The CIS Common Electric Power Market

Trade in electric power and mutual investments are at a low level and do not correspond with the sector’s potential. The CIS is a net exporter of electric power, but the actual volumes of import and export are small. CIS countries are capable of more, having large coal and gas reserves with huge potential for energy production, vast hydropower potential, and competitive advantage in power engineering. In spite of the considerable revival during recent years, mutual investments remain at a low level and are characterised by a one-sided structure. Power markets (power industry, hydrocarbons, coal, uranium) are specific: it is necessary to combine a complex approach to fuel and energy balance with functional integration in these unique markets. In the 2000s, the EurAsEC began work on creating a common power market (CPM). It goes without saying that, at the level of conception, power markets must be regarded as interrelated, which allows the implementation of the principle of comparative advantages in the process of integrating different countries. Alongside this, power industries may form separate markets with their own specific regulations. The idea of a common power market, which is the basis of the systematic work of the EurAsEC, inadequately reflects the peculiarities of the power industry. In our opinion, the subject that should be considered is the creation of a number of common markets, such as: an electric power market, an oil and gas market, and a coal market. The creation of a uranium market may then follow. In spite of their evident dependence on each other, each of these markets is very specific and consequently should be regulated independently Creating a common power market entails a number of solvable problems. The completion of the liberalisation of the Russian market, which is the biggest, networked market of the CIS, is one of the most important preconditions for the development of a common power market. In general, the integration of the power market is dependant on the institutional peculiarities of the national electric-power industry in the key countries. Despite this, if an optimal regulative environment is established, a common power market can still be created even with the preservation of a considerable presence of public companies in the generation and distribution of energy. Advancement towards a continental Eurasian common power market is economically rational. Russia and its neighbours are interested in Eurasian integration, which would not be constrained by the boundaries of the post-Soviet space. The very logic of a CPM urges us to go beyond the boundaries of the post-Soviet area. Russia and Kazakhstan are keen promoters of the CPM, as are a number of other CIS countries including Armenia, Azerbaijan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Ukraine and Belarus. Practically all of the CIS countries could gain real advantages as exporters and transmitters of electric power if real electric energy market mechanisms are introduced, thereby dealing with countries of Eurasia such as China, Iran, India, Turkey and EU countries. A CPM for Eurasia would develop gradually, founded on a number of bi- and multilateral agreements.post-Soviet space; electric power market; economic integration

