be it under a two-headed eagle or under the hammer-and-sickle red flag, may be dead. A new empire, however, may be in the making. Anatoly Chubais, the controversial architect of the Russian privatization, has called it a “liberal empire” and even put a timeframe on its creation: 50 years. His boss, Vladimir Putin, on the eve of Spring 2004 presidential elections, may be a man in hurry, attempting to impose a more ambitious schedule.

AUTHOR’S BIO: Ariel Cohen is a Research Fellow at The Heritage Foundation and the author of Russian Imperialism: Development and Crisis, Greenwood Praeger, 1998. Special thanks to Irene Gorelik for assistance in research of this article.