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Holding-Together Regionalism: Twenty Years of Post-Soviet Integration

Authors: Alexander Libman, Evgeny Vinokurov

Publisher: Palgrave Macmillan UK

Book Series : Euro-Asian Studies

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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About this book

An in-depth analysis of one of the most important and complex issues of the post-Soviet era, namely the (re-)integration of this highly interconnected region. The book considers the evolution of 'holding-together' groups since the collapse of the Soviet Union in 1991, looking at intergovernmental interaction and informal economic and social ties.

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Table of Contents

Frontmatter

Introduction

1. Introduction

Abstract

Within a single generation, the post-Soviet political, economic and social landscape has changed immensely. New structures — ranging from national power structures to a completely new economic reality based on the market instead of centralized planning — have come into existence. As 20 years have passed since the break-up of the Soviet Union in 1991, it seems like the right time to provide an overview, analysis and explanation of one of the most important and complex issues of the post-Soviet era, namely the (re-)integration of this highly interconnected region.

Alexander Libman, Evgeny Vinokurov

Basic Concepts

Frontmatter

2. Searching for Holding-Together Integration

Abstract

The following seven chapters of Parts I and II provide a comprehensive theoretical framework for holding-together regionalism and its application to the post-Soviet area. They also cover a number of issues relevant to post-Soviet political economy. Readers more interested in the practical issues and implications of regionalism will find these in Parts III and IV of this book. Chapter 4 on institutional integration is essential reading in that it provides a concise overview and analysis of 20 years of post-Soviet integration.

Alexander Libman, Evgeny Vinokurov

3. The Dynamics of Holding-Together Integration

Abstract

Establishing the differences between HTI and coming-together regionalism in terms of their origin and development is not an attempt to draw conclusions regarding the comparative evolution of HTI. Both HTI and coming-together regionalism aim to establish or to maintain a certain level of economic openness and political cooperation between countries; they are subject to similar external factors and forces (and, as aforementioned, they can be united by a shared history). Therefore, if it were possible to demonstrate that HTI and coming-together regionalism react identically to identical external influences, there would be no need to differentiate between these two types in an empirical study. Any differences ought to be related to the strength of these external forces rather than to the specific characteristics of the type of regionalism per se. The aim of this chapter is to suggest hypotheses to predict differences in the responses of HTI and coming-together regional projects to identical external factors. The three main areas of difference to identify are as follows:

reaction to negative external economic shocks;
sequence of the various stages of integration;
the extent to which the regional integration is politicized.

Alexander Libman, Evgeny Vinokurov

Post-Soviet Integration

Frontmatter

4. Institutional Integration: Twenty Years of Post-Soviet History

Abstract

Post-Soviet regional integration, as it has evolved over the last two decades, represents a blend of various institutional rules, arrangements and organizations, partly contradicting each other and with different membership. This is not a coincidence. For unlike European regional integration, for example, regionalism in the FSU developed from the outset as an accommodation of the many and often extremely divergent positions and interests of the former Soviet republics.

Alexander Libman, Evgeny Vinokurov

5. Economic Actors and Regionalization

Abstract

Chapter 4 concentrated primarily on the dynamics of regionalism in the FSU. However, as we stated in the introduction, another aspect of regionalism, which does not necessarily coincide with the development of formal intergovernmental arrangements, is regionalization based on the interaction of (primarily economic) actors at the micro level. There is very little research on this topic, partly because regionalization is much more difficult to grasp empirically: unlike regionalism, which is ultimately characterized by a limited number of international agreements and organizations, regionalization develops through multiple channels and is based on interaction of numerous agents. Nevertheless, as we explain in what follows, regionalization seems to be much more successful than regionalism in the FSU.

