Monday, December 15, 2014

Window on Eurasia: Russia’s Economic Problems Exacerbating Moscow’s Relations with Republics, Tatar Analyst Says

Paul Goble


            Staunton, December 15 – Russia’s economic problems combined with Moscow’s insistence on extracting just as much money from the regions as it did before is exacerbating relations between the center and the republics and prompting the latter to reconsider their attitude toward Russia as a whole, according to a Tatar analyst.


            A Kazan analyst who blogs under the name European Tatarstan says that declines in the ruble exchange rate, the collapse of the Russian stock market, and falling prices for oil all are having a significant impact on life in his Middle Volga republic and that that impact will only grow in the coming months (


            Despite official claims that the devaluation of the ruble will help the residents of the Russian Federation, he says, “the growth in prices as a result of the fall of the exchange rate of the federal currency are affecting absolutely everything, not just imported goods but also those produced in the Republic of Tatarstan and the Russian Federation.”


            That is because, he continues, goods in Russia are in fact of one of two categories: they are either imported or they are quasi-imported.  The latter consists of goods that are produced using foreign components or foreign equipment. And as the prices for those rise as a result of the ruble’s decline, so too will the prices for these goods.


            That is hitting small and mid-sized businesses in Tatarstan and elsewhere, forcing them to choose between raising their prices and losing customers as a result or seeing their profits decline or even disappear altogether.


            The impact of the collapse of the Russian stock market is similar, European Tatarstan says. Even as the majority of markets around the world are growing, Russia’s is falling. And that is hitting the firms of Tatarstan hard.  Tatneft has lost more than 40 percent of its value, and many Tatar firms are not the subject of any trading at all.


            And the declining price of oil is hitting the republic budget hard and from two directions. On the one hand, because Tatarstan gets most of its income from the sale of oil, it is facing a serious budget crisis given that Kazan drew up its budget on the basis of its estimate of world prices for oil at 100 US dollars a barrel, some 40 US dollars more than its oil is bringing now.


            On the other, Moscow is still seeking to extract from Tatarstan as much money as it did in the past, especially since its budgetary plans were also based on an oil price that is unlikely to be seen anytime soon.  That puts Kazan between a rock and a hard place, with few good choices available at least immediately.


            “All this shows,” the analyst concludes, “that in the next year, Tatarstan will encounter very serious economic challenges.” Moscow isn’t going to be able or willing to help.  As a result, the Tatars are going to have to cope on their own. The sooner they recognize this and begin to act on it, the better.


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