Nuclear Energy Complexes: Prospects for Development and Cooperation

1. 2005–2006 was a critical period in the development of the nuclear complexes of Russian Federation and the Republic of Kazakhstan. These years have ushered in a “nuclear renaissance”. Russia’s nuclear sector was subject to a total systemic review; the Federal Target Program (FTP) allocated to it funds totaling more than USD 55 billion. A decision was taken to consolidate all nuclear assets within one state corporation. Kazakhstan implemented the “15000 tons uranium by 2010” state development program. Its development programs for reactors and nuclear power plants are worked out jointly with Russia. Closer cooperation is also being pursued with other leaders in the field, primarily Japanese companies. Cooperation agreements between the two countries were adopted. The foundation of three joint ventures (JV) was the first tangible outcome of above agreements. 2. Meanwhile Kazakh uranium has become a focus of attention and fierce competition between the world’s largest consumers, including France, Canada, USA, Japan, China, South Korea, and Russia. Early this decade, Russia’s substantial production capacity and highly competitive uranium ore conversion technologies added to calls for the country to renew its economic links with Kazakhstan in the uranium mining and nuclear industries. Given Russia’s ambitious plans to develop nuclear energy, and the fact that its uranium stocks are practically depleted, the benefits of closer cooperation with Kazakhstan are clear. However, Russia will have to compete with well-established players on Kazakhstan’s uranium market. 3. Kazakhstan has aspirations to become a world leader in uranium mining and to focus production at the highly processed end of the nuclear fuel cycle. This was the backdrop for a recent transaction which will have a significant impact on the country’s nuclear industry. In the autumn of 2007, KazAtomProm purchased Toshiba’s 10% share in Westinghouse Electrics, a leading producer of nuclear reactors, for USD 540 million. This transaction has secured a permanent nuclear alliance between KazAtomProm, Toshiba and Westinghouse Electrics. For Kazakhstan, this creates new opportunities to develop a hi-tech nuclear industry and to market its output in the West. Supplying high-end nuclear products to Western markets is one of KazAtomProm’s development priorities, along with continued cooperation with Russia in supplying Soviettype reactors. 4. The need to integrate the nuclear power complexes of Kazakhstan and Russia along the entire production chain is a logical response to their urgent need to reduce their energy deficit, and to the synergies which exist between their production capacities and technologies at each stage of the nuclear fuel production chain: (1) uranium mining, (2) uranium enrichment, (3) production of fuel pellets and fuel elements, (4) reactor design and production, primarily 300 MW VBER-300 power reactors, (5) construction and operation of nuclear power plants, and (6) nuclear waste processing and disposal. 5. Kazakhstan has plans to develop its own nuclear power industry and is likely to base this on 300 MW Russian-Kazakh reactors and, in the longer-term, 1000 MW Westinghouse reactors. 6. The development of this capital-intensive sector will require extensive financing based on credit from a number of sources. International and national development banks are one promising potential source of such funding. The ability to secure this capital from international and national development banks rests entirely upon the nuclear energy industry’s potential for development, innovation, diversification and integration. The Eurasian Development Bank, VEB (Russian Development Bank) and the Development Bank of Kazakhstan have indicated their recognition of this. E.g., the EDB has extended credit to the Russian-Kazakh Zarechnoye JV.nuclear industry, economic cooperation, economic development, Russia, Kazakhstan, Eurasian Economic Community, CIS

Holding together regionalism and the interaction of functional bureaucracies

The paper focuses on regional integration projects established by countries originally comprising a single political entity after its collapse. It shows that in this framework the existing economic ties between countries are likely to adversely affect the interests of functional bureaucracy to support regional integration given the cutting off the existing connections is often more promising from the point of view of the budget expansion. Hence, interaction of national and supranational bureaucracies is unlikely to generate impetus for increasing regional cooperation. On the other hand, external economic shocks are likely to boost “holding-together” regionalism. The empirical case for the analysis is that of the regional cooperation of the post-Soviet countries in the area of transportation and power utilities.holding-together regionalism; regional integration; bureaucracy; post-Soviet countries

Is it really different? Patterns of regionalisation in the post-Soviet Central Asia

While the regional economic integration encompassing the former Soviet Union (FSU) transpires to be inefficient, there appears to be a stronger interest in regionalism in smaller groups of more homogenous and geographically connected countries of the region, specifically, Central Asia. Using a new dataset, we find that although the economic links between the Central Asian countries are more pronounced than between that of the CIS in several key areas, this advantage has been disappearing fast over the last decade. In addition, the trend of economic integration of Central Asia strongly correlates to that of the CIS in general. Currently Central Asia should be treated as a sub-region of the post-Soviet world rather than a definite integration region.On the other hand, however, we find that Kazakhstan emerges as a new centre for regional integration, which can bear some potential for regionalism in Central Asia, and that there is an increasing trend towards greater economic interconnections with China in Central Asia. --regionalisation,economic integration,post-Soviet space,Central Asia

