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At the second stage of the formation of Kazakhstani-Russian-
Belorussian economic efforts to form a customs union, the most important areas of cooperation are a closer coordination of economic reforms; harmonization of civil and economic legislation; unification of currency, tax, and price regulation by the state with the aim of leveling out the economic and legal conditions for the activities of commodity producers within a unified customs space; working out coordinated positions of the members of the Customs Union in relations with third countries and international organizations. At the meeting of heads of CIS countries in
November 1995, three more countries stated their desire to join the Customs
Union: Kyrgyzstan, Uzbekistan, and Tajikistan. Later, only Kyrgyzstan went through with the necessary procedures and entered the Customs Union.
Another example of collaboration in the field of integration is the agreement on the Baikonur space vehicle-launching site, which makes it possible to use this great scientific and technological facility in the interests of Russia and Kazakhstan, as well as documents on the issues of citizenship signed by the presidents of Kazakhstan and Russian.

Let us consider in somewhat greater detail the problems of citizenship, of which the solution on a bilateral basis was also outlined in the draft project of the EAU.

Issues of citizenship became particularly prominent at the time of the emergence and building of sovereign independent states after the disintegration of the USSR, when tens of millions of former Soviet citizens overnight ended up outside their "historical homelands." This problem is as topical for Kazakhstan and Russia as for other CIS countries. More than that, it often figures as one of the most important issues of bilateral relations with Russia.

The more acute aspects of this problem were lifted as a result of the signing in January 1995 by the presidents of Russia and Kazakhstan of a treaty on the legal status of citizens of both countries living on the territory of the other state and of an agreement on simplified procedures for acquiring citizenship in moving from one country to another. Well-known specialists from the two countries worked fruitfully on these documents.
Authoritative Kazakhstan! and Russian politicians and jurists believe that these are innovative agreements without parallel in the world, and they are a fairly rare example of regulating bilateral issues on a civilized basis.
The importance of these agreements both for progressive development of our countries and for normal life of the citizens of Kazakhstan and Russia cannot be exaggerated.

These documents envisage the introduction of maximally simplified procedures for acquiring citizenship and for movement without visas; they also offer possibilities for contract work and military service; assert the rights of possession, use, and disposal of property; create conditions for exchange of currency and transfer of sums of money by individuals and corporate entities of Kazakhstan and Russia; and many other provisions which reliably protect the rights and interests of the citizens of the two countries.

Yet another sphere in which combining the efforts of all the interested parties is needed is the legal status of the Caspian Sea.

The position of the Republic of Kazakhstan on this issue is based on the need for an early drafting and signing of a convention on the legal status of the Caspian Sea, of which a draft was worked out by the
Kazakhstan foreign ministry and sent out to all the interested states as early as March 1994. Unfortunately, there has been no response to this initiative for quite a long time now, and the agreement on regional cooperation on the Caspian Sea issue is still at a standstill.
At the same time preserving this unique object of nature is a task that the present generation must be worthy of.

The events of the recent years thus prove conclusively the need to proceed to a new level of integration, which will fully conform to the vital needs of the peoples. International experience shows that any interstate association goes through various states in its development, becoming enriched in the process with new forms of cooperation. The
Eurasian Union should be seen as just one of such transitional forms capable of optimizing the solution of the problems facing the Commonwealth.

From the time of the publication of the draft EAU project, politicians and scholars have been paying close attention to it. Four major scientific and practical conferences were devoted to this subject, as were hundreds of publications in Kazakhstan, Russia, and other states. Politicians, scholars, and diplomats continue to study the EAU project with great attention.
The current period in history is characterized by a radical breakdown of the old way of life. Society now faces difficult issues, and each person is subject to serious trials It is quite natural under these conditions that the peoples of Kazakhstan, Russia, and other countries with an interest in the unification of the Commonwealth will find it easier to overcome these difficulties together. A balanced attitude toward the past, a persistent realization of the present potential, and confidence in a more certain future - only these things will be able to give the peoples of our countries a natural feeling of spiritual harmony and a sense of full- blooded life.

History is offering us a chance to enter the 21st century in a civilized manner. One of the ways to achieve that, in my view, is the realization of the integration potential for the establishment of the
Eurasian Union, which will reflect the objective logic of the development of the post-Soviet space and the will of the peoples of the former Soviet
Union to achieve integration.

This is how President Nazarbayev, the author of the Eurasian project, characterized the development of this idea and his current vision of its future: "I still remain an adherent of integration of post-Soviet space. As
I formulated my vision of integration I laid no claims to total realization of all the provisions of the project, being fully aware of all the political connotations of that period. Two considerations were my primary motivation. First, I wanted to generalize within a single whole the most realistic proposals for further integration, which simultaneously appeared in the countries of the post-Soviet space. Second, I wished to interrupt the indecently drawn-out pause in the activities of the CIS institutions.

In the last two years there was movement in the CIS countries on some issues that had been at a standstill, including

4. VITAL PROBLEMS OF THE PRESENT-DAY STATE OF KAZAKHSTANI-RUSSIAN RELATIONS

The Present State and Prospects for Economic Cooperation between
Kazakhstan and Russia.
The top priority area of Kazakhstan’s policy in foreign trade is the strengthening of economic cooperation with Russia and consistent integration of the economies of the CIS countries. This is determined by the traditionally strong economic links, a high level of mutual complementarily and interdependence of two economies of a once unified state, the size of the commodity market and identify of economic problems awaiting solution. “Analysis of the results of development of the economy of the former USSR and of experiences of economically advanced nations,”
President Nazarbayev stressed, “shows that the transition to the market is objectively necessary and historically inevitable.”