Alexander Libman, Evgeny Vinokurov

6. Convergence and Divergence of Economic and Social Development

Abstract

Our analysis so far provides a highly heterogeneous picture of economic integration in the post-Soviet space. Formal regionalism seems to perform relatively poorly, and there are significant differences between the individual ‘holding-together’ initiatives. With regionalization, different sectors and different economic and political links also generate substantially different results. However, we have based our discussion so far on the key assumption that surviving Soviet economic and social links are significant for the countries of the former Soviet Union, or, in other words, that the FSU comprises ‘interdependent countries’. It is worth questioning whether this assumption is valid: in order to validate our analysis of the FSU in terms of ‘holding-together regionalism’, we must focus on the dynamics of internal links between countries in the region, that is, whether countries move closer to each other or diverge economically, politically and socially. This is especially important to any assessment of the future potential of regional integration.

Alexander Libman, Evgeny Vinokurov

7. The Political Economy of Post-Soviet Integration

Abstract

So far we have concentrated on documenting and describing regionalism and regionalization in the FSU. We turn now to an analysis of the underlying factors which shape these processes and attempt to answer three key questions. Firstly, why does FSU regionalization outperform FSU regionalism so significantly (particularly since the literature suggests that institutional homogeneity and economic interdependence should enhance cooperation)? Regionalization encompasses the economic links emerging at the microlevel, which could potentially create demand for regionalism, that is, intergovernmental cooperation, both from economic actors (who are more interested in removing barriers to trade and investment, if the links are substantial) and governments (which become more interested in controlling and regulating these important ties). Secondly, how does this argument relate to HTI as we have defined it in this book? And finally, given that FSU regionalism has been so unsuccessful in economic terms, why has it survived? Specifically, why do countries continue to engage in integration rituals, even though their partners are unlikely to agree to the arguments they present? Why is there no evidence of a ‘trigger mechanism’ whereby countries switch from cooperation to non-cooperation?

Alexander Libman, Evgeny Vinokurov

8. Sub-National Actors in Post-Soviet Integration

Abstract

Our discussion has repeatedly stated that the post-Soviet area is extremely heterogeneous in terms of its economic and political development. Moreover, it comprises large countries — Russia, Kazakhstan, Ukraine and Uzbekistan — with very significant internal differences. So even territories within individual states are dependent to differing degrees on their links with the FSU. During the 2000s, for example, the proportion of their total foreign trade which individual regions of Russia transacted with the FSU varied from almost nothing (Chukotka) to more than 60 per cent (Altai). Given these variations, sub-national governments are likely to have different preferences regarding post-Soviet regional integration (both regionalism and regionalization).

Alexander Libman, Evgeny Vinokurov

Key Areas

Frontmatter

9. Holding Together or Falling Apart: Results of the Gravity Equation of CIS Trade

Abstract

Following our general discussions in Part II, we go on to examine specific areas of cross-border interaction between FSU countries. We begin by looking at the most traditional area of economic cooperation — cross-border trade. Our objective is to examine the survival of former Soviet economic ties — whether the FSU countries still maintain significant trade links with each other, or, conversely, have they moved to trading more actively with extra-regional countries. Literature so far has documented a decline in internal trade while nevertheless claiming that trade was still too extensive vis-à-vis the predictions of the gravity model (a kind of ‘inverse border effect’) even where the terms of trade were less attractive. We re-examine this problem by applying a very recent dataset and estimating the gravity model for trade relations within the CIS.¹

Alexander Libman, Evgeny Vinokurov

10. Cross-Border Investment: General Trends through the 2000s

Abstract

As already mentioned, FDI seems to be one of the most successful areas of regionalization in the FSU. Investments are difficult to capture statistically. Nevertheless, abundant anecdotal and indirect statistical evidence¹ suggest that Russian and Kazakh multinationals have indeed expanded their presence in the FSU in the last two decades. This process has been, as with almost all other elements of post-Soviet regionalization and regionalism, unequally distributed across various sectors and countries. In this chapter, we take a closer look at the dynamics of outward direct investments of the largest post-Soviet countries in the economies of their neighbours.

