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

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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