These findings are based on the official statistics of the CU (Eurasian Economic Commission), analysis of statements and comments made by the representatives of government, diplomatic and business circles of the Republic of Belarus, Republic of Kazakhstan and the Russian Federation on the situation in the national economies and the social sphere in the framework of the Customs Union.
The results of the analysis showed that the problems and risks identified by us in March 2013, not only deepened by September, but also formed persistent negative trends.
Countries of the Customs Union demonstrate reductions in the mutual trade. Thus, according to the data for the first five months of this year, the mutual trade within the Customs Union and the Eurasian Economic Commission was down 9.9 per cent from the same period last year. The decrease compared to the same period last year happens each month, which is confirmed by the official statistics (see Annex 1). The largest drop in trade performance is observed in Kazakhstan and Russia. In May 2013 the trade performance of Kazakhstan tumbled 15.8 per cent compared to the same period last year, and the trade performance of Russia tumbled 15.1 per cent. This trend indicates a steady reduction of internal trade volume in the CU.
The poor dynamics in the mutual trade between the member countries is caused by the facts that the exports are mainly raw materials and the competitiveness of non-oil commodities is low. The main problem of the turnover between the members of the CU is still a small amount of goods that the participants are willing to offer each other, excluding energy sources. In addition, the increased competition as a result of lower prices for imported goods hits some industry markets. This creates the conditions for crowding out of some domestic producers from the market and for hostile takeovers.
Representatives of Kazakhstan believe that, despite the growth of trade within the Customs Union since 2010, its establishment had little effect on the positions of Kazakhstani goods in the markets of Russia and Belarus, but rather strongly affected the country’s structure of imports, where the share of Russian products has increased. At the same time the commodity structure of exports and imports, as well as the proportion of the volume of these products, have not changed much after the establishment of the CU.
Russia has resorted to external and internal trade wars, as a way of protecting the domestic Russian market.
Low growth rates of the trade within the CU, as well as the crisis developments in the Russian economy, contribute to waging trade wars against internal and external partners on specific product lines. This supports our predictions made in March of this year.
To date, Russia is going through a difficult situation in the economy and in the public sector. The Ministry of Economic Development of the Russian Federation believes that the Russian economy is in a state of stagnation. At the same time, Moscow fears the beginning of a slump, which will lead to a rise in unemployment. The plans of the Russian government to adopt a balanced budget for the fiscal 2015 are obviously impractical. According to the estimates of the Ministry of Finance of the Russian Federation, the budget deficit in 2014 will be at 0.6 per cent of the GDP, which is 0.4 per cent higher than the figure in its earlier forecast. However, such an index will not be achieved, because the reduction of 650 billion roubles in oil and gas and other revenues is expected in 2014, while maintaining the level of expenditure. The proposal of the Ministry of Finance of the Russian Federation to the Ministry of Defence of the Russian Federation to postpone some of the costs of the state armaments program for several years in order to ensure stability of the Russian budget is indicative of problems in the public sector.
According to the Federal State Statistics Service, the GDP growth in the second quarter of 2013 was only 1.2 per cent, well below the forecast of the Ministry of Economic Development. For comparison, the economic growth in the second quarter of 2012 was 4.3 per cent over the same period of 2011. The GDP growth declined to 1.6 per cent in the first quarter of 2013. Thus, 2013 may turn out to be the worst year in terms of economic growth for the entire presidency of Mr. Putin.
Financial statements of large-scale enterprises in the Russian Federation indicate that the fall in investment since April is more than 5 per cent. This is indirect evidence and a leading indicator of pitching into recession.
It is expected that the Russian government will have to cut down on its budget. Thus, the amount of federal revenues in the first half of 2013 was 48.6 per cent of the projected amount approved by the Federal Law on the Federal Budget for 2013 and for the Planning Period of 2014 and 2015. At the same time, Moscow will try to avoid a budget sequester, which will create new political tensions in Russia.
This means that the Kremlin is interested in establishing a maximum level of protectionism and import substitution for goods from third countries and for goods originating in the countries of the Customs Union with the aim of maximum load of Russian companies, growth of budget revenues and GDP.
A similar situation can be observed in Belarus. Thus, the GDP of Belarus in January to July 2013 in current prices was 340.1 trillion roubles and increased compared to the same period last year, in comparable prices, by 1.4 per cent. The forecast for 2013, in accordance with the Decree of the President of the Republic of Belarus of 25 September 2012 No. 418, anticipates its growth by 8.5 per cent that, given the current momentum, is not possible.