Interaction of Eurasian and International Financial Institutions

The paper handles two Eurasian international financial institutions, the Eurasian Development Bank (EDB) and the Eurasian Fund for Stabilization and Development (EFSD), focusing on the modalities of interaction with their international counterparts, including international financial organization and multilateral development banks. We attempt to explain the reasons behind the choice of partners, modalities of interactions, underlying incentives and constraints, and varying dynamics of these two entities. For the EDB, international interaction has to do primarily with the multilateral development banks. For the EFSD, the layout is substantially more complex, as the fund positions itself as an inherent part of the Global Financial Safety Net. The paper eliminates gaps in understanding the modalities and dynamics of the EDB and EFSD’s interaction with their counterparts among international financial institutions (IFIs) and provides an explanation for the institutional logic which manifests itself in these modalities and dynamics. It covers the following questions: What are the reasons behind varying dynamics of international interactions for both institutions? What conditions the choice of institutions to cooperate with? What is the relation between competition and complementarity in these interactions

Trans-Eurasian Container Traffic: a Belt and Road Success Story

Countries in Northern and Central Eurasia, including its largest economies, Russia and Kazakhstan, were among early believers in the value of the Belt and Road Initiative. Over the last years, they increasingly embraced various aspects of the BRI, most importantly additional investment and rising volumes of trans-Eurasian traffic. The latter, apart from being a lucrative business on its own, should eventually lead to better internal connectivity between inner-Eurasian regions. In this article I provide data and estimates for the spectacular growth of the volumes of trans-Eurasian container transit. Then I move to explain the underlying reasons and prospects. Finally, there are important remarks on the issue of financing, the role of China, and the role of international financial institutions

Interaction of Eurasian and International Financial Institutions

The paper handles two Eurasian international financial institutions, the Eurasian Development Bank (EDB) and the Eurasian Fund for Stabilization and Development (EFSD), focusing on the modalities of interaction with their international counterparts, including international financial organization and multilateral development banks. We attempt to explain the reasons behind the choice of partners, modalities of interactions, underlying incentives and constraints, and varying dynamics of these two entities. For the EDB, international interaction has to do primarily with the multilateral development banks. For the EFSD, the layout is substantially more complex, as the fund positions itself as an inherent part of the Global Financial Safety Net. The paper eliminates gaps in understanding the modalities and dynamics of the EDB and EFSD’s interaction with their counterparts among international financial institutions (IFIs) and provides an explanation for the institutional logic which manifests itself in these modalities and dynamics. It covers the following questions: What are the reasons behind varying dynamics of international interactions for both institutions? What conditions the choice of institutions to cooperate with? What is the relation between competition and complementarity in these interactions

A Theory of Enclaves

The manuscript represents a comprehensive theory of enclaves and exclaves. The theory comprises both political and economic aspects. It is the first general book on the world’s enclaves and exclaves. Due to its comprehensive and pioneer character, it has a potential to become a book of reference for the nascent and promising research field. In its attempt to provide a fully-fledged theory of enclaves and exclaves, it covers a wide scope of regions and territories throughout the world. Basically, it satisfies the need for a systematic view on the enclaves throughout the world. Rather than viewing each enclave as a unique case, or even as an anomaly, it provides a systematic investigation of enclave-related political and economic issues. Moreover, enclaves are approached in the conceptual framework of the mainland-enclave-surrounding state triangle, i.e. they are viewed relative both to their métropoles and the states that they immediately border at. While the number of enclaves reaches 282 with the total population of almost three million, their importance is much higher because of their specific status and specific issues raised for both the mainland states and the surrounding states. To give just a few examples, the importance of Gibraltar (30 thousand inhabitants, 6.5 sq. km) was disproportionately large for British-Spanish relations throughout the last three centuries. Tiny Ceuta and Melilla (72,000 and 62,000 inhabitants, 19.5 and 12.5km2, respectively) have caused (and are causing) tensions in Spanish-Moroccan relations for more than three centuries and have recently become visible at the EU level, too. German Büsingen (1,500 inhabitants, 7.6km2) was subject to several complex international treaties between Germany and Switzerland. Kaliningrad (960,000 inhabitants, 15,100 km2) managed to cause a major crisis in the EU-Russian relations in 2002-03. The manuscript strives to comprise at three facets of enclaves’ existence, that is, their political, economic, and social life. The scope of questions is large. The first layer consists of questions dealing with the very phenomenon of enclaves and exclaves. Are they specific indeed? Do they have any common characteristics so that they can be treated as a unique class of spatial objects? Then, we go on to discuss a number of issues concerning enclaves’ emergence, maturity, and disappearance. Why and how do they emerge? How do enclaves mature? How do they cease to exist? Furthermore, a large part of the investigation concerns enclave economies. Are enclaves generally incapable of being economically sustainable on their own? What are the conditions for economic prosperity? What are the factors impeding development? What are the factors advancing development? Here, we are dealing with a difficult challenge which these territories have to overcome. Their existence under the specific conditions of heavy external dependency and insufficiency of internal resources calls for specific ways of arranging their economic specialization. The economic challenge of enclaves and exclaves differs from the economic challenges of small states and islands because of their very enclave/exclave status. Finally, we search for enclaves’ place in the world, in particular in the bilateral relations between the surrounding state and the mainland state. What is the place of enclaves in world politics? What is the place of enclaves in world economy?enclave; exclave; insularity; Kaliningrad; Ceuta; Melilla; Gibraltar; Hong Kong; Cooch Behar; Baarle; Buesingen

