Economic Relations between Kazakhstan and Russia

Economic Relations between Kazakhstan and Russia

about the treaty's member states, which may damage relations between them.

— The Council for Education, Culture, and Science. The formation of

coordinated policy on education, promotion of cultural and scientific

cooperation and exchange, and joint activity on compiling textbooks and

manuals.

— To achieve a deeper coordination and effectiveness of the activities of

the EAU countries, it is deemed advisable to set up in each of them a State

Committee (or Ministry) for EAU Affairs.

— Regular meetings and consultations on health services, education, labor,

employment, culture, combating crime, and so on, by ministers of EAU

countries.

. Encouraging the activities of non-governmental organizations in

various areas of cooperation in accordance with EAU member

countries' national legislation.

— The Russian language is the official EAU language, functioning side

by side with the languages of legislation in the member nations.

— Citizenship. Free movement of citizens within EAU borders requires

coordination of external visa policy with regard to third nations. On

changing the country of residence within the EAU, an individual

automatically receives the other country's membership.

— One of the cities at the juncture of Europe and Asia, such as Kazan or

Samara, might be proposed as the capital of the EAU.

In order to create a unified economic space within the EAU framework, it is

proposed to establish a number of supranational coordinating structures:

— A commission on the economy under the Council of EAU Heads of State

to work out the main directions of economic reform within the EAU

framework; the commission takes into consideration the interests of the

national states and offers its proposals for endorsement by the Council of

the EAU Heads of State;

— A commission on the raw materials of the EAU exporter countries to

coordinate and endorse the prices and quotas for exported raw materials and

fuel and energy resources, an appropriate inter-state agreement to be

signed by the member countries; coordination of policy in the mining and

sale of gold and other precious metals is to be envisaged;

— A fund for economic and technological cooperation formed with EAU

members' contributions. The fund will finance promising science-intensive

economic, scientific, and technological programs and render assistance in

the solution of a wide range of problems, including legal, tax, financial,

and ecological issues;

— A commission on inter-state financial-industrial groups and joint

ventures; — an EAU international investment bank;

— An inter-state EAU court of arbitration on economic problems, to resolve

conflicts on a legal basis and to impose sanctions;

— A commission on the introduction of a clearance monetary unit (transfer

ruble).

It is proposed to implement a number of measures to preserve the potential

achieved in the previous decades and to enhance integration in the field of

science, culture, and education:

— The setting up of common EAU research centers to carry out fundamental

research in contemporary knowledge;

— The setting up of an EAU fund for the development of scientific research

to unite the scientific collectives from various countries;

— The setting up of a committee on links in the field of culture, science,

and education under the Council of the Heads of EAU Governments;

— Encouragement of the formation of non-governmental associations in the

sphere of culture, education, and science;

— The setting up of a grants fund under the EAU Executive Committee.

It is proposed to conclude the following accords on defense within the EAU

framework:

— A treaty on joint actions to strengthen the national Armed Forces of the

EAU member countries and to protect EAU external borders.

The EAU will establish a unified defense space to coordinate defense

activities:

. The formation of joint peace-making EAU forces to maintain

stability and eliminate conflicts within the member countries

and between them. The sending of peace-making forces to conflict

areas on EAU territory - with the agreement of EAU member states

and in accordance with international legal norms;

. The tabling of joint proposals by EAU member countries at

international organizations, including the United Nations

Security Council, on lending EAU joint contingents the status of

a peace-making force;

— The setting up of an inter-state center on problems of nuclear

disarmament attended by representatives of international organizations.

— All EAU states except Russia maintain their nuclear-free status.

In the area of ecology, the following mechanisms must be formed in the

nearest future, according to the EAU project:

— An ecological fund under the EAU Council of Heads of State, to realize

ecological programs within the EAU framework, to be financed by all member

states;

— Coordination of actions with international organizations to reduce the

extent of environmental pollution;

— Endorsement of short- and long-term programs for major problems of

restoration of the environment and liquidation of the consequences of

ecological disasters (the Aral Sea, Chernobyl, the Semipalatinsk nuclear

testing ground);

— The endorsement of an inter-state EAU agreement on storing nuclear waste.

The Eurasian Union of States is thus based on three principal provisions:

— Joint supranational coordinating organs for the management of the

economy, defense, and foreign policy;

— A unified economic space;

— A common defense complex.

The supranational institutions include the highest organ of political

leadership of the Union - the council of heads of state and heads of

government; the highest consultative organ, the parliament; the councils of

foreign and defense ministers;

And the interstate executive committee - a permanently functioning

executive and controlling body whose head is appointed by the heads of

government for a term which they themselves define.

As for the unified economic space, it may be built, e.g., on such a basis

as coordinating economic policies and mandatory programs; a common

legislative basis regulating relations between economic agents; a

supranational currency on the European ECU model; coordination of direct

links between enterprises; the setting up of joint and mixed industrial-

financial groups, transport firms, trade houses, and exchanges. The defense

and foreign trade complexes may be just as effective. The EAU as

represented by its executive committee must receive the status of an

authorized representative in all the leading interstate organizations of

the world.

The practical realization of the provisions of the EAU project in the

bilateral Kazakhstan!-Russian relations is excellent proof of the viability

of this program.

On January 20, 1995, a package of extremely important integration

documents was signed during the working meeting between presidents

Nazarbayev and Yeltsin. This package included a declaration on expanding

and deepening Kazakh-stani-Russian cooperation and an agreement on the

Customs Union, which was also signed by Belorussia. Both of these were

discussed in detail before. This last agreement opens the way to the

establishment of a unified customs space to be followed by a unified

economic space, as envisioned in the EAU project.

With the setting up of the Customs Union, the economic cooperation of

the three countries is built on the principles of free, non-discriminatory

trade; a common market of commodities, services, capital, and labor; and

close interaction in the production, investment, and financial spheres.

At present, the first stage in the formation of the Customs Union is

largely completed. The work done by the three sides is generally recognized

to be an important element of the realization of the foundations of the

Economic Union and the formation of the common market of CIS countries.

The legal acts on tariff and non-tariff regulation of foreign trade have

been unified. Kazakhstan and Russia have signed an agreement on unified

control of customs services. An agreement has also been reached on the

identity of trade procedures in both countries in relation to third

nations, and unified procedures have been introduced on the customs

statistics on foreign trade and customs registration of commodities subject

to excise. Customs controls on railroads and passenger air traffic between

the two countries are lifted step by step.

A treaty has been signed between the Republic of Kazakhstan and the

Russian Federation on joint efforts on the protection of outer borders, the

term “outer borders” taken to mean the sectors of the border between our

countries and the states that are not part of the CIS. The edict of the

president of Kazakhstan dated September 19, 1995 On the Lifting of Customs

Control on the Border between the Republic of Kazakhstan and the Russian

Federation concludes the first stage in the formation of the Customs Union

and orders the implementation of joint customs controls on the Kazakhstan

and Russian sectors of the outer borders of the Customs Union.