Establishing of the CU has led to increase in prices of particular commodity groups. On one side this is happening due to increase in customs tariffs leading to increase in prices for commodities imported from third countries, and, from another side, due to equation of prices within the CU. As a result, Kazakhstan has to resort almost to fixing of prices for socially important commodities and introduction of state regulation of prices. There is a significant increase in primary commodities observed at the market against decrease in purchasing capacity. Thus, in the RB there is constant high inflation rate which has been 36.1 per cent according to the results of 2012.
Protectionism is able to provide a temporary boost to industrial growth within the CU. However, such measures may cause industrial upgrading of the member countries to inhibit.
So far, the protective barriers affect trade. Thus, sources in diplomatic circles in Kazakhstan linked the reduced trade performance of the country in 2012 with protective barriers set by other participants. This is particularly true for food products, in some cases, these barriers are of technical nature. Discrimination against Astana is happening in the market of alcoholic beverages, confectionery (Russian legislation allows to import only a part of the product range) and in import VAT matters. For example, the Russian-made juice relating to child nutrition falls under the rate of 10 per cent, whereas the same juice made in Kazakhstan is taxed at 18 per cent.
We would like to draw your attention to the fact that the food production sector is equally developed in Kazakhstan, Belarus and Russia. This explains the fact that Russia is creating trade conflicts primarily in these sectors.
Despite the fact that the factor of rapprochement between Ukraine and the EU is indeed present in the motives of behaviour of the Federal Service for Supervision of Consumer Rights Protection and Human Well-Being, the underlying economic causes of introduction of protective barriers by Russia are precisely the crisis of development and trade inside the CU. This is confirmed by the fact that Russia has recently banned imports of not only Ukrainian goods, but those of other countries (including EU members), as well.
Thus, on August 12, 2013, the Federal Service for Veterinary and Phytosanitary Surveillance reported on the inspection of 6 enterprises producing food of animal origin in Turkey: three of them were specializing in dairy products and other three — in fish products and seafood. On the same day the Federal Service for Veterinary and Phytosanitary Surveillance restricted imports of Fonterra (a New Zealand-based company) products because of the causative agent of botulism. On August 15, 2013, 133 Germany-based companies were excluded from the list of food suppliers “because of the numerous detections of violations of the requirements of Russia and the Customs Union during the laboratory safety monitoring and systemic deficiencies recorded during inspections of German enterprises”.
In recent weeks, Russian officials have made claims to the quality of Polish food products and to the Polish suppliers. It started with Polish pork and continued 4 days later with Polish vegetables and fruits in connection with the alleged presence of nitrates and pesticides in the imported fruit and vegetable products. At the same time, Moscow does not confirm its accusations with specific facts. It must be emphasized that the intensification of the Russian-Polish trade claims is against the background of growth of exports from Poland to Russia by 12.8 per cent (EUR 3.9 billion) in the first half of 2013, while imports of Russian goods to Poland fell by 12.4 per cent (EUR 9.5 billion). The drop was primarily due to the decline in world prices for oil and gas that Warsaw buys mainly from the Russians.
This confirms our findings that Moscow is imposing trade sanctions against its economic partners to hide and balance the negative and crisis developments in its own economy and the one of the CU, and to create the illusion of effectiveness of the Customs Union.
We would like to note that not only the Kremlin uses this tactic, but also the official Minsk.
This is clearly shown by the situation where the leadership of Belarus attempts to regain control over the export of potash without the participation of Russian business by unprecedented action against Uralkali. We would like to note also that this tactic does not add to the stability of the Custom Union, but leads to political conflicts that may ultimately affect the functioning of the Union.
No one will deter Russia in the Baltic region
Recently researchers and analysts of the RAND Corporation issued the report “Exploring Requirements for Effective Deterrence of Interstate Aggression.”
The stated aim of this report is “to provide a fresh look at the subject in this context, with two primary purposes: to review established concepts about deterrence, and to provide a framework for evaluating the strength of deterrent relationships.” Chapter Four of the report is called “Deterring Russia in the Baltic Region” and presents analysis of security challenges in the Baltic States.
This particular report is interesting by the fact that it acknowledges the minimal likelihood of Russia’s military aggression in the Baltics. It is more than strange when take into account the previous report that insisted on high level probability of Russian aggression. This time experts consider the situation to be less dangerous for the Baltic Region.