Kaliningrad: Enclaves and Economic Integration

As the Soviet Union broke up, Kaliningrad suddenly found itself separated from mainland Russia by new frontiers. Hardly any other Russian region has been hit as hard by the economic disruption as Kaliningrad. The geographical situation of the region meant that it was more highly exposed to the destabilising effects of post-communist economic transformation. Since then, a dramatic trade opening has occurred, and regional trade and production have undergone profound changes. Kaliningrad has experienced a major shift in its economic orientation towards the tertiary sector and a new industrial orientation based on its position as an intermediary in EU–Russian trade. In short, that is what this report is about: the present and future economic development of this Russian enclave during its integration into the world economy, its place in the international division of labour and in the Russian–EU economic interface. The major phenomenon relative to the economic development of the region is its enclave status. The report explores the specific features of enclave economies and, specifically, Kaliningrad. It argues that (a) economic openness is a prerequisite for an enclave’s prosperity; (b) the enclave should develop an multi-vectored orientation toward both the Russian market and the EU market complementing industrial specialisation targeting the mainland by new features; (d) as economic integration – with the surrounding state or on a non-discriminatory basis – has significant positive effects on enclaves, the future of Kaliningrad’s regional economy and its specialisation is profoundly connected to Russian–EU relations and the prospects for their economic integration.enclave, exclave, Kaliningrad, Russia, European Union, Wider Neighbourhood

The System of Indicators of Eurasian Integration

The System of Indicators of Eurasian Integration (SIEI)under the auspices of the Eurasian Development Bank consists of nine general and two consolidated indices that are aimed at assessing integration in the post-Soviet region, and cover various aspects of the regional integration process. The SIEI is built around several sets of indicators, including the integration of trade and labour markets, and co-operation in key functional areas (agriculture, education, and energy); convergence of the main characteristics of the post-Soviet economies; and qualitative performance parameters of the CIS integration groupings developed based on an expert poll. The data given in this first version of the SIEI show the dynamics of integration processes in the decade 1999-2008. The SIEI consists of three sets of indices which correspond to the three main aspects of regional co-operation: (a) analysis of regional integration as the integration of markets. In this case, the integration of countries is assessed from the point of view of mutual flows of commodities, services and production factors; (b) analysis of regional integration as the convergence of economic systems.In this case, the subject of evaluation is the convergence of the countries’ main quantitative development characteristics in four key areas: macroeconomics (growth dynamics), financial policy, fiscal policy, and monetary policy; and (c) analysis of institutional co-operation. In this case, the subject of evaluation is the countries’ performance in formal integration projects within the post-Soviet space, taking into account the broad range of goals of the respective structures.regional integration; economic integration; post-Soviet space; former Soviet union