News report on metallurgical subsidies

Russia aims to claim 800 million USD from Kazakhstan accusing its government in subsidizing the metallurgical industry, Informburo reports. On December 28, 2017 Russian Ministry of Trade and Industry considered the appeal of four Russian metallurgical companies (“Russian steel”, “Severstal”, “Metallurgical factory of Magnitogorsk” and “Novolipetsk metallurgical factory”) that claimed to lose profits by 9% because of Kazakhstani subsidizing policy. Statistics show that Kazakhstan’s exports of siderurgy to Russia rose by 75% in 2017 (1,757 billion tons in 2017 compared to 1,006 billion tons in 2016). Officials in the Ministry of Trade and Industry are discussing the measures to be implemented in response to Kazakhstani subsidies, including reimbursement of profits and alternation of Kazakhstani legislation to eliminate the uneven competition at markets of the Eurasian Economic Union.

It seems unclear why the Eurasian Commission stands aside. According to the Article 93 (section XXIV, industry), member-states can appeal to the Commission to investigate the case of a subsidy. In a case of subsidizing, the Commission can initiate consultations to settle the dispute diplomatically, or transfer the proceeding to the Court of the Eurasian Economic Union if members fail to achieve consensus by diplomatic measures. Hoffman’s intergovernmental theory of integration explains the unwillingness of the states to appeal to Eurasian Commission, a supranational body similar to European Commission. Intergovernmentalism highlights the role of nation-states in the integration process, claiming that states can control the pace of integration and are autonomous in their decisions (Bache, George and Bulmer 2011, 11). Hix and Høyland (2011, 16) add that national governments decide what to delegate to the supranational bodies, which makes these bodies ‘agents’ of the governments rather than independent entities. Taking into concern that the dispute was initiated in November 2017 and the Commission has not been involved for three months, intergovernmentalism fits to explain the patterns of the EAEU integration. In turn, historical institutionalism suggests an explanation why Russia is not rushing to settle the dispute. Bache et al. (2011, 25) highlight that according to historical institutionalism, states act with respect to “pre-existent institutional relationships.” Thus, member-states in EAEU are constrained not only by formal obligations but also by behavioral norms and shared values. Accordingly, Russia would not initiate the rigid investigation against Kazakhstan because the relations of the two states follow the path of historical Russian influence in the region. In pursuit of political and economic gains, Russia seeks to maintain friendly relations with its biggest trade partner in Central Asia (World Bank 2018). By not launching the intransigent investigation, Russia signals to Kazakhstan that it does not want to initiate a trade war, but to solve the issue diplomatically without affecting the relations of the neighbors.

While intergovernmentalism can explain the nature of EAEU integration, historical institutionalism adds details to the intergovernmentalist interpretation. In addition to the theoretical discussion, it is worth mentioning that EAEU is a young international organization that has not encountered many disputes, which can excuse the lack of organization of the interior dispute-settlement mechanism.

Reference list:

Bache, Ian, Stephen George and Simon Bulmer. “Theories of European Integration,” in Id. Politics in the European Union. Oxford University Press. 2011.

Bache, Ian, Stephen George and Simon Bulmer. “Theories of EU Governance,” in Id. Politics in the European Union. Oxford University Press. 2011.

Eurasian Economic Commission. Department of Industrial Politics: Regulatory Acts. Retrieved from http://www.eurasiancommission.org/ru/act/prom_i_agroprom/SiteAssets/XXIV_prom.pdf

Hix, Simon, and Bjørn Høyland. ‘Introduction: Explaining the EU Political System,’ in Id. The Political System of the European Union. Basingstoke, Hampshire: Palgrave Macmillan. 2011.

World Bank. Russian Federation Product Exports By Country 2016. Retrieved from https://wits.worldbank.org/CountryProfile/en/Country/RUS/Year/LTST/TradeFlow/Export/Partner/by-country/Product/Total

Zhdanov, Kirill. (January 31, 2018). Russia aims to claim 800 million USD of lost profit from the metallurgy of the Republic of Kazakhstan. Informburo. Retrieved from https://informburo.kz/novosti/rossiya-namerena-istrebovat-800-mln-dollarov-nedopoluchennoy-pribyli-ot-metallurgov-rk.html