An update on the Customs Union.

Alexander Lukashenko delayed and stalled until the last possible moment but the Customs Union took off after all. Moscow refused to buckle in the face of oil duty blackmail and the issue is far from being resolved. Lukashenko makes it plain that he just might change his mind yet.

The Customs Code comes into effect on the territories of Russia, Belarus, and Kazakhstan on July 6, Russian President Dmitry Medvedev said in Astana when summits of the Eurasian Economic Community and Customs Union there were finally over. Customs control will be eased on the Russian-Kazakh and Russian-Belarussian borders. Customs posts will be abolished on July 1, 2011.

Customs Union summit took place on Kazakh President Nursultan Nazarbayev’s birthday. Nazarbayev met with Lukashenko on Monday night and persuaded him to waive objections, or so it seems. Medvedev and Lukashenko had no tete-a-tete meetings.

Taking his sweet time, Lukashenko made a formal announcement concerning ratification of the Customs Code on Saturday. This announcement finally revealed composition of the international structure. Minsk’s principal objection with regard to the Customs Union concerned Russian oil export duty within its borders. Senior Deputy Premier Igor Shuvalov said yesterday that Belarus keeps insisting on oil export duty abolition. Russia and Kazakhstan are of the opinion meanwhile that every Customs Union member retains the right to collect export duty pending eventual establishment of a common economic area. “I’d like to emphasize that this is not an opinion of the Russian Federation alone because Kazakhstan thinks so too,” said Shuvalov. Lukashenko would not take the bait yesterday. “Any union of sisterly nations ought to be a blessing. Time will tell,” he said.

Official Minsk might find consolation in the knowledge that it got upper hand on another moot issue. Russia gave consent to preservation of a low duty on second-hand foreign autos imported by private citizens (this particular regime will remain in force at least until July 1, 2011). Together with oil duty, this issue was of paramount importance for Belarus where auto duty is fairly low. The same benefit was reserved for Kazakhstan as well. Strict auto re-sale rules were introduced to prevent a massive inflow of cheap foreign autos into the Russian market.

According to Aleksei Portansky of the Supreme School of Economics, ratification of the Customs Code as such by Belarus could not be expected to put an end to squabbles. Minsk will keep badgering the Kremlin for oil export duty abolition. “The reasoning is simple. The Belarussians decided that stifling objections for the moment was potentially more rewarding,” he said. The expert added that performance of the Customs Union was going to be uneven, at least at first. The Customs Code includes a good deal of references to acting national legislations. Also importantly, Russia never passed a law on customs regulations.

“Customs Union norms concur with WTO requirements. The joint working team will continue doing its job,” said Shuvalov. He added that Russia might settle all moot points regarding its individual entry into the WTO within the next few weeks. What entry tactics the rest of the Customs Union preferred would then remain something for their presidents themselves to decide.

The alliance of the three post-Soviet countries might evolve into an alliance of five. Presidents of Tajikistan and Kyrgyzstan Emomali Rakhmon and Roza Otunbayeva told journalists in their respective capitals that they were contemplating membership in the Customs Union too.