Ex-Soviet republics hit by Russian economic crisis

Russia`s economic turmoil has sent shock waves across former Soviet republics as the ruble`s collapse pushes the crisis into the region with strong ties to Moscow, analysts said.

Tiblisi: Russia`s economic turmoil has sent shock waves across former Soviet republics as the ruble`s collapse pushes the crisis into the region with strong ties to Moscow, analysts said.

Under the pressure of falling oil prices and Western sanctions over the Ukraine conflict, the ruble this year plunged by 40 percent against the dollar and the euro, pulling the currencies of many ex-Soviet countries to the bottom.

"Russia is dragging ex-Soviet countries into an economic crisis," said Igor Nikolayev, the director of the FBK Strategic Analysis Institute.

"Their trade with Russia and remittances by migrants working in Russia shrink as the ruble weakens."

Besides the economic fallout, the impact of the Russian crisis on its ex-Soviet neighbours is likely to have a geopolitical dimension as well.

On January 1, the Russia-led Eurasian Customs Union which also includes Belarus, Kazakhstan and Armenia is to morph into the Eurasian Economic Union (EEU).

But the fate of the project -- championed by President Vladimir Putin to reassert Moscow`s influence over its Soviet-era vassals -- now looks uncertain, said Nikolayev.

Belarusssian President Alexander Lukashenko has already demanded that trade between the EEU countries be carried out in dollars instead of national currencies.

"The Eurasian Union is exposed to a very big risk" because of the Russia crisis, said Kazakh leader Nursultan Nazarbayev.Moscow`s closest allies in the post-Soviet era, the Customs Union member countries were the first to feel the aftershocks of Russia`s shaken economy, which shrank in November for the first time since October 2009.

Lukashenko has admitted Belarus -- with around 40 percent of its exports bound for Russia -- has been hit hard by Moscow`s troubles.

In December, Belarussians rushed to convert their savings to dollars and euros, fearing devaluation of their currency, which has so far fallen more than 13 percent against the greenback.

The panic forced the country`s central bank to introduce a 30-percent tax on all foreign currency purchases and raise interest rates to encourage citizens to keep their money in the bank.

Energy-rich Kazakhstan faces an uphill battle to protect the national industry as exports to the Customs Union countries fell this year by more than 12 percent and the domestic market was flooded with cheap Russian goods as the ruble collapsed.

Russia`s economic crisis "poses the risk of declining demand for our exports and subsequently of an economic slowdown," Kazakhstan`s Finance Minister Bakhyt Sultanov said last week.

The Central Asian nation had already devalued its currency, the tenge, by 19 percent in February and allocated $15 billion for infrastructure projects over three years from its sovereign wealth fund.

In Armenia, "the Russian economic crisis translates into shrinking exports to Russia and falling dollar remittances by migrant workers", economy analyst Ashot Aramyan told AFP.

According to the impoverished country`s central bank, dollar remittances from Russia fell in October by around 19 percent year-on-year and its dram currency has lost more than 11 percent against the dollar this year.

Armenia`s 2014 economic growth projection has revised down to 3.3 percent from 4.1 percent.

"Our economy is tied to Russia. There are 1,200 Russian-owned enterprises in Armenia that control strategic sectors -- energy, railroad, communications," Aramyan said. "Developments in Russia`s economy shape the economic situation in Armenia."

Manvel Gasparyan, who owns a shoe factory that used to export up to 90 percent of its production to Russia, said he was forced to cut by five the volume of his Russia exports.

"In Russia, the prices of our goods are rising as a result of the ruble`s devaluation, while people`s incomes are shrinking. The demand fell dramatically. 

"A very sad picture."

Kyrgyzstan and Tajikistan -- the ex-Soviet states in Central Asia with large numbers of migrant workers in Russia -- have also been buffeted.Since January, the Kyrgyz som has lost more than 17 percent to the dollar, and Tajikistan`s somon nearly 14 percent, according to official data.

"As a result of Russia`s crisis, Kyrgyzstan has lost up to 70 percent of dollar remittances by migrant workers," independent analyst Aleksey Krasin told AFP.

"The (Russian) crisis could deal a severe blow to our economy," Kyrgyzstan`s central bank governor, Toktogul Abdygulov, told journalists this month. He added that the bank, with its scarce foreign currency reserves, "can`t keep the som afloat for long".

After the ruble`s collapse, "the Tajik migrant workers can`t afford to send money to their families in Tajikistan. We will be forced to return to our country," Karomat Sharipov, the leader of the Tajik Migrant Workers Movement in Moscow, told the openrussia.org website last week.

However, with their huge oil and natural gas resources, the economies of Azerbaijan and Turkmenistan have so far withstood the pressures of a weak ruble and continue to expand.

Poorer Moldova and Georgia -- the pro-Western ex-Soviet republics which have worked hard to reduce their dependence on Moscow and signed this year free-trade agreements with the European Union -- have suffered some side effects from Russia`s economic distress.

In both countries shrinking dollar remittances from Russia were "just an additional factor behind the economic setback in 2014. Internal factors played a primary role," Roman Gotsiridze, the president of Tbilisi-based Economic Development Centre, told AFP.

The Georgian lari has weakened by nearly nine percent this year against the dollar, "mainly due to the widening current account deficit and limited foreign direct investments," Gotsiridze said.

In Moldova, the central bank has deliberately devalued the national currency, the leu, by 20 percent "to stimulate exports to the European Union," Moldovan economic analyst Roman Chirca told AFP.

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