News report on the common market of oil products
Word Count: 499 (without citations)
News Report 1
The news article discusses the creation of a common market of oil and oil products within the EAEU by 2025 (Eurasian Economic Commission, 2017). It is stated that the project, approved by the EEC in December 20, 2017, is to be passed further to be signed by the Supreme Eurasian Economic Council. What is especially striking is that the proposed document does not only abolish the inner tariffs, but adds two significant changes: 1) further integration and liberalization of the whole market of oil and oil products; 2) cooperated regulations on related infrastructural and technical spheres (Council of the Eurasian Economic Commission, 2017). This report will conclude that while the first change can be explained by the intergovernmentalist approach, the second indicates possible further developments, which are best described by neofunctionalism.
Elaborating the first point, the project states that the prices for oil and oil products will now be regulated by the market, new stock exchange sites will be opened, the states will be providing non-discriminatory access for other member-states, and that the laws regarding the sector will be commonly regulated across the union (Council of the Eurasian Economic Commission, 2017, p. 4-5). This means that the member-states now significantly lose their sovereignty concerning the oil industry regulations. However, the context is that those countries (Russia and Kazakhstan, in particular) are heavily dependent on their oil economy, i.e. EAEU accounts for 14.5% of the global oil production ("Eurasian Economic Union", 2018). Moreover, both countries have large state monopolies in the industry, e.g. Russia’s state-owned “Rosneft”, “Transneft”, and “Bashneft”, and Kazakhstan’s “KazMunaiGaz”, which now will be left unprotected in the common market. Therefore, a reasonable question arises as to why the countries would purposefully give up their sovereignty on such an important industry sector. The intergovernmentalist theory provides an answer, claiming that when national interests of states coincide and gains outweigh losses, they are open to integration on technical issues (Bache et al., 2011, p. 11). Thus, according to Moravcsik (1991), the common market, in this case, is only a continuation of the member-states’ domestic policies, e.g. by integrating, states with low domestic oil production will have a facilitated access to cheaper oil, and other states will have more internal trade with other union members and increase the competitiveness of their own production by the means of liberalized economy.
On the second point, the agreement also highlights the importance of integration of transporting facilities (mainly railroads), common ecological standards of oil extraction, and sharing of various statistical accounts, e.g. volumes of extracted and refined oil (Council of the Eurasian Economic Commission, 2017, p. 5). It also elaborates that for more convenient access to railroads, cooperation of railroad operators and common standards of it are necessary (Council of the Eurasian Economic Commission, 2017, p. 11). The fact that creation of the common market of oil and oil products also seems to entail the integration of other sectors supports a possible neofunctionalist development taking place in the future. Neofunctionalism states that the integration in some areas are impossible without integrating other related areas, i.e. “the spillover effect” takes place (Bache et al., 2011, p. 8-9). In the case of EAEU, it can be seen that to properly maintain all the goals of common development without integrating the infrastructure that supports it.
Reference List
Bache, I., George, S., & Bulmer, S. (2011). Politics in the European Union. OUP Oxford.
Council of the Eurasian Economic Commission. (2017, December 20) О проекте решения Высшего Евразийского экономического совета «О формировании общих рынков нефти и нефтепродуктов Евразийского экономического союза» [On the project of the Decision of the Supreme Eurasian Economic Council “On the creation of the common market for oil and oil products in the Eurasian Economic Union”]. Retrieved from https://docs.eaeunion.org/docs/en-us/01415726/cncd_26122017_98
Eurasian Economic Commission (2017). Совет ЕЭК одобрил Программу формирования общих рынков нефти и нефтепродуктов ЕАЭС [Council of the Eurasian Economic Commission approved the Programm on common market of oil and oil production within EAEU].
Eurasian Economic Union. (2018). Eaeunion.org. Retrieved 2 February 2018, from http://www.eaeunion.org/?lang=en#about
Moravcsik, A. (1991). Negotiating the Single European Act: national interests and conventional statecraft in the European Community. International Organization, 45(01), 19. http://dx.doi.org/10.1017/s0020818300001387