Alexander Libman, Evgeny Vinokurov

11. Financial Markets and the Banking Sector

Abstract

Our discussion has focused so far on FDI in the manufacturing and service sectors of the economy. Now we turn our attention to the CIS financial sector. In this chapter,¹ we review the scope and limits of potential financial integration and proposed initiatives. Financial markets became the focus post-Soviet countries’ ambitions in the late 2000s: Russia and Kazakhstan almost simultaneously launched international financial projects (though these differed somewhat in scope and in the tools they employed). Kazakhstan’s project, a Regional Financial Centre in Almaty, failed to survive the crisis of 2007–09. Although a similar project to create an International Financial Centre in Moscow remains high on the agenda, its feasibility and scope have been questioned.

Alexander Libman, Evgeny Vinokurov

12. Trans-Eurasian Transport Corridors

Abstract

In the following chapters, we examine three key infrastructure sectors for which cross-border economic ties are crucial – transport infrastructure, electric power infrastructure and telecommunications. We begin by exploring the transport sector, focusing on the economies of the transcontinental east-west and north-south transport corridors in the post-Soviet area.¹ We combine analysis of economic interaction with analysis of the various institutions involved. Transportation is particularly important for post-Soviet regionalism: not only because access to global markets is a serious problem for many landlocked FSU countries but also because transport potential represents a kind of ‘public good’ from which many FSU could benefit by making the transport corridors available to extra-regional actors. This public benefit, however, can only come through international cooperation. As in any situation where society at large stands to benefit, there are strong incentives to deviate from the optimal level of cooperation; therefore, regional cooperation as a mutual commitment device is crucial.

Alexander Libman, Evgeny Vinokurov

13. Towards a CIS Common Electric Power Market

Abstract

The electric power sector in the post-Soviet area is strongly influenced by specific elements of HTI. Unlike the EU, North America, South America, Southeast Asia and other macroregions moving towards a common electric power market, the USSR already had a single system, which was founded on a highly centralized and highly efficient administration. As well as physical infrastructure, the CIS countries inherited a single set of technical standards from the USSR. Today, measures are being taken multilaterally to increase international energy supply and transmission in the CIS.

Alexander Libman, Evgeny Vinokurov

14. CIS Telecommunications Sector: The Rise of the Multinationals

Abstract

Having looked at electricity, which is a classic example of a sector which ‘holds together’ regional integration, we turn to the telecommunications sector, in which the direct impact of Soviet heritage is very limited, but where regionalization in the FSU has been highly successful. It is the dynamism of private companies that has driven the development of this sector and its transborder links. The telecommunications sector represents a showcase of corporate integration across the post-Soviet area, again driven by private Russian companies aiming to become true multinationals.

Alexander Libman, Evgeny Vinokurov

15. Agriculture in the CIS: Departing from the Soviet Past

Abstract

Another sector in which an entirely new development trend has emerged in post-Soviet countries since the disintegration of the USSR is agriculture. It is well known that the Soviet Union had been a net importer of grain since the 1960s. Ten years after embracing market economics, several post-Soviet countries had evolved into full-scale agricultural exporters with a strongly competitive position on the market. In the case of agriculture, therefore, potential co-operation between post-Soviet countries could be driven by considerations other than the cultural similarities or infrastructural interdependence previously discussed (though these arguments also have a role to play). Firstly, post-Soviet countries depend upon each other geographically for grain exports: for example, Kazakhstan has to rely on the infrastructure of Georgia, Russia and Ukraine to access global markets. Secondly, post-Soviet countries trade in similar commodities and, therefore, have incentives to cooperate to benefit from their monopoly power. We review below the main areas of interdependence.

Alexander Libman, Evgeny Vinokurov

16. Labour Migration

Abstract

The huge increase in migration in the post-Soviet space represents one of the most surprising changes of the last decade. For the last two decades, five CIS countries — Armenia, Kazakhstan, Moldova, the Kyrgyz Republic and Tajikistan — have been among the nations with the highest emigration rates in the world. Tajikistan, the Kyrgyz Republic and Moldova are also among the top 10 countries in the world in terms of their ratio of migrant remittances to GDP. The migration corridors between Russia and Ukraine, and Russia and Kazakhstan, are among the world’s top 10 migration corridors, with Russia being the second destination (after the United States) and third origin country in the world.

