Member States of the Eurasian Economic Union Concerned Over Anti-Russian Sanctions of the USA

The confrontation between Russia and the West has had a negative impact on the closest partners of Moscow that share in the trade and economic market with Russia. Thus, the member states of the Eurasian Economic Union (EAEU), including Russia, Belorussia, Kazakhstan, Armenia and Kyrgyzstan, have been concerned over the new law on sanctions against Russia, Iran and North Korea signed by U.S. President Donald Trump (www.whitehouse.gov, August 02).

President of Kazakhstan Nursultan Nazarbayev during the working meeting with Prime Minister Bakytzhan Sagintayev emphasized that a new wave of U.S. sanctions against Russia may have impact on the economy of Kazakhstan. “I address everyone, before the year is out; we have to work hard to finish the year in an orderly way. There is a substantial risk. There are price fluctuations for our energy carriers and raw materials. It might be the influence of sanctions against Russia. That fact must be taken into account,” Nazarbayev said (http://www.akorda.kz, August 07).

It should be emphasized that a new package of U.S. economic sanctions against Russia is the response of the U.S. to the Russian interference into the American presidential elections, annexation of Crimea, and the support of armed separatists in eastern Ukraine. The package imposes restrictions on Russian energy companies such as Gazprom, Rosneft, Lukoil, which are actively operating in Central Asian states. The U.S. president may not curtail or lift sanctions without congressional approval.

The market of Kazakhstan has responded nervously to the new list of sanctions. In early August, the national currency of Kazakhstan depreciated by 15 points against the U.S. dollar, i.e. the Kazakh tenge depreciated by 3.5%. If before the American sanctions, one USD was equal to KZT 334.5, after August 2, the USD exchange rate jumped as high as KZT 343. The currency market of Kazakhstan faced the devaluation with hysteria and panic. In this regard, the National Bank of Kazakhstan had to make an official statement where it condemned the speculative actions of some commercial banks and called on the population to stay calm. However, the National Bank honestly claimed that “the current dynamics of the tenge rate is explained first by the expected negative impact of additional sanctions of the USA against the Russian Federation, the uncertain further development of the situation, as well as the respective dynamics of the Russian ruble. Certain speculative comments in the media fuel the panic buying of US dollars” (www.zakon.kz, August 2).

Such explanations by the national bank of the country expectedly caused the discontent of the Kazakh society about the dependence of the tenge rate on the fluctuations in the Russian ruble and the ups and downs of the Kremlin’s foreign policy. Due to the increased volatility of the tenge to dollar rate in the domestic currency market, the National Bank of Kazakhstan has decided to decrease the reference rate to 10.25% (www.nationalbank.kz, August 21).

After the introduction of anti-Russian sanctions, the markets of other member states of EAEU – Belorussia and Kyrgyzstan – have faced reduced economic performance and a nervous environment in the financial sector. The American sanctions against Russia have already had a negative impact on the economy of Belorussia, which is closely connected with the Russian market. In particular, restrictive measures have affected the performance of Belorussian banks, many of which are the subsidiaries to the Russian banks. According to Alpari Forex Broker analyst Vadim Iosub, “U.S. sanctions have shortened the period of loans granted to Russian banks. Now these banks may not attract long-terms loans on western markets. Respectively, the subsidiaries of these banks in Belorussia will need to adjust their plans” (www.naviny.by, July 29).

The U.S. sanctions against Russia have the same negative impact on the Kyrgyz economy, too. In the interview with the Kyrgyz analyst, Arslan Kapai, he said, “in the long term, the anti-Russian sanctions may damage the economic growth rate of Kyrgyzstan given that Moscow is a key trade and economic and investment partner of Bishkek.” Therefore, it should be noted that Kyrgyzstan remains the most vulnerable and poor state among other EAEU members. The Eurasian Economic Union is known to be established at the initiative of Russia and it is the main instrument to get the states of former USSR back under the influence of Moscow. It is the political and economic dependence on the Kremlin that has forced President of Kyrgyzstan Almazbek Atambayev to sign the Agreement on the Eurasian Economic Union (www.eaeunion.org, August 12, 2015).

It should be noted that after Atambayev came to power, he not only bound the Kyrgyz economy to the financial system of Russia, but he was also actively pursuing an anti-American policy for 7 years. Based on the “recommendation” of the Kremlin, he forced the US airbase to leave Kyrgyzstan that participated in the Operation Enduring Freedom - Afghanistan against the international terrorism. (www.ria.ru, June 03, 2014).  

