World Economy

Ex-Soviet Republics Hit by Russia Crisis

Ex-Soviet Republics Hit by Russia CrisisEx-Soviet Republics Hit by Russia 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.

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, AFP reported.

“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 neighbors 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.


 Sad Picture

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.