At the second stage of the formation of Kazakhstani-Russian-

Belorussian economic efforts to form a customs union, the most important

areas of cooperation are a closer coordination of economic reforms;

harmonization of civil and economic legislation; unification of currency,

tax, and price regulation by the state with the aim of leveling out the

economic and legal conditions for the activities of commodity producers

within a unified customs space; working out coordinated positions of the

members of the Customs Union in relations with third countries and

international organizations. At the meeting of heads of CIS countries in

November 1995, three more countries stated their desire to join the Customs

Union: Kyrgyzstan, Uzbekistan, and Tajikistan. Later, only Kyrgyzstan went

through with the necessary procedures and entered the Customs Union.

Another example of collaboration in the field of integration is the

agreement on the Baikonur space vehicle-launching site, which makes it

possible to use this great scientific and technological facility in the

interests of Russia and Kazakhstan, as well as documents on the issues of

citizenship signed by the presidents of Kazakhstan and Russian.

Let us consider in somewhat greater detail the problems of

citizenship, of which the solution on a bilateral basis was also outlined

in the draft project of the EAU.

Issues of citizenship became particularly prominent at the time of the

emergence and building of sovereign independent states after the

disintegration of the USSR, when tens of millions of former Soviet citizens

overnight ended up outside their "historical homelands." This problem is as

topical for Kazakhstan and Russia as for other CIS countries. More than

that, it often figures as one of the most important issues of bilateral

relations with Russia.

The more acute aspects of this problem were lifted as a result of the

signing in January 1995 by the presidents of Russia and Kazakhstan of a

treaty on the legal status of citizens of both countries living on the

territory of the other state and of an agreement on simplified procedures

for acquiring citizenship in moving from one country to another. Well-known

specialists from the two countries worked fruitfully on these documents.

Authoritative Kazakhstan! and Russian politicians and jurists believe that

these are innovative agreements without parallel in the world, and they are

a fairly rare example of regulating bilateral issues on a civilized basis.

The importance of these agreements both for progressive development of our

countries and for normal life of the citizens of Kazakhstan and Russia

cannot be exaggerated.

These documents envisage the introduction of maximally simplified

procedures for acquiring citizenship and for movement without visas; they

also offer possibilities for contract work and military service; assert the

rights of possession, use, and disposal of property; create conditions for

exchange of currency and transfer of sums of money by individuals and

corporate entities of Kazakhstan and Russia; and many other provisions

which reliably protect the rights and interests of the citizens of the two

countries.

Yet another sphere in which combining the efforts of all the

interested parties is needed is the legal status of the Caspian Sea.

The position of the Republic of Kazakhstan on this issue is based on

the need for an early drafting and signing of a convention on the legal

status of the Caspian Sea, of which a draft was worked out by the

Kazakhstan foreign ministry and sent out to all the interested states as

early as March 1994. Unfortunately, there has been no response to this

initiative for quite a long time now, and the agreement on regional

cooperation on the Caspian Sea issue is still at a standstill.

At the same time preserving this unique object of nature is a task that the

present generation must be worthy of.

The events of the recent years thus prove conclusively the need to

proceed to a new level of integration, which will fully conform to the

vital needs of the peoples. International experience shows that any

interstate association goes through various states in its development,

becoming enriched in the process with new forms of cooperation. The

Eurasian Union should be seen as just one of such transitional forms

capable of optimizing the solution of the problems facing the Commonwealth.

From the time of the publication of the draft EAU project, politicians

and scholars have been paying close attention to it. Four major scientific

and practical conferences were devoted to this subject, as were hundreds of

publications in Kazakhstan, Russia, and other states. Politicians,

scholars, and diplomats continue to study the EAU project with great

attention.

The current period in history is characterized by a radical breakdown of

the old way of life. Society now faces difficult issues, and each person is

subject to serious trials It is quite natural under these conditions that

the peoples of Kazakhstan, Russia, and other countries with an interest in

the unification of the Commonwealth will find it easier to overcome these

difficulties together. A balanced attitude toward the past, a persistent

realization of the present potential, and confidence in a more certain

future - only these things will be able to give the peoples of our

countries a natural feeling of spiritual harmony and a sense of full-

blooded life.

History is offering us a chance to enter the 21st century in a

civilized manner. One of the ways to achieve that, in my view, is the

realization of the integration potential for the establishment of the

Eurasian Union, which will reflect the objective logic of the development

of the post-Soviet space and the will of the peoples of the former Soviet

Union to achieve integration.

This is how President Nazarbayev, the author of the Eurasian project,

characterized the development of this idea and his current vision of its

future: "I still remain an adherent of integration of post-Soviet space. As

I formulated my vision of integration I laid no claims to total realization

of all the provisions of the project, being fully aware of all the

political connotations of that period. Two considerations were my primary

motivation. First, I wanted to generalize within a single whole the most

realistic proposals for further integration, which simultaneously appeared

in the countries of the post-Soviet space. Second, I wished to interrupt

the indecently drawn-out pause in the activities of the CIS institutions.

In the last two years there was movement in the CIS countries on some

issues that had been at a standstill, including

4. VITAL PROBLEMS OF THE PRESENT-DAY STATE OF KAZAKHSTANI-RUSSIAN RELATIONS

The Present State and Prospects for Economic Cooperation between

Kazakhstan and Russia.

The top priority area of Kazakhstan’s policy in foreign trade is the

strengthening of economic cooperation with Russia and consistent

integration of the economies of the CIS countries. This is determined by

the traditionally strong economic links, a high level of mutual

complementarily and interdependence of two economies of a once unified

state, the size of the commodity market and identify of economic problems

awaiting solution. “Analysis of the results of development of the economy

of the former USSR and of experiences of economically advanced nations,”

President Nazarbayev stressed, “shows that the transition to the market is

objectively necessary and historically inevitable.”

The main feature of the present-day situation in Kazakhstan is the

increasing impact of the mechanisms that have evolved in the years of

reform and a weakening of the effect of non-market factors. In the initial

stages, the underdeveloped state of such important instruments of the

formation of the market as privatization, de-monopolization, absence of a

competitive environment, were the main sources of inflation in the

republic, a worsening state of the finances of enterprisers, an acute

shortage of turnover capital, a fall in production due to falling demand

and real earnings of the main mass of the population, as well as growing

abuses in trade and banking structures.

The prevailing technological, economic and organizational standards

made a significant impact on the potential of foreign trade relations. “The

cohesion of the economic space of the former USSR was affected through

centralized state planning implemented by command-administrative

management. In the process, the country’s economy worked as a ‘single

workshop’, and not all production and economic links here were rational

from the market point of view. The transition to a market economy

throughout the economic space of the former USSR required a profound

restructuring, and this called for considerable resources and time,” Ex-

Prime Minister A.M. Kazhegeldin stressed.