One year later Atambayev defiantly denounced the Agreement Between the Governments of the United States of America and the Government of the Kyrgyz Republic Regarding Cooperation, which was the basis of the bilateral cooperation (www.24.kg, July 21, 2015). And this summer the Kyrgyz president blamed the Government of the United States for pushing Uzbekistan for the conflict with Kyrgyzstan. He claimed he had no warm sentiments about the policy pursued by the U.S. State Department run by Democrats. Atambayev openly blamed the United States for the interventions into his national affairs reminding that Americans “actually pushed for, encouraged the conflict between the two fraternal peoples – the Kyrgyz and the Uzbeks” (www.sputnik.kg, July 24, 2017).

The result of the unilateral pro-Russian policy of the Atambayev’s Government was full dependence of the Kyrgyz national economy on the Russian economy. In 2013, the strategic gas industry of the republic was sold just for $1 to the Russian Gazprom, which is now under the Western sanctions (www.fergananews.com, July 29, 2013). Oil products and fuel and lubricants are 100% imported to Kyrgyzstan from Russia, where the main supplier is Rosneft, which is also under the sanction imposed by the Government of the United States. After the accession to the Eurasian Economic Union, Kyrgyzstan has lost its transit corridor for the transit of the Chinese goods to other CIS states, which brought multimillion profit to the public treasury. According to Minister of Finance Adylbek Kasymaliev, as a result, the government debt of Kyrgyzstan is $4 billion 243 million, which is approximately the annual budget of the country (www.azattyk.org, July 22, 2017). After the accession to the EAEU, no particular breakthroughs in the development of the industrial production have occurred, as was promised by Atambayev. All these indicators show that the economy of Kyrgyzstan may suffer from the anti-Russian sanctions more than others.

Armenia, a member to EAEU since January 2015, is seriously concerned over the new package of American sanctions against Russia. The Armenian Minister of Finance, Vardan Aramyan, noted that “American sanctions against Russia and Iran will damage the economy of Armenia” (www.regnum.ru, August 5, 2015). This concern is caused by the fact that the new sanctions of the United States are mainly against the Russian oil and gas sector. Today the Russian Gazprom fully provides Armenia and Kyrgyzstan with natural gas. Due to the sanctions, Gazprom may raise the natural gas prices for Armenia and Kyrgyzstan. This can lead to the growing prices of electricity, food and oil products, which will cause a wave of discontent.

Migrant workers from Central Asia and Caucasus working in Russia are also seriously concerned about the anti-Russian sanctions imposed by the United States. In particular, the authorities of Uzbekistan, Tajikistan, Turkmenistan, Kazakhstan, Kyrgyzstan, Armenia and Azerbaijan expect the massive return of their citizens from Russia, if sanctions lead to certain job cuts in Russia. According to the Main Directorate for Migration Affairs of the Ministry of Internal Affairs of Russia, today about half a million citizens of Armenia, 600,000 citizens of Azerbaijan, over 2 million citizens of Uzbekistan, over 2 million citizens of Ukraine, one million citizens of Tajikistan and Kyrgyzstan, 500,000 citizens of Kazakhstan work in Russia. Deterioration in the economic situation in Russia may reduce the amount of money transferred by migrants to their homeland. Today transfers from Russia constitute the major part of all transfers to Armenia, Uzbekistan, Kyrgyzstan and Tajikistan. For example, last year Kyrgyz migrants in Russia transferred $2.4 billion home, which is one half of the national GDP. A possible reduction of money transfers from Russia and a massive return of Kyrgyz migrant workers back home may lead to another color revolution in Kyrgyzstan.

Thus, the inclusion of Russia into the list of rogue states along with Iran and North Korea has expectedly caused concern of the political leaders of post-Soviet countries that have Moscow as their main trade and economic partner. It has become obvious that Russia cannot symmetrically respond to the American sanctions. Instead, the Kremlin applies its favorite method of causing anti-American mood in the authoritarian leaders and residents of CIS.

However, the anti-Russian sanctions of the West may give a good chance to Central Asian and Caucasian states to reduce the imperial influence of Moscow on their national economies. “The current American sanctions package is a step toward removing Russia from the world globalization process,” outstanding political expert Lilia Shevtsova concluded (www.svoboda.org, August 1, 2017). It remains to be seen whether the CIS states will use this opportunity.

Uran Botobekov

Doctor of Political Science (PhD), expert on Political Islam

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