According to the RAND Corporation analysts, Russia does not consider the Baltic States to be a strategically important region for itself.
Therefore, despite the Kremlin’s desire to change the balance of forces in Europe in its favor, Russia does not consider “aggressive actions in the Baltic States as a tool of achieving these goals.”
The US specialists have not found evidence of preparing the invasion of Estonia, Latvia or Lithuania, and Russia’s buildup of military power on their borders.
They have made a conclusion that a more aggressive behavior of Russia towards the Baltic countries can occur in case of the anti-missile defense systems deployment on their territory.
Instead, experts recommend that the US authorities treat Estonia, Latvia and Lithuania with understanding and condescension and even take into account that their eternal anti-Russian fears are associated with difficult common historical past. In other words, they advise to rather provide moral support.
The report of the RAND Corporation cannot be treated only as a private opinion of a non-governmental organization. The findings of this center of expertise usually anticipate and justify strategic decisions made by the United States.
Thus, two years ago RAND Corporation held a war game, which revealed that the Russian armed forces need only about 60 hours to occupy the Baltic States, and NATO allies would not physically have time to help Estonia, Latvia and Lithuania. The analysis of the results of the war game was one of the rationales for deploying four multinational battalion-size battle groups on their territory.
Today, the RAND Corporation concludes that Russia does not threaten the Baltic States, and military tensions over this region can arise only if the missile defense systems are deployed. It follows logically that the further militarization of the Baltic States is explosive and undesirable.
So, the US elites as well as NATO do not want to deal with the Baltic States. They do not want to be distracted by countries that are of no importance for Russia, their main antagonist.
The first recommendation made by the analysts of the RAND Corporation in the report is “to assess the motives of potential aggressors and ease security concerns. In Europe, this could include avoiding deployment of the most provocative U.S. systems in or near Eastern Europe, thinning Russian and Baltic forces, and working on a successor to the Conventional Forces in Europe Treaty.”
In the case of military provocation in the Baltic Sea, similar to the one that occurred in the Kerch Strait, NATO, the US or the EU will not even provide the Baltic States with active diplomatic assistance, not to mention immediate military support. The RAND Corporation made this more than clear for the Baltic States.
Russian Aluminium, Health Ministry Announce Ebola Vaccine
Russian Aluminium (RUSAL), one of the world’s largest aluminium producers, together with the Ministry of Health of the Russian Federation, announced the completion of the vaccination against the Ebola virus in the Republic of Guinea. Two thousand people have received the GamEvac-Combi vaccines during the testing programme conducted at the Scientific Diagnostic Centre for Epidemiology and Microbiology (SDCEM) in Guinea.
The centre was an initiative of Russian business tycoon, Oleg Deripaska, and was built by RUSAL during the height of the Ebola epidemic in 2015. GamEvac-Combi vaccine was created in the Gamalei Federal Research Centre for Epidemiology and Microbiology of the Ministry of Health of the Russian Federation. The vaccine is currently in the final round of testing.
“As part of the testing programme, the health of the vaccinated participants and the development of the immunity are monitored for one year. At the end of this period of monitoring, the vaccine will receive international certification making it available for use by the World Health Organisation and other organizations for the purpose of preventing the spread of the disease,” according to media release.
Vladimir Putin, President of the Russian Federation, instructed the development of the vaccine following a request from the President of the Republic of Guinea Alpha Condé at the end of 2014.
In 2016, the vaccine was revealed during the World Health Assembly where the former WHO Director-General, Margaret Chen, was in attendance. The vaccine was registered in Russia at the end of 2015.
Along with developing the vaccine, RUSAL, as part of the public-private partnership supported by Oleg Deripaska, opened a research centre, an isolation ward and a hospital in Guinea. RUSAL’s commitment to fighting the epidemic was acknowledged by the Russian Minister of Foreign Affairs, Sergey Lavrov, who thanked RUSAL’s shareholder, Oleg Deripaska, for his contribution to the international effort against Ebola.
The strong relationship that RUSAL has established with the Republic of Guinea is something that Oleg Deripaska often speaks about. He recently highlighted RUSAL’s commitment to helping the population of the country hit by the virus; “When the outbreak of the fever came, we made every effort to help”, said Oleg Deripaska.