The policy of liberalization of foreign trade activity and of open

economy did not result in 1993 in any growth of exports. It amounted to

$1.5 billion, thus remaining at the 1992 level. Shifts in the geography of

Kazakhstan export due to the re-orientation of foreign trade links to

industrially developed nations resulted in the strengthening of raw

materials exports. The share of machines, equipment and transport vehicles

in the export dropped to 2 percent, and the share of fuel and energy

complex and that of metallurgy rose to 80 percent. Rising domestic prices

prevented partners from concluding long-term foreign trade deals,

stimulating instead commodity exchanges. The share of barter and clearing

deals in export operations made up more than 26 percent. More than 56

percent of imports were affected through exchange of commodities. Barter

operations were mostly in the nature of structurally unbalanced exchanges.

The republic suffer considerable losses due to inadequate knowledge of the

market conditions and the desire to access foreign markets at any price.

A noticeable feature of Kazakhstan economy is the low level of the

development of machine building, which is not up to present-day

requirements, and this makes an adverse impact on other branches of the

economy, as it results in the common shortage of metal-tooling products.

This aggravates the shortage of spare parts and of products used in several

adjacent branches of industry and adversely affects the standards of

servicing.

Some of Kazakhstan most important tasks in 1994 were the closure of, and

changing production lines at, non-viable enterprises and development of

promising export-oriented ones, which also satisfy domestic demand. This

called for a set of measures to identify enterprises in the state of

depression, closing down unprofitable lines of production in energy-

consuming industries and rehabilitation and reorganization of non-

profitable production lines.

The basis of the development of Kazakhstan, just as of Russia and many

other CIS countries, is export of natural resources. In 1994, the

government introduced regulations for the licensing of natural resources,

and a law was adopted on payments for utilization of natural resources. It

was at that time that efforts were initiated to attract domestic and

foreign investors to develop the fuel and energy complex. The development

began of the Tengiz, Karachiganak, and some other oil yields at oil fields

continued to be introduced. Open – cut coal mining was expanded at

Ekibastuz, Maykubek, and Shubarkul coalfields, with the aim of reducing the

mining of coal underground at low-profit and non-profitable mines of the

Karaganda coalfields.

In the metallurgical industry, the development of production of

ferrous metals and the raw-materials basis of such production continued,

including the revamping of the Karaganda metallurgical plant with the aid

of foreign investment; its re-orientation toward the iron ore pellets of

the Sokolovsko – Saribai mining association; the development of production

of stainless steel and rolled metal and the building of an electric

metallurgical plant for the production of stainless steels in Aktobe;

further development of ferrous alloys in Aktobe and Aksu and of its raw-

materials basis –the Donskoy ore –dressing plant; the re-orientation of

idle production lines of JSC Khimprom to the production of ferromanganese.

Organizational measures were taken in 1994 to develop production of

fireproof materials.

At the same time there was a fall in the production of ferrous

metallurgy due to an aggravation of the raw materials and fuel shortage and

a parlous state of equipment at enterprises of this industry. The decline

in industrial production was to a considerable extent due to non-solvency

of enterprises in view of their insufficient financial resources, non-

payment by the buyers for products delivered, and weak financial

discipline.

The decline in non-ferrous metallurgy continued, as production of

copper, titanium, and manganese fell. To check the decline in this branch

of industry, the production lines at the Chilisai ore-dressing plant

switched to a different product; the Zyryanovsky lead plant was rebuilt,

and its commissioning was brought forward; the raw – materials basis for

the titanium industry was created, as was the Syrymbet tin field, the tin

being produced at the Tselinny chemical plant. The functioning gold mines

and ore-dressing plants were revamped, and work was accelerated to develop

major gold fields at Vasilkov, Bakyrchik, and Akbakai.

In 1994, the share of machine-building industry and machine tooling in

the overall industrial production continued to fall, amounting to six

percent. Low investment activity, non- competitiveness of the Kazakhstan

machine-building industry, limited financial consumer capacity

predetermined an almost twofold reduction volumes in most types of machine

–building branches even compared to the crisis-ridden year of 1993.

The situation was worst in the chemical and petrochemical industries,

whose production capacities far exceeded the republic’s domestic needs.

Considerable share of the product was exported to other CIS countries and

the “far abroad”, but the enterprises suffered from shortage of raw

materials, even shortages of oil, which is produced in Kazakhstan itself.

JSC Polipropilen, AKPO, Khimvolokno production association used imported

raw materials only. In 1994, the decline in most types of petrochemical

products reached 55-60 percent. Oil refining dropped by 20.3percent.

The timber, woodworking, and papermaking industries suffered from

shortage of raw materials. Between the beginning of 1993 and the end of

1994, the production of timber fell by 21 percent, and this had a negative

effect on the state of production at sawmills and woodworking factories.

The production of saw-timber, chipboard, and cardboard fell by 31.9, 59.3,

and 47.5 percent respectively, but the production of paper increased

threefold.

In 1993 and 1994, decline in production also continued in the

construction materials industry. Production of cement declined to the level

of 1973, while production of pre cast concrete products dropped to the

level of 1974. There was a considerable drop in production at enterprises

producing asbestos cement pipes and coupling (by 34.2percent), linoleum (by

40.3 percent), cement (by 61.6 percent), asbestos (by 71.2 percent), bricks

(by 78.8 percent). Production of sanitary wares dropped by 25 percent.

During the last five years, GDP volumes continued to fall, declining

roughly twofold; the greatest decline (by 25.4 percent) was observed in

1994, and in 1995 it was almost nine percent.

However, during the time of the reform considerable changes took place in

the structure of GDP: The share of services grew sharply – from 32 percent

in 1992 to 47 percent in 1995; the share of commodity production declined

by 12 percent. The volume and share of services mostly grew in the trade,

.•.

•3 • ti '

Competitiveness of the Kazakhstan machine-building industry, limited

financial consumer capacity predetermined an almost twofold reduction in

production volumes in most types of machine-building branches even compared

to the crisis-ridden year of 1993.

The situation was worst in the chemical and petrochemical industries,

whose production capacities far exceeded the republic's domestic needs. A

considerable share of the product was exported to other CIS countries and

the "far abroad," but the enterprises suffered from shortages of raw

materials, even shortages of oil, which is produced in Kazakhstan itself.

JSC Polipropilen, AKPO, Khimvolokno production association in Kustanai,

Shymkentshina production association used imported raw materials only. In

1994, the decline in most types of petrochemical products reached 55-60

percent. Oil refining dropped by 20.3 percent.

The timber, woodworking, and papermaking industries suffered from

shortages of raw materials. Between the beginning of 1993 and the end of

1994, the production of timber fell by 21 percent, and this had a negative

effect on the state of production at sawmills and woodworking factories.

The production of saw-timber, chipboard, and cardboard fell by 31.9, 59.3,

and 47.5 percent respectively, but the production of paper increased

threefold.

In 1993 and 1994, decline in production also continued in the

construction materials industry. Production of cement declined to the level

of 1973, while production of pre cast concrete products dropped to the

level of 1974. There was a considerable drop in production at enterprises

producing asbestos cement pipes and couplings (by 34.2 percent), linoleum

(by 40.3 percent), cement (by 61.6 percent), asbestos (by 71.2 percent),

bricks (by 78.8 percent). Production of sanitary wares dropped by 25

percent.

