KAZAKHSTAN: WTO NEGOTIATOR AITZHANOVA CONFIRMS DECISION

UNCLAS SECTION 01 OF 02 ASTANA 001005 SENSITIVE SIPDIS STATE FOR SCA/CEN, EEB STATE PLEASE PASS TO USTR E.O. 12958: N/A TAGS: PGOV PREL ECON ETRD WTRO RS BO KZ SUBJECT: KAZAKHSTAN: WTO NEGOTIATOR AITZHANOVA CONFIRMS DECISION TO PURSUE WTO ACCESSION AS CUSTOMS UNION REF: (A) O'MARA-AMB HOAGLAND JUNE 11 EMAIL (B) ASTANA 0497 ¶1. (U) Sensitive but unclassified. Not for public Internet. ¶2. (SBU) SUMMARY: Kazakhstan's lead WTO negotiator, Vice Minister of Industry and Trade Zhanar Aitzhanova, told the Ambassador on June 11 that the decision by Kazakhstan, Russia, and Belarus to launch joint WTO accession negotiations as a customs union was made at the top political level, and now the technocrats have to find a way to implement it. Had Kazakhstan's own WTO accession negotiations proceeded more quickly, the decision might have come out differently. WTO accession remains a "big priority" for Kazakhstan -- and neither Kazakhstan nor Russia want to "throw away" the accession agreements they have already negotiated -- but to make the customs union work, it is simply not possible for the three countries to pursue accession individually, Aitzhanova argued. Explaining the importance of the custom's union, she stressed that Russia is a huge market for Kazakhstan, and thus the Kazakhstanis need to be strategic about Russia-Kazakhstan economic relations. There needs to be better coordination with Russia on industrial development and economic diversification policies, and Kazakhstan has to focus on ensuring its open access to the Russian market. Aitzhanova and Russia's lead WTO negotiator will travel to Geneva next week to officially inform the WTO about the decision and discuss how to proceed. END SUMMARY. DECISION MADE AT POLITICAL LEVEL ¶3. (SBU) The Ambassador met on June 11 with Kazakhstan's lead WTO negotiator, Vice Minister of Industry and Trade Zhanar Aitzhanova, to discuss Russian Prime Minister Putin's June 9 public announcement and Kazakhstan's official notification to us (ref A) that Kazakhstan, Russia, and Belarus will suspend their WTO accession negotiations as individual countries and instead launch joint WTO negotiations as a customs union. The Ambassador explained to Aitzhanova that as far as he understood, there is no mechanism for a customs union to accede to the WTO without its member states doing so individually. He urged that Kazakhstan keep its options open and not formally withdraw its WTO application. ¶4. (SBU) Aitzhanova responded that the decision to launch joint WTO negotiations as a customs union was made at the political level, by the countries' leaders, and now the technocrats have to find a way to implement it. Had Kazakhstan's own WTO accession negotiations with the United States proceeded more quickly, the decision might have come out differently. WTO accession remains a "big priority" for Kazakhstan -- and neither Kazakhstan nor Russia wants to abandon the many WTO accession agreements they have already negotiated. However, as a practical matter, the customs union's common tariff regime will come into force on January 1, 2010, and a trilateral commission will be making decisions on foreign trade relations for the customs union. For all the elements of the customs union to work, it is simply not possible for the three countries to individually pursue WTO accession, Aitzhanova maintained. RUSSIAN MARKET CRITICAL FOR KAZAKHSTAN ¶5. (SBU) Explaining the importance of the customs union, Aitzhanova stressed that Russia is a huge market for Kazakhstan, and Kazakhstan is very dependent on Russia's economic and transport infrastructure. Thus, the Kazakhstanis need to be strategic about Russia-Kazakhstan economic relations -- which means better coordination of the two countries' industrial development and economic diversification policies to ensure complementarity. According to Aitzhanova, this coordination does not mean Soviet-style central planning; on the contrary, the private sector has to decide what will be produced. Instead, the issue is ensuring Kazakhstani access to the Russian market -- which is essential, because Kazakhstani producers cannot be competitive by simply meeting domestic demand. "For the private ASTANA 00001005 002 OF 002 sector, open access to the Russian market is more important than the WTO," Aitzhanova maintained. Open access to Russia should also encourage foreign investment in Kazakhstan, she added. ¶6. (SBU) Aitzhanova said that these latest developments should not really be surprising. "The idea of Eurasian economic integration is President Nazarbayev's -- because of economic realities and the region's integrated infrastructure and common markets. So this is not really new. The surprise is not the customs union, but rather the developments with WTO accession." KAZAKHSTAN, RUSSIA TO OFFICIALLY INFORM WTO ¶7. (SBU) Aitzhanova said that she and Russia's lead WTO negotiator will travel with a small team to Geneva next week for meetings with the WTO Secretariat and the WTO working parties. At that time, they will officially inform the organization about the decision on joint accession and discuss how to proceed. She said that she would speak with USTR and invite someone from Washington to attend. Aitzhanova conceded that the WTO Secretariat had already informed her that there is no provision allowing a customs union to accede to the WTO without its member states doing so individually. "We may have to ask the WTO to change this," Aitzhanova added. (NOTE: Aitzhanova seemed to admit that the Kazakhstanis misunderstood a provision permitting accession of customs territories as applying to customs unions. She explained, "Now we understand that this means customs territories within countries, like Chinese Taipei," rather than customs unions composed of several countries. END NOTE.) She confirmed, however, that she does not have instructions to formally withdraw Kazakhstan's WTO application in Geneva. GREATER POLITICAL WILL FOR CUSTOMS UNION ¶8. (SBU) Aitzhanova reiterated that neither Kazakhstan nor Russia wants to undermine the many accession agreements they have already finalized. The only agreements Kazakhstan has not finalized are major ones with the United States, European Union, and Saudi Arabia, and less significant ones with Ecuador, El Salvador, and Chinese Taipei. But negotiations with the United States and European Union have been difficult, Aitzhanova argued. "There has been stronger political will for the customs union, because the three presidents very much want it. We don't feel the same strong political will (from the United States and Europe) on the WTO. We hear political statements in support of our WTO membership, but this doesn't filter down to the technical level," she explained. HOAGLAND