“Currently the vaccine is administered to the Russian medics and other specialists going to the regions where there is a high risk of Ebola contagion”, said Veronika Skvortsova, the Minister of Health of the Russian Federation. “During the Ebola outbreak, the centre has shown the best results in terms of the number of Guinean persons wholly recovered: 62.5% of the SDCEM patients with a confirmed Ebola fever diagnosis have been successfully treated”.
The advantages of GamEvac-Combi vaccine
The vaccine was developed using a biotechnology method without using the pathogenic Ebola virus. The base of the vaccine is the genetic material of an adenovirus and vesicular canker virus, safe for humans, modified with a gene containing the information about the structure of the GP protein of the Ebola virus.
Pre-clinical and clinical studies have proven the safety of the vaccine and have shown that it stimulates the immune system more efficiently than foreign vaccines. Another important advantage of the vaccine is its more favourable transportation and storage conditions: GamEvac-Combi can be transported and stored at the temperature above -16◦C – and similar foreign vaccines require the temperature of less than – 60 ◦C for storage, which is difficult to implement in the hot African climate.
The SDCEM centre, that will continue to do medical examinations for the Guinean population, is the most advanced and biologically safe facility in the Western Africa. The centre was created in line with all international humanitarian organizations’ recommendations and is equipped with modern medical and laboratory equipment. RUSAL invested more than US$10 million in the construction of the SDCEM.
Currently, SDCEM is the leading centre in the field of investigating and preventing infectious diseases in Guinea. It also serves as the training facility for the national epidemiologists.
RUSAL has been active in Guinea since 2001 being one of the largest foreign investors in the country. In Guinea, RUSAL owns Kindia Bauxite Company (KBC) as well as the bauxite-alumina facility Friguia. RUSAL continues implementing projects to launch the world’s largest bauxite mines Dian-Dian in Boké region.
Putin, United Russia and the Message
On Dec. 8, Russian President Vladimir Putin took part in the plenary meeting of the 18th United Russia party congress, reiterated the key challenges, problems and accomplishments for the nation. The congress delegates identified the challenges and priorities in the party’s work for the coming year.
Putin acknowledged the party’s support during his presidential election campaign, saying it was “a momentous thing shaping the top institution of power” in Russia. This concerns the president, the government, the region – any level, down to the local or municipal one.
Putin further referred to an action plan that was presented in a condensed form in the Executive Order in May 2018 and that set out in national projects drafted by the Government (the majority in the Government are United Russia members) and was supported by legislators (United Russia holds the majority in the State Duma). He pointed to the fact that there would not be any success without United Russia’s backing at the regional and municipal level.
“The United Russia party plays a special role. For a number of years the party has been showing its competence, its ability to make responsible decisions, explain these decisions to the people,” Putin told the party delegates during his address, while acknowledging frankly that there have been pitfalls and problems in the political leadership.
Leadership means making responsible decisions the country needs. This leadership is an enormous resource to achieve dynamic and substantive change that can ensure a radical improvement in the quality of life and greater well-being of the population.
Putin reminded the party meeting that the entire world going through a dramatic situation. In his words: “the world is undergoing a transformation, a very powerful and dynamically evolving transformation, and if we do not get our bearings, if we do not understand what we need to do and how, we may fall behind for good.”
He suggested that United Russia with its tremendous legislative, organisational and human resource potential must fully utilise it and consolidate all of society, in solving development issues, in implementing the nationwide agenda.
Putin told the party delegates never allow any sort of rudeness, arrogance, insolence towards people at any level – at the top level and the lowest, municipal level. This is important because it does the country a disservice, it is unfair to the people and it denigrates the party to the lowest of the low. The public demands fairness, honesty and openness.
What is “society” after all? It is the people. Thus, one key factor here is that people’s opinions and attitudes must necessarily be taken into account. There must be commitment to implementing people’s initiatives, and their initiatives must be used in attaining common goals, especially at the municipal level, according to the Russian leader.
The most crucial thing for a political party is a steady standing of its representatives and that United Russia does not have to fear change but rather work strategically towards making a change for the better.
Putin further asked the delegates to work relentlessly for a free democratic country, development of nationwide tasks, realisation of new ideas and approaches. Discussions and competition, including within the party itself are very efficient tools for solving problems in the interests of the nation. United Russia has to do everything needed to instil both inside the party in particular and in society in general this political culture, an atmosphere of dialogue, trust and cooperation with all political forces of Russia.
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