Wednesday, September 24, 2014

Window on Eurasia: Russian Economic Problems Hitting Central Asia Hard, Opening the Way for China

Paul Goble


            Staunton, September 24 – The economic problems of the Russian Federation, some of which have been exacerbated by the sanctions and counter-sanctions regime, are now spreading to some Central Asian countries because of a fall-off in transfer payments home by gastarbeiters in Russia and by Moscow’s inability to pay for investment in that region.


            That is the conclusion of analysts at the European Bank for Reconstruction and Development and of Moscow experts, some of whom believe that the EBRD has overstated the problem to discourage Central Asian countries from cooperating with Russia but others of whom think that it has not (


            In an article in yesterday’s “Nezavisimaya gazeta,” Viktoriya Panfilova, who follows developments in the CIS, notes that the EBRD says that to date, Tajikistan and Kyrgyzstan have been hit hardest but “any further weakening of the Russian economy as a result of sanctions will be reflected in a slowing of economic growth” in the region as a whole.


            Nabi Ziyardullayev, the deputy director of the Moscow Institute for Problems of the Market, explained why. Tajikistan and Kyrgyzstan are “closely connected with the Russian economy and very weakly tied to the Western one,” especially with regard to transfer payments home which in the case of Tajikistan may amount to 10 billion US dollars a year.


            This pattern means two things, he suggested. On the one hand, “Russia will not receive any particular dividends” for five to ten years if the Central Asian countries join the Eurasian Economic Union. But on the other, “it will win on the geopolitical level from the broadening of the alliance.”


            Another Moscow expert, Elena Kuzmina, who heads the economics of the post-Soviet states sector of the Moscow Institute of Economics, said that the EBRD figures may be an exaggeration intended to keep the Central Asians from joining the Moscow-led grouping. But she suggested that would prove unsuccessful because they have few choices but to do so.


            Moreover, Kuzmina pointed out, it is a mistake to view Central Asia as a single place. Each of the countries is different and presents Russia and indeed the outside world with a different set of challenges.  Most Russian investment is going into Uzbekistan and Kazakhstan because that is where the oil is; most transfer payments are going to Tajikistan and Kyrgystan.


            But the two Moscow analysts did agree on one thing: declining Russian investment in Central Asia at a time when China is dramatically increasing its investments there means that the re-orientation of the countries of that region toward China is going to accelerate, something that will have economic and political consequences long into the future.



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