Newspaper article The Christian Science Monitor

Russia's Chill Felt in Former Soviet States from the Baltics to Central Asia, Nations Still Partly Dependent on Russia Feel the Economic Downturn

Newspaper article The Christian Science Monitor

Russia's Chill Felt in Former Soviet States from the Baltics to Central Asia, Nations Still Partly Dependent on Russia Feel the Economic Downturn

Article excerpt

The foundering of Russia's economy is radiating throughout the former Soviet Union, with a wave of devaluations, stockpiling of food, runs on banks, job losses, and general anxiety.

Seven years the collapse of the union, many former Soviet states are still tightly linked to Russia economically, with their currencies tied to the heretofore stable ruble.

Moscow's bank defaults and stricken ruble are reverberating from the Baltics to Central Asia.

"Russia's economic situation is extremely dangerous for all these countries, because they are still in Moscow's periphery," says Sergei Kazyenov, a regional specialist at the Institute of National Security and Strategic Research in Moscow. "There is not a single CIS or Baltic country that can gain from Russia's crisis." The Commonwealth of Independent States (CIS) consists of Russia and 12 neighboring countries that were once part of the Soviet Union.

Central Asian CIS countries are looking at reorienting trade toward China. The Baltic states, not CIS members, and Ukraine are more actively courting the West.

Former Soviet States Feel the Cold Wind of Russia's Economic Crisis

Those already hurting most financially are Ukraine, Armenia, and Belarus. Even the oil producers - Turkmenistan, Azerbaijan, and Kazakstan - are not completely buffered by their dealings with the West.

Latvia, Lithuania, and Estonia are in the best position, because they are not connected as tightly to Russia's economy as the other former Soviet republics. But a large portion of the Baltic countries' exports goes east to Russia, and their ports depend on transit business.

Nearly every CIS currency has lost value in recent weeks, directly linked to the ruble's fall. Economists say that some states will eventually suffer more than Russia, because they have weaker economies.

A big casualty may be integration moves inside the CIS itself, says Kazak President Nursultan Nazarbayev. A summit of five countries seeking greater integration - Russia, Kazakstan, Kyrgyzstan, Belarus, and Tajikistan - will be postponed.

Danger of instability

The impact of Russia's turmoil could be political as well as financial. With separatist tensions in Georgia and Azerbaijan and civil war in Tajikistan, there is a danger that economic instability will drive insurgents deeper into battle or the arms of Muslim radicals.

Here's how Russia's crisis has affected its close neighbors so far:

Ukraine is a leading victim. Nearly all its gas is imported from Russia, which accounts for roughly 40 percent of Ukraine's external trade. Ukrainians who work in Russia, especially in the construction market, now face unemployment.

On Sept. 4 Ukraine effectively devalued its hrvyna currency, widening the foreign-exchange corridor to 2.5-3.5 to the dollar from 1.8-2.25. Panicked Ukrainians have rushed to buy dollars and staple goods. Gasoline prices have soared 60 percent and food prices at least 20 percent.

Moody's rating agency has downgraded Ukraine's currency bonds, owing to a drop in gold and currency reserves.

The only good news is a $2.2 billion loan approved by the International Monetary Fund.

Belarus, Russia's closest partner in the CIS, is taking a major beating. The zaichik currency collapsed along with the ruble, and citizens are stockpiling food. Russia supplies all of Belarus's oil and gas and most of its electricity.

Moldova's agrarian economy looks to Russia as its main export market. It relies on imported energy from Russia, too. President Petru Lucinschi estimates that so far Russia's financial crisis has cost Moldova 5 percent of its gross domestic product (GDP last year was about $1. …

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