During .the last five years, GDP volumes continued to fall, declining

roughly twofold; the greatest decline (by 25.4 percent) was observed in

1994, and in 1995 it was almost nine percent.

However, during the time of the reform considerable changes took place

in the structure of GDP: The share of services grew sharply - from 32

percent in 1992 to 47 percent in 1995; the share of commodity production

declined by 12 percent. The volume and share of services mostly grew in the

trade] in banking and finances, insurance, and realty, while the share of

everyday services fell. In other words, the main trend in the changes of

macro-economic proportions was a move towards parameters characteristic of

countries with well-developed market economies. The share of consumption of

end products rose to 69 percent of utilized GDP as contrasted with 58

percent in 1993. Investment in 1995 amounted to some 30 percent of GDP.

Beginning in the second half of 1994, certain positive changes began to

occur: a decline in the rate of inflation, a growth in accumulation of

capital, a stabilization in the exchange rate of the national currency, a

decline in the banks' interests rates, and a relative growth in industrial

production.

The rate of inflation steadily declined from 4.9 in June 1994 to 3.2

percent in April 1995. The decline in production, which sharply Increased

in November 1993 through March 1994, practically, ceased in some branches

in 1994. As a result, industry as a whole grew by 0.3 percent in September,

by 1.1 percent in December, and by 1.2 percent in April. As distinct from

the previous years, a certain stabilization of production, which began in

June 1994, was accompanied by a certain slowing down rather than

acceleration of inflation.

The rate of price growth in the production and consumption sectors of the

economy in 1995 slowed down. The highest inflation occurred in January (an

increase of 108.9 percent compared to the previous month), and the lowest,

in August (102.1 percent). The annual index of consumer prices throughout

the republic was estimated at 160 percent (the monthly index, 104.3

percent, whereas the annual index of inflation of consumer prices in 1994

amounted to 1256 percent, which corresponds to a monthly inflation rate of

123.4 percent. (The annual index of production prices was at the level of

141.2 percent).

The positive dynamics in the consumer and wholesale prices was achieved

above all by harsh financial and credit policies and the government's

measures aimed at stage by stage liberalization of prices and tariffs for

commodities and services, which resulted hi a sharp reduction in the range

of regulated prices. At the beginning of 1996, only the prices of electric

power, heating, gas, passenger and freight railway traffic were regulated,

and at the local level, regulation involved prices" and tariffs of communal

services and the services of urban passenger transport.

In 1995, the monetary and credit policies were characterized by changes

in the monetary and credit instruments of the National Bank, its operations

at the inter bank credit, currency, and stock markets, and the development

of the market of state securities. Whereas hi 1994 and January 1995 the

principal instruments were centralized and auction credits, in 1995 the

emphasis shifted from state-apportioned credits to the development of

securities markets and auction credits.

The primary market of state treasury bonds actively began to develop.

The volume of trading on this market is steadily growing, with demand

exceeding supply. Toward the end of 1995, 4.3 billion tenge's worth of

treasury bonds had been issued. In September 1995, pawnshop credits were

introduced, with state treasury bonds as collateral.

The National Bank's average refinancing rate went from 210 percent in

January to 52.5 percent in December 1995. This reduction was made possible

by a considerable alleviation'' of the inflation situation.

The weighted average percentage rate for auction credits amounted in

1994 to 292.61 percent; during ten months of 1995, it went down to 103.29

percent, and in October 1995 it stabilized at the 52.56 percent level.

In 1995, the reduction in production output amounted to eight percent.

Production output fell at 44 percent of enterprises. Of the 220 most

important kinds of industrial products, production of 48 kinds increased

and that of 167, decreased. It should be noted at the same time that hi

1995 decline in production was overcome, and there was an increase in

production compared to the previous year in electric power production,

metallurgy, and in the chemical and petrochemical industries.

In 1995, the policy of liberalization of foreign trade activity

continued; distribution of export quotas was completely eliminated, and the

list of licensed export products was considerably reduced. Kazakhstan

traded with 124 states of near and far abroad.

In the framework of official aid for development, Kazakhstan received a

number of credits to the tune of $1.3 billion from international financial

organizations and individual donor countries.

One of the main types of foreign resources for the republic was direct

investment, in particular the setting up of joint ventures and foreign

enterprises. The rate of establishment of joint ventures in Kazakhstan is

fairly high. Thus, at the end: of 1990 there were just 15 of them, while at

the end of 1995 more than 2000. JVs operated in the republic, of which 500

operated on foreign capital only. Most of these were set up in the;

mining industries.

From the beginning of 1995, steadily increasing numbers of enterprises

were turned over for administration. Toward the end of December 1995,

external administration was introduced at some 20 major industrial

enterprises in various sectors. The necessary legislative basis was created

for the involvement of foreign capital in Kazakhstan.

Thus the implementation of economic policies in 1992-1995 in Kazakhstan

resulted in the liberalization and openness of the economy and the

expansion of private enterprise.

There were significant shifts in the market infrastructure. Trade and

the banking sector developed rapidly, and other financial institutions were

born - in other words, there was, progress in those spheres of the economy

that had previously; been underdeveloped but that were vital for the

functioning of the market economy.

The liberalization of foreign and domestic trade resulted in a slight

reduction of export in 1994 and early 1995 compared to the decline in the

volume of GDP. The export of commodities, mostly to CIS countries, amounted

to $13 billion in 1994 and $4.97 billion in 1995. The greatest share of

exports went to the Russian Federation — 47 percent, or $1.4 billion's

worth in 1994; in 1995, the exports amounted to $2.8 billion, including

$2.1 billion to Russia.

Russia's share in Kazakhstan's imports from CIS countries at the

beginning of 1995 was the largest - 70 percent; Turkmenistan's, 10 percent;

and Uzbekistan's, 9 percent. Of considerable significance is the fact that

more than 50 enterprises securing Russia's defense interests work on

Kazakhstani territory. All principal roads of Russia leading east and

southeast, Yuzhsib and Transsib railways included, pass through Kazakhstan.

Major Russian high voltage power lines, communications lines, and pipelines

are also connected with Kazakhstan.

As before, Kazakhstan's exports to Russia are raw materials, oil and

petrochemical products, as well as products of ferrous and non-ferrous

metallurgy.

Deliveries of ferrous metals (35.2 percent), copper and items made of

copper (15.1 percent) make up a considerable share of exports. Russian

enterprises are also the main consumers of Kazakhstan oil and petroleum

products, which amount to 40 percent of the exports of mineral products.

