08ASTANA2570, KAZAKHSTAN: CUSTOMS UNION WITH RUSSIA AND BELARUS

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Reference ID Created Released Classification Origin
08ASTANA2570 2008-12-30 10:44 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Astana

VZCZCXRO6997
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW
RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW RUEHROV
RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHTA #2570/01 3651044
ZNR UUUUU ZZH
O 301044Z DEC 08 ZDK
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4236
INFO RUCNCIS/CIS COLLECTIVE 0987
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0387
RUEHKO/AMEMBASSY TOKYO 1093
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC 0462
RHEHNSC/NSC WASHDC 0559
RHEFAAA/DIA WASHDC
RUEAIIA/CIA WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ASTANA 002570 
 
DEPT FOR SCA/CEN, EEB 
PLEASE PASS TO USTR 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EFIN RS KZ
SUBJECT:  KAZAKHSTAN:  CUSTOMS UNION WITH RUSSIA AND BELARUS 
THREATENS WTO ACCESSION BID 
 
REF:  ASTANA 2445 
 
1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
2.  (SBU) SUMMARY:  Kazakhstan's WTO negotiator told the Ambassador 
on December 24 Kazakhstan is ready to accelerate WTO accession 
negotiations with the United States.  However, the international 
financial crisis is making some Kazahstani officials more hesitant 
about the theoretical benefits of globalization.  Instead, they see 
immediate and tangible benefits from a possible near-term customs 
union with Russia and Belarus.  Aitzhanova acknowledged joining the 
customs union could dramatically slow - or derail - Kazakhstan's WTO 
accession.  We know Russia has long opposed Kazakhstan's WTO 
membership before its own accession.  The new customs union, if 
Kazakhstan follows through, as it currently seems likely to do, 
would be a convenient way for Moscow to limit Astana's sovereignty. 
To sell a WTO agreement to the president and prime minister, 
Aitzhanova said she will need concessions from the United States, 
especially on banking and financial services.  She expressed 
exasperation that USTR has not yet provided working-party report 
comments from the June meeting in Switzerland.  She added she also 
needs a full agricultural package and a description of services. 
END SUMMARY 
 
3.  (SBU) During a two-hour working lunch on December 24, the 
Ambassador told Vice Minister of Industry and Trade and WTO 
negotiator Zhanar Aitzhanova he had heard in September USTR is ready 
to accelerate work on Kazakhstan's WTO accession and then heard in 
early December from Kazakhstan's Ambassador to the United States 
Erlan Idrisov that Kazakhstan is eager to move forward on WTO.  He 
passed Aitzhanova an edited version of the talking points USTR had 
provided for this meeting. 
 
4.  (SBU) Aitzhanova responded that there is indeed political will 
on both sides to move ahead, but, as a negotiator, she knows that 
political will doesn't always translate into action.  Because of the 
world financial crisis, "the terms are more important to us than the 
speed - what matters is the substance of the deal."  She said Prime 
Minister Masimov and President Nazarbayev continue to insist on the 
best deal possible with clear evidence of concrete benefits for 
Kazakhstan.  Without adequate concessions from the U.S. side, she 
said, she will not be able to sell them the deal.  Further, the 
financial crisis is increasing political opinion in Kazakhstan to 
avoid more international economic integration.  "Not everyone is 
convinced we should go global," she said, noting that Kazakhstan's 
banking sector is dangerously exposed to the international financial 
crisis because of large-scale foreign borrowing. 
 
WILL CUSTOMS UNION WITH RUSSIA TRUMP WTO? 
 
5.  (SBU) The Ambassador cited press reports that Kazakhstan is 
preparing documents for April 1 to become a member of a 
Russia-Belarus-Kazakhstan customs union, and asked if this could 
derail Kazakhstan's WTO negotiations.  At first, Aitzhanova 
cautioned the United States not to see this as a threat but as a 
political signal that the concept of enhanced regional economic 
integration for protection against international economic shocks 
might supersede calls for increased global collaboration. 
Eventually, she acknowledged that formation of the customs union 
would have a real impact on Kazakhstan's WTO bid and would force 
renegotiation on multiple levels.  She remarked that the customs 
union presents tangible and immediately recognizable benefits that 
appeal to decision makers, whereas WTO accession's benefits are 
future and potential. 
 
6.  (SBU) Aitzhanova suggested that if U.S. WTO negotiators offered 
no further concessions by April 1, 2009 - the date that a common 
tariff agreement is due for the proposed customs union - it might be 
hard to argue for WTO accession's precedence over the formation of 
the customs union.  "I am constantly asked by our leadership why 
U.S. political support for our WTO accession is not translating into 
actual progress.  When I show them the costs of the agreements, they 
say 'no.'  To them, the benefits of the customs union are clear, 
 
ASTANA 00002570  002 OF 002 
 
 
while the benefits of WTO membership remain theoretical." 
 
"THE BALL IS IN YOUR COURT, NOT OURS" 
 
7.  (SBU) Aitzhanova refuted USTR's view that "the ball is in 
Kazakhstan's court," and said she is still
 waiting for USTR's 
comments on the working-party report from their last meeting in June 
in Switzerland.  "The sooner we get it, the sooner we can start," 
she added.  She lamented that the United States is slower in its 
responses than her other negotiating partners like Australia, the 
European Union, and Saudi Arabia.  She said she is eager to 
accelerate WTO negotiations with the United States, but will be 
unavailable the first three weeks of January because she will be in 
New Delhi finishing bilateral work in preparation for President 
Nazarbayev's official visit to India at the beginning of the third 
week of January. 
 
8.  (SBU) When asked what the United States can do concretely to 
prepare for renewed negotiations, she said Kazakhstan needs the 
working-party report comments from June, a full agricultural 
package, and a description of services to be negotiated.  Most 
important, regarding the banking and financial services sector, 
"Kazakhstan does not want anything that will further jeopardize us 
at home - flexibility on your part is essential.  This is our 
political reality." 
 
9.  (SBU) COMMENT:  In early December, Kazakhstan's ambassador in 
Washington, Erlan Idrisov, told the Ambassador some in Kazakhstan 
fear Russia is trying to lock CIS countries into the customs union 
to control their WTO accession (reftel).  We know Russia has long 
opposed Kazakhstan's WTO membership before its own accession.  The 
new customs union, if Kazakhstan follows through, as it currently 
seems likely to do, would be a convenient way for Moscow to take 
advantage of the international economic crisis to limit Astana's 
sovereignty.  END COMMENT. 
 
HOAGLAND

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