Alexander Libman, Evgeny Vinokurov

An Intertwined Region

Frontmatter

17. The Foreign Policies of Russia and Kazakhstan: Post-Soviet Regionalism and Power Balance

Abstract

The emergence of regional integration groups in the modern world is to a great extent an outcome of the permanent interaction of two processes: contagion and competition between integration projects. On the one hand, ‘integration breeds integration’ in the neighbouring regions. On the other hand, multiple integration projects often (if not always) have some overlap in actual or potential membership, leading to permanent competition between regional integration initiatives. For HTI, the impact of competition is, possibly, even stronger than for coming-together projects: HTI as ‘regionalism by default’ is likely to comprise extremely unwilling members who are, generally speaking, searching for their place in the world economy through interaction with other states or integration groups. In order to evaluate any integration project’s current and potential development, it is necessary to assess the geographical foci of the foreign policies of key countries in the project. This is what we intend to do in this chapter, looking at the two most likely promoters of post-Soviet integration – Russia and Kazakhstan.

Alexander Libman, Evgeny Vinokurov

18. Post-Soviet Space, Central Asia and Eurasia

Abstract

The nature of holding-together regionalism dictates the initial composition of countries participating in a regional agreement and establishes borders which participants perceive as being, in some senses, natural and reasonable. This has probably been less applicable to former African colonies but is extremely pronounced in case of the FSU. The post-Soviet space inherited its borders from the Russian Empire: almost all nations of the FSU (with the exception of Western Ukraine, which has been part of the Hapsburg monarchy) have been part of a single state for at least one and a half centuries. However, as we have already described, these initially ‘natural’ spaces lose their coherence over time. This then erodes the foundation for the HTI. The situation is somewhat better in Africa, where post-colonial regionalism partially coincided with existing geographical borders between parts of the continent (these borders did not necessarily reflect cultural and religious divisions, but that is also true for the borders between independent states). In the post-Soviet space, which comprises countries with very different cultures and which lean towards different extra-regional poles of influence (Turkey, the EU, China, Romania and so on) the problem of fragmentation will have a fundamental impact on HTI.

Alexander Libman, Evgeny Vinokurov

19. Issues for the Next Decade

Abstract

As we approach the conclusion of this book, we summarize a few of the issues that will — or should — appear high on the agenda in the years to come. In Chapter 18, we described the status and role of post-Soviet integration in the context of the wider Eurasian continental integration (this issue is the subject of Eurasian Integration: Challenges of Transcontinental Regionalism, published by Palgrave Macmillan). We have also provided some insight into the most complex sub-region of the post-Soviet space, Central Asia. Below, we highlight further issues affecting the development of regional integration in the post-Soviet space, its intensification and expansion, how trade integration in the region can be fostered, its compatibility with other regional integration initiatives and its relations with the global trade integration and WTO accession.

Alexander Libman, Evgeny Vinokurov

20. Conclusion

Abstract

Post-Soviet integration has been a permanent feature of political debate in the FSU for the last two decades but seems to have received only limited attention in academic literature. This may at first have been due to the expectation that old Soviet links would soon disappear. Post-Soviet regionalism seemed to be an artificial concept, associated with permanent integration rituals, but demonstrating no real progress in terms of intergovernmental cooperation. Rapidly increasing migration and investment interaction in the 2000s and the establishment of the Customs Union challenge this perception: regionalism in the post-Soviet space is alive and well and is certainly able to influence government policy. It is therefore deserving of scholarly investigation — which we attempt with this book.

Alexander Libman, Evgeny Vinokurov

Backmatter

Title: Holding-Together Regionalism: Twenty Years of Post-Soviet Integration
Authors: Alexander Libman
Evgeny Vinokurov
Copyright Year: 2012
Publisher: Palgrave Macmillan UK
Electronic ISBN: 978-1-137-27113-6
Print ISBN: 978-1-349-33774-3
DOI: https://doi.org/10.1057/9781137271136