Russia has pledged to finance a rescue fund to bail out its allies within the Eurasian Economic Community (EEC), as those former Soviet states now face an increasingly adverse economic environment against the background of the continuing global financial meltdown.
At a summit meeting in Moscow, the EEC leaders approved a plan to create a $10 billion rescue fund to help soften the effects of the global financial crisis. Russia pledged to contribute $7.5 billion to the bailout fund, Kazakhstan promised $1 billion, and the rest will come from the other member states.
The EEC membership consists of Russia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan, while Armenia, Moldova, and Ukraine have observer status. Moscow used to have a 40 percent quota in the EEC voting and financial responsibilities; Kazakhstan, Uzbekistan and Belarus had 15 percent each; and Kyrgyzstan and Tajikistan had 7.5 percent.
A new quota distribution has not been announced following Uzbekistan's suspension of its EEC membership last November. By pledging, however, to underwrite 75 percent of the proposed bailout fund, Russia has apparently moved to exceed its financial allocation.
Uzbekistan spent less than three years in the EEC after formally joining it in January 2006. In November 2008 it suspended its membership, citing economic considerations. Tashkent complained that the EEC had been created around the planned customs union of Belarus, Kazakhstan, and Russia and that other EEC member states were supposed to join the customs union arrangements without any discussions. Nonetheless, on February 6 EEC Secretary General Tair Mansurov said the group had experienced no problems following Uzbekistan's withdrawal (Interfax, Regnum, RIA Novosti, February 6).
The Kremlin appeared keen to avoid the impression that Moscow was about to offer economic aide to its EEC allies. The rescue fund would issue stabilization loans on terms acceptable to borrowers but similar to those of loans from international financial organizations, Russian President Dmitry Medvedev said. He made it clear that Russia would be in control of the EEC anti-crisis fund (Interfax, RIA Novosti, February 4).
EEC officials tried to present the rescue fund as a multilateral effort, rather than a Russia-dominated facility. On February 6 Mansurov announced that the rescue fund would be managed by a board that included six finance ministers. Member states would contribute 10 percent of the pledged funds in cash and the remaining 90 percent in promissory notes, he said (Interfax, Regnum, RIA Novosti, February 6).
The EEC also moved to have an existing banking institution be involved in the new rescue scheme. The EEC council decided that the rescue fund would be jointly managed by the fund's board and the Eurasian Development Bank (EDB), the EDB said in a statement on February 6. The EDB would fund multilateral projects from the rescue fund, according to the announcement (Interfax, February 6). The EDB was created jointly by Russia and Belarus in January 2006 with a chartered capital of $1.5 billion.
The EEC leaders also indicated that the Moscow meeting was just another move toward the stated goal of the customs union. On February 4, at a meeting with Medvedev, Kazakh President Nursultan Nazarbayev made it known that the customs union between Russia, Belarus, and Kazakhstan would be completed by the end of 2009. He also said that integration would help post-Soviet states deal with the crisis (Interfax, RIA Novosti, February 4).
Mansurov stated that the customs union of Russia, Belarus, and Kazakhstan would be formally created by 2010. Kyrgyzstan and Tajikistan would be able to join the union as soon as their economies and legislation were prepared for the move, he said.
Yet even before the proposed customs union is finalized, the group has moved to create the Customs Union Commission. On February 4 Russian economist and former politician Sergei Glaziev was appointed Executive Secretary of the Customs Commission of the Customs Union (RIA Novosti, February 4).
The EEC summit meeting in Moscow apparently did not discuss other integration ideas put forward by Kazakhstan's leadership, notably the creation of a Eurasian Economic Union, an idea first suggested by Nazarbayev. It was understood that the February meeting would refrain from discussing any of Kazakhstan's earlier initiatives or any potentially divisive issues, such as joint currency policies and Central Asian water resources.
Last year the EEC nations reported positive economic results. In 2008 the Belarus GDP was up 10 percent over the previous year, Tajikistan was up 7.9 percent, Kyrgyzstan 7.6 percent, and Russia 5.6 percent, while Kazakhstan has yet to announce its GDP data, according to the CIS statistical committee. Increasing inflation, however, is an ominous sign for the EEC economies. Last year Belarus reported an annual inflation rate of 14.8 percent, Tajikistan 20.4 percent, Kyrgyzstan 24.5 percent, Armenia 9 percent, Russia 14.1 percent, and Kazakhstan 17 percent (Interfax, February 4).
Russian officials expressed the hope that the economic problems could facilitate closer EEC integration. The global economic crisis would push former Soviet states to achieve closer economic and political integration, maintained Sergei Mironov, speaker of the Federation Council, Russia's upper house of parliament. At the same time, he conceded that most post-Soviet economies remained undiversified and commodities-based and post-Soviet currencies had already become adversely affected (Interfax, February 4).
Currency problems have emerged as a matter of concern for the EEC states. The Russian ruble has lost nearly 40 percent of its value against major currencies since last September. Earlier this year, the Belarusian ruble was devalued by 20 percent.
In January 2009 Kazakhstan spent $2.7 billion to defend the national currency, the tenge; but on February 4 the national bank abandoned its policy of supporting the tenge, which resulted in a 20 percent devaluation. Furthermore, in the first week of February, Kyrgyzstan's currency, the som, lost some 10 percent of its value; and in the past month the Tajik somoni has also dropped by about 10 percent.
The EEC nations have come to face increasingly difficult economic problems. It remains to be seen whether the proposed $10 billion rescue fund will suffice to deal with these crises.