DUSHANBE, December 12, 2014, Asia-Plus — An article “Money Troubles: Russia”s Weak Ruble Pulls Down Neighbors” Currencies” by Charles Recknaget posted on Radio Liberty’s website on December 11 notes that as the value of Russia”s ruble tumbles amid low oil global prices and Western sanctions, it is taking the currencies of many former Soviet republics down with it.
Kazakhstan, which is both a major trading partner with Russia and an oil producer in its own right, has been badly hit by both the fall of the ruble and the shrinking price of oil. Rather than try to protect the value of the Kazakh currency, the tenge, the government decided to devalue it by 19 percent in February this year. Yet even that may not be enough to keep the currency from devaluing further next year.
And there is another challenge: The slipping ruble is not only making it hard for Russians to afford Kazakh goods, it also means Kazakhstan must protect its own industrial and agricultural sectors from low-cost Russian imports flooding the market.
The article notes that Belarus is also in uncomfortable circumstances. Its currency, the ruble, has slipped some 13 percent against the dollar since the start of the year. One reason is that the slump in the Russian ruble”s value has reduced revenues from Belarus”s two large refineries which convert Russian crude oil into gasoline and other products for the Russian market.
And now the pressure is rising further as Minsk and Moscow reportedly engage in a trade war over charges that Belarus is acting as a backdoor for smuggling banned EU milk and meat products into Russia.
Ironically, that trade war comes as the current Customs Union between Belarus, Russia, and Kazakhstan prepares to expand into a new Eurasian Economic Union (EEU), which will include Armenia and Kyrgyzstan and begin operations January 1, the article says.
Whether Minsk and Moscow can solve their differences ahead of time remains to be seen, as does whether Moscow will help its weaker EEU partners cope with the downturn in their economies.
Several other countries on Russia”s fringes are suffering from the ruble”s collapse, mainly because they have large numbers of citizens working in Russia. Moldova, Tajikistan, Kyrgyzstan, and Uzbekistan have all seen the value of remittances those migrant workers send home diminish.
The Moldovan National Bank announced on December 11 that the country”s currency, the leu, lost 17 percent of its value against the dollar this year due to the devaluation of the Russian currency as well as that of Ukraine, another important economic partner.
Tajikistan”s somoni has dropped 5.5 percent, Kyrgyzstan”s som has dropped 15 percent, and Uzbekistan”s som has dropped 9 percent. The three Central Asian states, which have many citizens working as migrant laborers in Kazakhstan, have also been hit by the economic downturn in that country.
Turkmenistan, a major gas exporter, has fared better. With pipelines to Russia and Europe, to China, and to Iran, it does not depend solely on the Russian market and it has sufficient foreign currency savings to keep its manat within a narrow band against the dollar. At the same time, few Turkmen go to Russia as migrant workers, so remittances are not an issue.
Oil-rich Azerbaijan looks still more impervious to the tough new economic realities in the region. It, too, is being battered by low oil prices but has a large stabilization fund to keep its currency, the manat, within its usual band against the dollar. At the same time, most of its trade is with Turkey, not Russia.
The biggest loser in the region is Ukraine, the article says. Its currency, the hryvnia, has reportedly lost 86 percent of its value against the dollar since the start of the year as the country battles pro-Russian separatists and the country”s economy is in crisis.
