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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