In 1994, Kazakhstan's imports of industrial and technical goods and of

consumer goods from the far and near abroad amounted to $3.4 billion; in

1995, the figure was $3.7 billion. The largest share of imports fell on

Russia - $1.3 billion and $1.8 billion respectively. Imports from Russia

covered 30 percent of the demand of households and the republic's

enterprises for raw materials, 70 percent of the demand for industrial

manufactured products (including 90 percent of the demand, for complex

household appliances), and more than 70 percent of the * demand for

products of the chemical and timber industries. Kazakhstan's imports from

Russia are dominated by electric; machines, equipment, mechanisms, and,

transport vehicles. Their share in over imports amounts to 70-percent.

There are also imports of considerable amounts of raw materials for the

foodstuffs industry and the foodstuffs themselves (10.2 percent), mineral

products and metals (10.1 percent), and other consumer goods (7.8 percent).

More than half of imported mineral products and non-ferrous metals come

from Russia.

The share of deliveries against convertible currency in the export-

import operations between Kazakhstan and Russia amounted to 6.5 percent of

the total volume of exports; the share of baiter operations was 32.6

percent; and the share of clearing and similar operations, 60.9 percent. In

this process, baiter deals did not as a rule result in a balanced and

equivalent exchange. Analyses of export-import barter deals in 1993-1995

shows that total exports were twice as large as imports of commodities. As

a result of these operations, considerable funds of Kazakhstan Commodity

producers annually stay in Russia.

On the whole, the results of economic development show that the

republic was close to achieving macroeconomic stabilization, that the

impact of market incentives increased, and that a new system of reference

points and motivations developed. The main problems of the critical period

of development were partially solved, but new ones emerged.

Harsh monetary and credit policies, liberalization of the domestic and

foreign markets promoted the formation in the republic of market mechanisms

for the regulations of the economy and for ensuring equal possibilities and

guarantees for all the agents of economic activity. In this situation the

possibility appeared of creating a common economic space covering

Kazakhstan and Russia, in which free circulation of commodities, capital,

and labor would be made possible.

The development of Kazakhstani-Russian relations between 1991 and 1995

showed that the two states adopted a great many documents covering a wide

range of economic issues.

The implementation of these agreements created favorable conditions for

establishing economic links between economic agents and for the development

of a common market that would be advantageous for the economic interests of

both Kazakhstan and Russia.

The relations between the two countries in the economic sphere

developed, against the background of improving multilateral cooperation:

within the CIS framework. The legal basis for this, process was the treaty

on the jetting-up of the CIS Economic Union signed on September 24, 1993.'

This document proclaimed as the main goal a voluntary, stage-by-stage re-

creation, on new, market principles of unified economic space, or common

market, with free circulation of commodities, services, capital, and labor.

On the basis of the treaty, a solid legal groundwork was created. On

October 21, 1994, an interstate economic committee was set up at a-session

of the council of CIS heads of state, and a memorandum on the main

directions of integration development of the Commonwealth of Independent

States was signed. These documents envisaged a stage-by-stage formation of

a customs union and the possibility of movement of different countries at

different speeds toward a unified economic space within the Economic Union.

A characteristic feature of the situation in the CIS is universal

recognition of the need for stepping up integration processes in the

economic interaction of CIS countries. It should be noted that, among CIS

countries, economic relations were most intense between Russia, Kazakhstan,

Ukraine, and Byelorussia, with 80 percent of commodity circulation within

the CIS taking place within these countries.

One of the basic documents on economic integration was an agreement on

a customs union between the Russian Federation, the Republic of Kazakhstan,

and the Republic of Belarus.1 Let us recall that on January 20, 1995 the

presidents of Kazakhstan and Russia, in their joint declaration on the

expansion and deepening of Kazakhstani-Russian cooperation, instructed

their governments to sign an agreement on the customs union. The heads of

governments of Kazakhstan, Russia, and Belarus signed this document.

The formation of the customs union was preceded by extensive

preparatory work aimed at harmonizing the legislative systems of the two

countries. A number of governmental and interdepartmental agreements,

protocols, and joint normative acts were signed, including those on free

trade, on a unified procedure for regulating foreign trade, on the re-

export of commodities, on the introduction of a unified procedure for non-

tariff regulation of trade with a coordinated nomenclature and volumes of

licensed and quoted commodities, on the establishment of a free trade zone,

on the unification and simplification of customs procedures, on

collaboration between customs services, on combating illegal drugs

trafficking, on the terms of maintenance of military facilities on the

territories of the two sides, and on joint security measures for the

protection of the external borders of the Customs Union. These agreements

covered a sufficiently wide range of issues, and they formed the basis for

further action.

The agreement on the setting up of the Customs Union was based on the

principles of unified customs territory of the member states of the Customs

Union and the existence of a uniform mechanism of economic regulation. It

is proposed to form the Customs Union in two stages. At the first stage,

tariffs and quantitative restrictions on mutual trade are lifted that are

envisaged in the agreement on a unified procedure for regulating foreign

trade activity of April 12, 1994; fully identical systems for regulating

foreign economic links, identical trade regulations, common customs tariffs

and non-tariff measures for regulating relations with third countries are

introduced. At this stage, work is envisaged on the unification of

legislation on foreign trade, customs, currency, finances, tax, and of

other laws bearing on foreign trade activities.

Agreements on the Customs Union envisage the possibility of

introduction of coordinated time restrictions on mutual trade in case of

shortages of commodities on the domestic market, acute payment deficit, and

other circumstances.

The countries assumed the obligation to establish unified control over

their customs organs and organize joint supervision of the movement of

commodities and transport vehicles on the borders. The procedures for such

supervision are regulated by agreements between the customs organs of the

states involved.

The agreement on the Customs Union is open to all other CIS member

states that will recognize the provisions of the agreement and express a

readiness to fulfill them in their entirety.

The joint statement was in effect an agreement on coordinated moves for

further realization of economic reform and creation of a uniform mechanism

for regulating the economies based on market principles. It set the task of

unification of legislation on foreign trade, customs, currency, finances,

prices, taxes, and other economic laws ensuring free development of

production links and of enterprise, as well as equal possibilities and

guarantees for economic agents of the three states.

In that document, the heads of the governments of the three states

noted the considerable progress in the creation of possibilities for a real

formation of a customs union on the basis of agreements and protocols

signed. The sides agreed that tariff and quantitative restrictions on

mutual trade will be lifted through the setting up of fully identical

systems of regulation of external economic links, unconditional guarantees

for effective joint protection of the external borders of the member states

of the Customs Union, and establishment of identical trade procedures,

common customs tariffs, and measures for non-tariff regulation with respect

to third countries. It was stressed that the development of foreign

economic links will be promoted by the stage-by-stage formation of a

clearing union to ensure continuous clearing on the basis of mutual

convertibility of national currencies and formation of an effective payment

system.

An agreement was reached to render state support to the development of

direct links and cooperation between enterprises, to the establishment of

financial-industrial groups, formation of favorable conditions for mutual

access and protection of investment, and acquiring real estate,

Measures were outlined for the formation of a common

scientific/technological space for a more rational utilization of the

available intellectual, scientific, and technical potential.

State delegations headed by deputy heads of governments take part in

regular monthly sittings of the commission. These sessions consider the

implementation of agreements, analyze the state of affairs in the practical

formation of the customs union, and coordinate joint measures.

