Kazakh Currency Crisis Threatens Eurasian Economic Union

The Kazakh tenge has fallen to a degree that threatens the viability of a theoretical Russian-led “ruble zone.” The monetary project, which has come under increased scrutiny in light of recent events in Crimea, has been championed by Russian President Vladimir Putin along with his contemporaries in both Belarus and Kazakhstan as the economic accompaniments to the Customs Union’s political provisions. Among the factors that have significantly weakened the union of post-Soviet economies figure prominently the pending default of the Ukrainian economy, a Russian ruble that continues to descend in value, and the adjoining devaluation and ongoing crisis surrounding the Kazakh tenge.

The Kazakh tenge was devalued by the Kazakh Central Bank back in February, in a reactive moved geared to maintain trade and export relevance vis-à-vis Russia. The Kazakh Central Bank has preeminently warned of future “high devaluation expectations” due to the precarious status of the Russian economy. As the ruble continues to be marked by uncertainty and fluctuating rates of exchange, the market for Kazakh commodities exported to Russia will weaken, as their automatically increase, which, in turn, will engender further devaluation of the tenge and increased economic unease throughout Kazakhstan.

Ukraine, whose status as possible member of the Customs Union was quickly overturned last month, has been predicted to default on more than $3b in Eurobonds that it had sold to Russia months before the current crisis. In February, Standards & Poor’s lowered Ukraine’s long-term rating status in light of what it viewed as an impending default. The Ukrainian government has affirmed that it will repay the debt in spite of rumors of further Russian occupation of Ukraine, though many doubt the government’s ability to do so without significant foreign help.

News Briefs:

  • Hamid Karzai has appointed Tajik Yunus Qanooni as interim Vice President to replace Mahommed Fahim, who died on March 9 of heart failure. Like Fahim, Qanooni rose to prominence as part of the Northern Alliance. He is notably less senior than Fahim, who took control of the loose conglomeration of militias whenAhmed Shah Massoud was killed in a bombing two days before the terrorist attacks on 9/11 by the Taliban. Afghan and American officials had been counting on Fahim’s seniority and respect to keep order in the case of a Pashtun victory in the election on April 5. Fahim commanded a great deal of support from the military and intelligence services (who are notably mostly Northern Alliance themselves) and Qanooni has fewer connections that would enable him to assist in governing.
  • The ruling Kyrgyz political party, Ata-Meken (or “Fatherland”) has withdrawn from the government coalition, effectively dissolving the current government, which was formed after protestors overthrew ex-president Kurmanbek Bakiyev. Current Prime Minister Zhantoro Satybaldiyev has been deprived of much of his power. The current rows in the Kyrgyz Parliament originated over accusations of corruption, accusing the prime minister of “abuse of office, and misappropriation of state and foreign funds and aid” when he was in charge of returning the notoriously violent South to peace during the riots of 2010. This means the current acting government must elect a new premier in three consecutive votes, or the parliament is in danger of being disbanded by current president Almazbek Atambayev.
  • Ukrainian troops are planning to withdraw completely from Crimea after more Ukrainian bases were taken over by Russian troops and local militias. Andriy Parubiy, head of the national defense and security council for Ukraine, declaredshortly after Ukrainian naval HQ at Bakhchisaray was taken over, that over 25,000 Ukrainian troops and their families would be moved “quickly and efficiently to mainland Ukraine.” Additional visa restrictions for Russians travelling to Ukraine have been announced by Putin, marking the first time that visas have been required to visit the country since the Soviet Union was disintegrated. Ukraine alsoannounced it is leaving the Moscow-led Commonwealth of Independent States military alliance, planning on military exercises and war games with British and American forces.
  • Reports of the death of so-called Russian “bin Laden” Doku Umarov were corroborated yesterday by sympathetic websites. His death was reported officially by the Russian government before the Sochi Olympics as a way to reassure the concerns that the events would be the targets of terrorist attacks. Umarov was responsible for successive attacks in 2009 and 2010 on the Moscow subway, and aimed to establish a Caucasian caliphate and united militant groups in Chechnya, Dagestan, and the northern Caucasus region in 2007. However, this is not the first time Umarov has been declared dead by Russian authorities, though as the BBC notes, the source makes the reports of his deaths more reliable.

 

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