The main feature of the present-day situation in Kazakhstan is the increasing impact of the mechanisms that have evolved in the years of reform and a weakening of the effect of non-market factors. In the initial stages, the underdeveloped state of such important instruments of the formation of the market as privatization, de-monopolization, absence of a competitive environment, were the main sources of inflation in the republic, a worsening state of the finances of enterprisers, an acute shortage of turnover capital, a fall in production due to falling demand and real earnings of the main mass of the population, as well as growing abuses in trade and banking structures.

The prevailing technological, economic and organizational standards made a significant impact on the potential of foreign trade relations. “The cohesion of the economic space of the former USSR was affected through centralized state planning implemented by command-administrative management. In the process, the country’s economy worked as a ‘single workshop’, and not all production and economic links here were rational from the market point of view. The transition to a market economy throughout the economic space of the former USSR required a profound restructuring, and this called for considerable resources and time,” Ex-
Prime Minister A.M. Kazhegeldin stressed.

The policy of liberalization of foreign trade activity and of open economy did not result in 1993 in any growth of exports. It amounted to
$1.5 billion, thus remaining at the 1992 level. Shifts in the geography of
Kazakhstan export due to the re-orientation of foreign trade links to industrially developed nations resulted in the strengthening of raw materials exports. The share of machines, equipment and transport vehicles in the export dropped to 2 percent, and the share of fuel and energy complex and that of metallurgy rose to 80 percent. Rising domestic prices prevented partners from concluding long-term foreign trade deals, stimulating instead commodity exchanges. The share of barter and clearing deals in export operations made up more than 26 percent. More than 56 percent of imports were affected through exchange of commodities. Barter operations were mostly in the nature of structurally unbalanced exchanges.
The republic suffer considerable losses due to inadequate knowledge of the market conditions and the desire to access foreign markets at any price.

A noticeable feature of Kazakhstan economy is the low level of the development of machine building, which is not up to present-day requirements, and this makes an adverse impact on other branches of the economy, as it results in the common shortage of metal-tooling products.
This aggravates the shortage of spare parts and of products used in several adjacent branches of industry and adversely affects the standards of servicing.
Some of Kazakhstan most important tasks in 1994 were the closure of, and changing production lines at, non-viable enterprises and development of promising export-oriented ones, which also satisfy domestic demand. This called for a set of measures to identify enterprises in the state of depression, closing down unprofitable lines of production in energy- consuming industries and rehabilitation and reorganization of non- profitable production lines.

The basis of the development of Kazakhstan, just as of Russia and many other CIS countries, is export of natural resources. In 1994, the government introduced regulations for the licensing of natural resources, and a law was adopted on payments for utilization of natural resources. It was at that time that efforts were initiated to attract domestic and foreign investors to develop the fuel and energy complex. The development began of the Tengiz, Karachiganak, and some other oil yields at oil fields continued to be introduced. Open – cut coal mining was expanded at
Ekibastuz, Maykubek, and Shubarkul coalfields, with the aim of reducing the mining of coal underground at low-profit and non-profitable mines of the
Karaganda coalfields.

In the metallurgical industry, the development of production of ferrous metals and the raw-materials basis of such production continued, including the revamping of the Karaganda metallurgical plant with the aid of foreign investment; its re-orientation toward the iron ore pellets of the Sokolovsko – Saribai mining association; the development of production of stainless steel and rolled metal and the building of an electric metallurgical plant for the production of stainless steels in Aktobe; further development of ferrous alloys in Aktobe and Aksu and of its raw- materials basis –the Donskoy ore –dressing plant; the re-orientation of idle production lines of JSC Khimprom to the production of ferromanganese.
Organizational measures were taken in 1994 to develop production of fireproof materials.

At the same time there was a fall in the production of ferrous metallurgy due to an aggravation of the raw materials and fuel shortage and a parlous state of equipment at enterprises of this industry. The decline in industrial production was to a considerable extent due to non-solvency of enterprises in view of their insufficient financial resources, non- payment by the buyers for products delivered, and weak financial discipline.

The decline in non-ferrous metallurgy continued, as production of copper, titanium, and manganese fell. To check the decline in this branch of industry, the production lines at the Chilisai ore-dressing plant switched to a different product; the Zyryanovsky lead plant was rebuilt, and its commissioning was brought forward; the raw – materials basis for the titanium industry was created, as was the Syrymbet tin field, the tin being produced at the Tselinny chemical plant. The functioning gold mines and ore-dressing plants were revamped, and work was accelerated to develop major gold fields at Vasilkov, Bakyrchik, and Akbakai.

In 1994, the share of machine-building industry and machine tooling in the overall industrial production continued to fall, amounting to six percent. Low investment activity, non- competitiveness of the Kazakhstan machine-building industry, limited financial consumer capacity predetermined an almost twofold reduction volumes in most types of machine
–building branches even compared to the crisis-ridden year of 1993.

The situation was worst in the chemical and petrochemical industries, whose production capacities far exceeded the republic’s domestic needs.
Considerable share of the product was exported to other CIS countries and the “far abroad”, but the enterprises suffered from shortage of raw materials, even shortages of oil, which is produced in Kazakhstan itself.
JSC Polipropilen, AKPO, Khimvolokno production association used imported raw materials only. In 1994, the decline in most types of petrochemical products reached 55-60 percent. Oil refining dropped by 20.3percent.

The timber, woodworking, and papermaking industries suffered from shortage of raw materials. Between the beginning of 1993 and the end of
1994, the production of timber fell by 21 percent, and this had a negative effect on the state of production at sawmills and woodworking factories.
The production of saw-timber, chipboard, and cardboard fell by 31.9, 59.3, and 47.5 percent respectively, but the production of paper increased threefold.

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