At the same time each side set up its own national sections of the

intergovernmental commission on the customs union. Five groups were set up

in the framework of each national commission to cover the following areas:

1. Creation of the Customs Union. Solving tasks in the realization of a

mechanism for the establishment, of a. free trade zone; working out

normative acts for the unification of currency, financial, and general

legislation; preparing proposals for the introduction of unified procedures

for foreign trade regulation and an identical customs tariff, for

coordinating a unified procedure of customs control, for working out an

agreement on unified management of customs services, and so on.

2. Harmonization of legislative systems to coordinate the legal basis

of agreements with agreements already achieved and to eliminate

discrepancies in the economic legislative systems of the states, and to

solve other issues.

3. Realization of the provisions of treaties; of friendship,

cooperation, and mutual assistance; preparation of draft agreements and

documents on freedom of movement, citizens' legal status, conversion,

mutual debts of enterprises, and on military cooperation.

4. The development of production and enterprise. Taking coordinated

measures for economic reforms, preparing agreements on scientific and

technological cooperation, investment activity, state support of

enterprises participating in joint financial-industrial groups.

5. In the area of finances and payment relations: the organization of

work on providing regular quotations for the national currencies, on the

setting up of a network of currency exchange points, on concluding an

inter bank agreement on mutual access to domestic markets of authorized

banks, on working out a common mechanism for currency regulation and

control, on unification of taxes and their size, on the methodology of

price formation, and so on.

Practically all issues have been resolved in. the framework of the

three countries on non-tariff regulation of foreign trade activity; work

on the unification of normative legal acts in this area has been

completed. The partners came to an agreement on the procedure for

registering contracts on exports of strategically important commodities.

Work is being completed on the establishment of unified operation

modes in trading with countries and on re export of commodities.

Apart from bilateral agreements, the Customs: Union also relies on a

number of multilateral agreements and conventions adopted by the CIS

Countries, including The Foundations of Customs Legislation, A Unified

Methodology for the Customs Statistics on Foreign Trade, On the Movement of

CIS Countries' Citizens Through Their Territories Without Visas, On

Guarantees for the Rights of Individuals Belonging to National Minorities,

On the Establishment of a Unified System of Air Defense of CIS Member

States, and On Legal Aid and Legal Relations in Civil, Family, and Criminal

Cases.

Thus the main principle on which the Customs Union is founded is the

existence of a unified customs territory and a uniform mechanism for

regulating the economy, based on unified legislation.

Toward the end of 1995, significant changes occurred in the trade and

economic relations of Kazakhstan and Russia. The agreement was revised on

trade and economic relations; the emphasis was made on the development of

direct links between producers, which resulted in a considerable increase

in the exchange of products. In 1995, trade between Kazakhstan and Russia

amounted to $319 billion, or 54 percent of the total volume of the

republic’s trades, an increase of 55.4 percent on the same period in the

previous year. Exports amounted to $2.1 billion, which made up 42 percent

of the total volume of Kazakhstan export; exceeding the 1994 figures by a

factor of 1.5. Imports reached the $1.8 billion mark, or 49 percent of all

imports, exceeding the 1994 imports by 66 percent.

Work on the formation of the Customs Union can thus be seen as one of

the main achievements in the field of economic integration of Kazakhstan

and Russia. A breakthrough was achieved in the establishment of a common

market. The three countries established a unified customs zone and

eliminated controls at their internal borders. Close businesslike links

were established between the customs services.

The Customs Union brings tangible results to each of its members. The

overall volume of trade between the CIS countries outside the Customs Union

continued to fall, while the lifting of custom barriers enabled Kazakhstan,

Russia, and Byelorussia to considerably increase commodity circulation.

In October 1995, the heads of the governments of Russia, Kazakhstan,

and Byelorussia issued a joint appeal to the governments of CIS member

states to join the triple union. Running somewhat ahead of the story, let

us note that in March 1996 Kyrgyzstan joined the customs union.

At the same time progress in the development of bilateral economic

relations is checked by a number of problems, notably by chronic nonpayment

of mutual debts. Kazakhstan's debt for electric power received from Russia

grew almost threefold in 1995. In turn, Russia owed a large sum to

Kazakhstan for the coal from Ekibastuz.

Serious possibilities are sometimes missed for successful cooperation

between enterprises in the fuel and energy complex, in metallurgy, and

other branches of the economy of Kazakhstan and Russia. Close production

links became established between the Orskneftegazsintez JSC and the

Aktyubinskneft JSC, which form the Orenburg JSC. Early in 1995, the

management of these associations conducted mutual consultations and decided

that a joint oil company must be set up.

In Russia, the formation of financial-industrial groups went on at an

increasing pace. The results of their work in 1995 show that integration of

industrial and banking capital had a positive impact on economic

development.

Further effective economic cooperation between Kazaklistan and Russia

calls for systematic analysis and work on a mechanism of control over the

implementation of bilateral Kazaklistani-Russian treaties and agreements.

The following tasks should in our view be singled out in the field of

economic cooperation between Kazaklistan and Russia that are of mutual

interest and call for coordinated decisions of the governments:

a) Stabilization of export of raw materials and subsequent increase in

it as a basis for the growth of currency earnings for the

modernization of production;

b) Diversification of exports;

c) Additional currency and investment resources for restructuring the

economy;

d) Support for active trading policy on CIS countries' potential

markets;

e) Moderate protectionism in relation to newly created import-replacing

production lines.

Under these conditions the two countries will have to solve new

problems in economic integration in the framework of the Customs Union and

in the system of world economic links, in searching for additional

financial resources necessary for the implementation of economic

restructuring and their balanced growth, in defending the interests of the

domestic market from unfavorable conditions in the world economy and from,

foreign competition at the stage of stabilization of their economies.

In choosing a promising export and import specialization, Kazakhstan

and Russia should give preference to commodities that are least susceptible

to market fluctuations. To achieve this, it is necessary to conduct regular

analysis and forecasting of the situation on the markets for the principal

import and export commodities, favoring long-term agreements on their

purchase/selling over one-off deals.

In the medium-term perspective, transition should be effected from

restrictive policies to encouragement, consistently facilitating the

formation of a progressive, structure of exports and creating a

corresponding system of its state support.

Analysis of export/import operations of foreign trade companies and

enterprises shows that, in the absence of combined controls over exports

and currency and of an obligatory norm of currency sales, 1 all export

earnings reach the republic. According to Kazakhstan specialists

calculations, some $0.6-0.8 billion end up on the accounts of Kazakhstan

enterprises in the countries of near and far abroad. According to Russian

experts, corresponding figures for Russia range from $5 to $17 billion. In

this connection, one of the main tasks of management of foreign trade

activities of the two states is the setting up of systems of customs

control over export and import contracts and banking control over currency

earnings, investments, and other commodities.

In future, it is advisable to step up coordination of information

systems of control over repatriation of currency earnings by the customs

bodies and the banking system, which will permit a concentration of efforts

on securing maximum currency earnings from exports.

