Fri, Jan 23, 2015 - Page 9 News List

Russia’s ruble crisis threatens nations relying on remittances

The depreciation of the ruble is not only decreasing the amount sent home by workers from Caucasus and central Asia, but could also lead to political unrest

By Shaun Walker and Alberto Nardelli  /  The Guardian, MOSCOW

Russia’s ruble crisis is posing a major threat to nations along its southern fringe, whose economies rely heavily on billions of US dollars shipped home every year by their own citizens working within Russia.

The 50 percent drop in the ruble has not only decimated the value of remittances sent home by workers from the Caucasus and central Asia, but is discouraging migrants from staying in Russia to earn a salary for themselves and their families. According to data projections by the Guardian, based on World Bank figures, nine nations that rely heavily on cash sent home from Russia for their economic buoyancy could collectively lose more than US$10 billion this year because of the weak Russian currency.

“I’ve sacrificed starting a family, I’ve sacrificed any kind of normal life to work here, and now I’m only able to send home a few hundred [US] dollars a month,” said Aziz, who works at a car repair plant in northern Moscow.

His regular job and some moonlighting as a cab driver has typically earned him about US$900 per month to send home to his parents and sisters, who live in the Fergana valley in Uzbekistan. Now he is lucky to earn half that sum.

“I’m starting to think there is not much point in staying. Life is miserable enough here anyway, the only reason to be here was for the money. I think it could be time to go home,” he said.

Aziz is not the only person thinking about leaving. As the economic situation in Russia deteriorates, authorities have also introduced a new harsher system for obtaining work permits for migrant workers. Currently, there are millions of citizens of former Soviet nations working illegally in Russia.

“So far people are not leaving en masse, mainly because they are worried they will not be able to come back,” said Gavkhar Dzhurayeva, who runs an organization offering free legal support to migrant workers. “However, lots of people are talking about it, if things don’t improve.”

The tendency could be problematic for Russia too, which is expected to rely on immigrant labor for the formidable building projects as the nation prepares to host the 2018 World Cup.

According to the World Bank , 21 percent of Armenia’s economy, 12 percent of Georgia’s, 31.5 percent of Kyrgyzstan’s, 25 percent of Moldova’s, 42 percent of Tajikistan’s, 5.5 percent of Ukraine’s, 4.5 percent of Lithuania’s, 2.5 percent of Azerbaijan’s and 12 percent of Uzbekistan’s, rely on remittances.

These are some of the highest rates in the world. Of the five nations globally whose GDP is most reliant on these payments, three are former Soviet republics. In most of these cases money from immigrants in Russia comprises a significant portion of these inflows. About 40 percent of remittances to Armenia, Georgia, Moldova and Ukraine are from Russia, rising to 79 percent for Kyrgyzstan.

Already, the sharp decline in the ruble has forced currency devaluations in Turkmenistan this month, and speculation that Kazakhstan’s tenge might need a further devaluation against the US dollar after a 19 percent move in February last year.

The economies of the region are strongly tied together, with Belarus sending more than half of its exports to Russia, and the nascent Eurasian Economic Union supposedly tying together Russia, Belarus and Kazakhstan as a single bloc. Armenia and Kyrgyzstan have also joined. In addition to the plummeting ruble, these nations will also have to deal with a potentially huge shortfall in remittances, which cannot but have an effect on GDP.

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