Nachricht | Central Asia - Ukraine Crisis The Collateral Damage of Russia’s War

Western sanctions against Russia are having dramatic impacts across Central Asia

Information

Das ausgebrannte Gebäude der Stadtverwaltung von Almaty nach den Unruhen im Januar 2022. Das vormals als relativ stabil geltende Kasachstan hat sich sozioökonomisch als brodelndes Fass erwiesen. Foto: Rasul Nazyrov / IMAGO / SNA

The sanctions imposed on Russia by the West in response to the invasion of Ukraine are the subject of heated controversy: while some support them as a non-militarized way to put pressure on Russian President Vladimir Putin, others stress that sanctions often affect the poorest members of a population and furthermore can serve to aggravate conflict.

However, what barely gets mentioned in discussion of the sanctions policy is the collateral damage to countries that have close economic ties to Russia. Countries in Central Asia are particularly affected. Western sanctions, which have caused the rouble to plummet, are having dramatic consequences for economies and populations there — and will potentially politically destabilize the former Soviet republics.

Leonie Schiffauer works for the Rosa Luxemburg Foundation as a senior advisor for East, South and Central Asia. She holds a PhD in Social Anthropology from Cambridge University. 

Translated by Sam Langer and Michael Dorrity for Gegensatz Translation Collective.

Currency Collapse and Trade Problems

The Central Asian economies are closely intertwined with Russia, which is one of the region’s main investors and its most important trading partner. Through their membership in the Eurasian Economic Union, Kazakhstan and Kyrgyzstan have especially close economic ties to the country. The volume of trade between Russia and Kazakhstan alone amounted to 25.6 billion US dollars last year. Kazakhstan also imports 70 percent of its commodities from Russia. As a result of this close interconnection, the financial stability of the Central Asian states directly depends on the state of the Russian economy.

Following the fall in the rouble, the currencies of Kazakhstan, Kyrgyzstan, and Tajikistan also lost considerable value. The Kazakh tenge has been hit particularly hard, falling by 20 percent. Prices for basic foodstuffs and gasoline are already on the rise, and there are mounting concerns about inflation and the disruption of supply chains.

Russia has already announced that for the time being it will no longer export grain and sugar to the member states of the Eurasian Economic Union. This puts Kazakhstan and Kyrgyzstan in particular, dependent on Russian imports, in an extremely difficult situation. However, the market in Tajikistan is also suffering — there, prices for some foodstuffs, including flour and sugar, have risen by almost 30 percent. The fact that Russia has also restricted fertilizer exports is also likely to become a problem for agriculture in the Central Asian republics in the long term. There are also fears of supply bottlenecks for medical products, of which Kyrgyzstan, for example, imports up to 60 percent via Russia and Ukraine.

In Kazakhstan, the economic situation could be further aggravated by the fact that the country's oil exports, accounting for 14 percent of gross domestic product and 57 percent of the export economy, are mainly routed through Russia. The CPC pipeline, which transports the majority of exports, runs from western Kazakhstan through southern Russia to the Black Sea terminal in Novorossiysk. Its proximity to the Ukrainian war zone, particularly Mariupol, means that the cost of insuring supply is skyrocketing, driving up prices.

Oil buyers also fear that the US and EU will impose an import ban on Russian oil. Since ten percent of the pipeline’s oil comes from Russian oil fields and is then transported mixed with Kazakh oil, traders could be left sitting on their oil as a result. In addition, the pipeline is co-owned by Russian companies and it is currently unclear whether it will be affected by direct sanctions.

There is clearly a similar problem in terms of other exports, as well. European ports have reportedly already refused cargo, originating in Kazakhstan, that had been transported via Russia.

Dependence on Labour Migration

Labour migration is an essential economic factor in Central Asia. In 2021, more than 7.8 million people from Central Asia were registered in Russia as migrant workers — 4.5 million from Uzbekistan, 2.4 million from Tajikistan, and 900,000 from Kyrgyzstan. According to figures from the World Bank, in the past year money transfers from abroad (primarily Russia) made up more than one quarter of Kyrgyzstan and Tajikistan’s GDP. Often, entire families are economically dependent on the support of their relatives working in Russia.

Sanctions imposed on Russia as a result of its annexation of Crimea already had a profound impact on the region in 2014 (Tajikistan was the hardest hit, with money transfers halving between 2013 and 2016). Because of the far more comprehensive sanctions that have now been imposed, it is to be feared that the Central Asian states could be hit even harder this time.

In addition, the dramatic fall in the rouble means that remittances are worth far less and are often no longer sufficient to cover even basic needs. Especially in countries like Tajikistan, where very little support can be expected from the state, large sections of the population now face the prospect of lacking essential supplies.

Since the beginning of the Russian invasion of Ukraine, many migrant workers have lost their jobs or fear that they will not be able to find any subsequent employment. The labour markets in their countries of origin do not usually offer them viable alternatives. And finally, labour migration is now made more difficult by the extensive cancellation of flights to Russia. Especially in spring — when many migrant workers tend to leave for work in the Russian construction industry — this fact will create tremendous difficulties for families in Kyrgyzstan, Uzbekistan and Tajikistan.

Are the Sanctions Destabilizing an Entire Region?

Not least because of their high degree of economic dependence, the governments of the Central Asian states have been rather subdued in their reaction to Russia’s war of aggression, and have voiced no public criticism. Uzbekistan’s government has taken a neutral stance. Tajikistan and Turkmenistan have made no statement. The president of Kyrgyzstan, Sadyr Japarov, expressed understanding for the assault (at which Ukraine withdrew its ambassador to Kyrgyzstan) but has subsequently taken no clear position.

Kazakhstan, meanwhile, declared that it would not recognize the Donetsk and Luhansk People's Republics as independent states and refused Russia’s request to send troops to Ukraine. Precisely this statement by Kazakhstan is remarkable in view of the fact that Russia sent troops to the country as recently as January of this year to stabilize the political situation during the uprising there. This may reflect fears that Kazakhstan could find itself in a similar position to Ukraine in future, precisely because of its border with Russia and in view of statements made by Putin in 2014 that called Kazakhstan's statehood into question.

The economic consequences of the sanctions policy for Central Asia could also be accompanied by political destabilization of the region. Kazakhstan, considered relatively stable until the January events in which 225 people died, has proven to be a ticking socio-economic time bomb. Even in the proportionally richest Central Asian country, climbing prices and the disappearance of jobs, particularly in the oil industry, could provoke further unrest.

In the economically weakest countries of the region, Kyrgyzstan and Tajikistan — already suffering in the wake of the pandemic — economic woes will dominate. It is already evident that the lack of earning opportunities via labour migration — as well as the devaluation of money earned in Russia — will bring about enormous hardship. In the entire region, it will thus be the poorest whom the sanctions will affect the most.

The decision to impose sanctions against Russia is an entirely understandable reaction to Russia’s war of aggression. However, the question of which sanctions make sense should not only be discussed with regard to Russia. The collateral damage that will be inflicted on neighbouring countries needs to be taken into account. They are not responsible for the war and, in spite of all the attendant difficulties, do not want to participate in it.