It is advisable to restrict the decisive role of the state in foreign

economic activity to internationally recognized standards, to be

implemented in accordance with the rules and norms of the World Trade

Organization.

It is also advisable, in a situation of considerable reduction of the

share of state property, to export and import commodities in state

interests only within the framework of intergovernmental agreements, which

must not include any privileges or tax or duty exemptions. For this

purpose, the possibility is created for domestic purchases on a competitive

basis.

The state policy of selective protection in relation to promising

exporting industries and conquering foreign markets gradually becomes one

of the main priorities of economic policy as a whole; it is called, upon to

prepare the implementation of a really proactive export policy, without

which it is impossible to ensure either the payment of foreign debts, or

internal financial stabilization, or investment activity and employment.

Another important task is the achievement of favorable trading

procedures-in relations with foreign countries and their trade and economic

groups, organizations, and unions, as well as the lifting of existing

discriminatory restrictions, and prevention of new ones, with regard to the

member states of the customs union.

To solve this task, plans are made to work consistently and

purposefully toward the entry of Kazakhstan and Russia in the World Trade

Organization, to harmonize our countries' legislative systems with

international norms and principles, and to implement the agreement on

partnership and cooperation with the European Union and agreements with

other countries.

Formation of new economic relations with states of the near abroad will

require a longer that previously believed period of time and a gradual and

coordinated advance toward generally accepted international norms of

organization.

The future economic policy of Kazakhstan in relation to Russia and the

countries of the near abroad must have the following goals development and

rationalization of cooperative economic links in terms of minimizing

expenditure and increasing competitiveness;

— The utilization of transit communications serving the export/import

commodity flows from Customs Union members to third countries;

— Cooperation and coordination of CIS countries' efforts in the

restructuring of production and in optimizing the distribution of

production forces. An active economic policy in relation to countries of

the near abroad is seen as one of the levers for the rehabilitation of the

economy and creating conditions for its upward swing.

Particularly important in the economic relations of Kazakhstan and

Russia is the creation of conditions for establishing horizontal links

between agents operating on the market, the use of new forms of economic

cooperation, such as joint ventures, transnational production, commercial,

and financial structures, and of financial-industrial groups.

Thus the entire course of economic cooperation between Kazakhstan and

Russia and its present state show that there is no alternative to close,

mutually advantageous, and constructive relations between the two

countries. As the two largest countries of post-Soviet space possessing

great natural resources, production potential, and a desire for

cooperation, Kazakhstan and Russia are quite capable of solving the tasks

they face in reforming the economy and achieving the level of economically

developed countries.

Present-day economic science and practice show that economic

integration is the absolute imperative of the future.

CONCLUSION

The analysis, in terms of history and political science, of the birth

and development of new, sovereign states at the end of the 20th century,

considered here in dynamic interaction with the development of other

states, leads us to a number of significant conclusions.

The formation of interstate relations between the Republic of

Kazakhstan and the Russian Federation is an example of synthesis of mutual

relations between two equal agents of international law. Considering the

unique situation and the entire context of ongoing processes, these

relations may be seen as a considerable contribution to the world political

and juridical experience.

An in-depth analysis of the causes of the disintegration of the USSR

was not the goal of the present study; besides, as President Nazarbayev

pointed out, it is difficult and even practically impossible to understand

everything that is connected with this event, which had such stupendous

consequences. However, it is possible to outline the objective and

subjective characteristics of this historical event.

Among the objective factors, economic causes must above all be pointed out.

The rigidly conservative plan-and-command system of the country's economy,

carrying the unbearable burden of the military-industrial complex and

serious structural unbalance, could not meet the real challenges of the

present level of development of the world economy - the postindustrial

resource- and energy-saving revamping of the economy and a breakthrough in

information technology. The inevitable nationality problems that

accumulated in the ethnically diverse Soviet Union called for considerable

attention and timely response to the challenges in this area. Perestroika

suddenly made these challenges topical almost overnight, but it couldn't

provide an adequate solution of the problems within the framework of a

unified state structure. The Novo-Ogarevo project proved Utopian in view of

its goal of achieving a consensus among nearly forty of its participants.

It is no secret that Russia played an integrative role, being a kind

of backbone in the genesis and architecture of the unitary state.

Considering its actual political and economic weight as the most powerful

republic of the Union, it is easy to understand the centrifugal effect of

the separation of the Russian Communist Party from the Communist Party of

the Soviet Union and the subsequent declaration of the sovereignty and

independence of the Russian Federation.

Among other factors, the subjective element also played a role in the

disintegration of the USSR. This element could be analyzed in terms of

persons and situations, but this is not of the greatest importance for the

purposes of the present study.

The dialectical development of Kazakhstani-Russian relations in the

process of the sovereignty of Kazakhstan showed the correctness of the view

of this process as a consequence of the disintegration of the USSR and

subsequent objective course of events in the post-Soviet space. It is

important to stress, in the context of our study, the consistent efforts of

President Nazarbayev of Kazakhstan aimed at developing integrative

processes in the relations between Kazakhstan and Russia and in the

Commonwealth of Independent States.

In turn, the declaration of sovereignty was only the beginning of a

complex process of real sovereignty for the post-Soviet countries. Using

Kazakhstan as a model, we tried to analyze the serious and comprehensive

work that had to be done, and will still have to be done, to achieve a

normal, civilized entry of the Republic in the international community. The

formation of the new Kazakhstan statehood occurred against the background

of an all-round political and economic reform of society. Despite many

complicated and contradictory processes, the country's leadership

endeavored therefore to act on the basis of scientifically well-founded

programs and concepts capable of providing the Kazakhstan is with real

reference points, the nearest tactical goals, and general strategic

objectives in this far from simple transition period.

The instituting of the post of president of the republic, the elections of

the first head of the Kazakhstan state, the constitutional reform, the

formation of a full-fledged parliamentarian system in the country were the

landmarks of the development of Kazakhstan as a sovereign independent

state.

The parliamentary system developed in Kazakhstan as a significant part

of a general political reform; it went through many political conflicts and

problem situations.

The Supreme Soviet of Kazakhstan, consisting of 360 deputies elected in

1990, was far from perfect. It should be remembered, however, that it was

this parliament that adopted the most important state acts on sovereignty,

independence, and the presidency; under this parliament, political reform

began, and new market laws were discussed and adopted. The deputies of this

parliament nurtured the idea of a professional, compact, and effective

highest legislative organ of the country working on a permanent basis.

The first professional parliament of Kazakhstan, numbering 177

deputies, was elected in March 1994. Its fate was contradictory and

dramatic. Though elected for a term of four years, this Supreme Soviet was

not quite ready for routine legislative work; besides, there were

significant violations of procedure during its election, and it was

therefore dissolved on a decision of the Constitutional Court in March

1995.

The country's political parties and movements took an active part in

the elections in December 1995 of a new parliament consisting of two

chambers, the Senate and the Mazhilis. Compact and professional, the new

parliament is, in the view of many jurists and politicians, quite capable

of fruitful legislative work and is absolutely in keeping with the

democratic principle of the division of powers.

The constitutional process in the republic also developed in a dynamic

way. This process consistently, step by step opened up new areas of the

rule of law, which corresponded to the vital periods in the development of

the republic. The path traversed from the first Constitution of sovereign

Kazakhstan, adapted in January 1993, to the Fundamental Law of the country,

adopted at a referendum in August 1995, is the path of progressive dynamic

legislative movement, of which many parameters corresponded to the

standards of developed democratic states.

Decisions on a wide range of problems in interethnic relations, the

dynamics of their development from the Forum of the Peoples of Kazakhstan

and the rise of national-cultural centers to the convocation of the

Assembly of the Peoples of Kazakhstan made it possible to conduct, in this

most difficult period in the building of the Kazakhstan state, all-round

socioeconomic and political reforms largely due to the preservation of

interethnic accord, civic peace, and goodwill of the peoples of Kazakhstan.

There is no need to emphasize the importance of Russia as a magnitude

of world order and Kazakhstan's closest neighbor. It is known all too well

what complex, and at times painful, political, economic, and social

processes took place, and are still taking place, in both states. During

the hundreds of years of cohabitation on vast adjacent territories,

Russians and Kazakhs have accumulated, despite certain differences in their

culture, traditions, and religion, a wealth of experiences in good-

neighborly relations.

The historical community, interdependence, and inter-connectedness of the

two countries' economies form the basis of Kazakhstani-Russian relations.

Of great significance is the geopolitical aspect of the relationship

between Kazakhstan and Russia as the two biggest states of the region,

which largely affects the general climate of the Eurasian subcontinent.

President Nazarbayev repeatedly stressed that Russia is our main

strategic partner, and the special relationship with Russia helps in the

solution of the most important current and long-term tasks in the

development of Kazakhstan. It may be stated today that a qualitatively new

level of relations is now taking shape in the relations between Kazakhstan

and Russia, characterized above all by the beginning of a practical

realization of the high integration potential accumulated in the public

consciousness of the two countries. It is tills area in Kazakhstan's

foreign policy, one that provides the key to the formation of a new shape

of the Kazakhstan state and is closely connected with the policy of

integration, that is an absolute priority for Kazakhstan.

Under the new historical conditions, the stable and dynamic development

of Kazakhstani-Russian relations rests on a serious legal basis. That basis

is the treaty of friendship, cooperation, and mutual assistance between the

Republic of Kazakhstan and the Russian Federation dated May 25, 1992, as

well as treaties and agreements signed in the course of the first official

visit of President Nazarbayev to Russia in March 1994 and his working

meeting with President Yeltsin in January 1995. As a follow-up to these

fundamentally important agreements, a whole series of intergovernmental

documents, agreements, and memorandums were signed which regulate the

relations between concrete ministries and departments.

However, the everyday practical experiences of bilateral cooperation

show that the joint efforts of the two countries must be constantly kept

up. Closer integration, especially in the economy and in the humanitarian

sphere, is necessary in the interests of democratic reform both in

Kazakhstan and in Russia. The process of further elaboration and

coordination of new agreements does not therefore cease. Recent years have

seen continuous meetings of heads of ministries and departments, government

delegations, and groups of experts to consider bilateral issues.

A considerable share of the economic potential of Kazakhstan and Russia

is employed in supporting production in the two countries. In recent years,

integration links have dynamically developed not only on the interstate

level but also between individual regions and enterprises. Besides, our

peoples are linked by centuries-old spiritual and cultural ties, as well as

by kinship and purely human relations, which must be constantly reinforced.

That is why the policy of integration is a principled line of conduct for

Kazakhstan leadership. "On the question of priorities," President

Nazarbayev commented, we must stress the vast importance of relations with

the Russian Federation. The effective factors here are the interdependence

of the economies, historical affinity, and demography. The two countries

are simply doomed to good-neighborly relations and collaboration. This

collaboration must be based on equal rights and mutual advantage, if we

have in mind the strategic goal of consolidating our common economic,

defense, humanitarian, information, and educational space.

Various aspects of economic and financial relations, problems in state

security and military-strategic cooperation, and humanitarian problems may,

as practical experience has shown, be positively resolved only if mutual

interests are taken into account, and if there is a conscious desire for

fruitful and mutually advantageous cooperation.

On March 28, 1994 a package of 23 treaties and agreements were signed,

five of them by the heads of state. These are, above all, the treaties on

further deepening of economic cooperation and integration, on military

cooperation, an agreement on the main principles of using the Baikonur

launching site, and a memorandum on the issues of citizenship and legal

status of citizens of the two countries.

These steps are in keeping with the integration efforts of our states

in the CIS framework, too. The ground has been laid for the economic and

settlement unions, and the Interstate Economic Committee - the Economic

Union's coordinating and executive committee - has begun to operate in

Moscow.

Other agreements, which significantly increase the horizons of

multilateral and bilateral cooperation, also promote the progress of the

Commonwealth toward new integration successes. Apart from the trade and

economic ones, agreements on cooperation in the sphere of defense also

belong here.

While noting the high level and rate of development of Kazakhstani-Russian

relations, it must be said that, both in previous times and nowadays,

unresolved problems naturally remain. There is a certain stage-by-stage

approach in foreign policy due to objective differences between the two

countries in their view of priorities in the phases of declaration,

establishment, and consolidation of sovereignty and independence.

The historical experiences of good-neighborly relations between

Kazakhstan and Russia and the solid relations of strategic partnership in

the present inspire confidence that the peoples of Kazakhstan and Russia

will enter the 21st century in a dignified manner.

LIST OF USED SOURSES

1.Mansurov. T. “Relationship between Kazakhstan and Russia”, 1998, /p.p178-

250/

2. Esengalin. N. “ External Economy” 1999, /p.p 12-45/

3. Peter Bophinger. “Kazakhstan 1993-2000” 2001, /p.p171-184/

4. Luts Hoffmann. “ Kazakhstan During the Transition”1998, /p.p202-235/

5. World Bank “Annual Report” 1998, /p.p 252-259/

6. World Bank “Annual Report” 2000, /p.p153-159/

7. National Agency of Statistics “Semiannually Report”2001 /p.p 159-175/

8. Hella Engerrer “Research of relationship between Kazakhstan and Russia

during the Transition” 1999 /p.p 25-50/

9. Katerina Dittmann “Tendency of Economic Development of Kazakhstan”, 1998

/p.p 89-123/

10. Todaro “Transition in CIS countries 2001 /p.p 25-31/

11. Mishkin “Relation Between Russia and CIS Countries 2001 /p.p 23-30/

12. Krugman “International Economies” 2001/2 /p.p 31-35/

13. EBRD “Annual Economic Report ” 2001, /p.p 123-159/

14. Daniel Gross “Economic Transition in Former Soviet Union” 1995 /p.p 145-

160/

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