Russian invasion of Ukraine aggravates poverty in Central Asia, Caucasus

ALMATY -- Central Asia, which was already facing a slide in employment and income due to the COVID-19 pandemic, is now dealing with the economic ramifications of Russia's invasion of Ukraine, say economists.

The war in Ukraine could raise poverty rates by about 1% across the Caucasus and Central Asia through its impact on inflation and remittances, the International Monetary Fund (IMF) wrote in a report published November 30.

"This implies that nearly an additional one million people could fall into poverty in the coming years. The poorest people in the poorest countries will bear the brunt of the war," the report said.

The inflation outlook in the region is dismal because of "the war's impact on global food and energy prices", which are now much higher than the average figures for 2021, the IMF said.

"High food prices are especially concerning for low-income families who have low savings and spend a higher share of their income on food -- as much as 60 to 70 percent in Azerbaijan, the Kyrgyz Republic and Tajikistan," it said.

In addition to grappling with inflation, residents are losing vital income.

For years, the economies of the countries of the Caucasus and Central Asia have depended greatly on remittances, which used to account for 10% to 30% of their GDP.

For the majority of these countries -- especially Kyrgyzstan and Tajikistan -- labour migration to Russia and the subsequent remittances were the main "industry" and ensured the stability of the economy.

For instance, migrant workers abroad sent $2.8 billion back to Kyrgyzstan in 2021, nearly all of that from Russia. Kyrgyzstan's GDP was $8.5 billion last year.

Citing past observations, the IMF pointed out that remittances from Russia correlate closely to Russia's GDP: "The higher the GDP, the higher the level of remittances."

Sustained sanctions on Russia for its invasion of Ukraine "could damage its productive capacity, leading to persistent changes in migration patterns and a drop in remittances from Russia".

"The fall [in remittances] could be significant given Russia's projected GDP losses, deeply affecting many families that rely on them as a source of income support," the IMF report said.

The IMF urged the leaders of the region's countries to "act now to prevent the war in Ukraine and the broadening sanctions on Russia from increasing poverty levels".

Exploiting Kyrgyz workers

Central Asian migrant workers, who already endure humiliation and extortion at the hands of Russian officials and employers, were among the first groups to feel the economic impacts of the Russian invasion.

Insan-Leilek, an NGO based in Razzakov (formerly Isfana), Batken province, Kyrgyzstan, with backing from the Friedrich Ebert Foundation, in late November published a report on the effects of the war in Ukraine on migrant workers in Russia.

Like the IMF report, the NGO found that a drop in income for migrant workers in Russia has in turn curbed remittances to Kyrgyzstan, and that has "negatively affected the standard of living" of the workers' families back home.

Almost half of the respondents in the NGO's study reported that their families in Kyrgyzstan had started to "experience financial hardship" as a result.

Many Kyrgyz migrants lost their jobs or saw a significant salary cut, while some never received the the wages owed to them, said Gulnara Derbisheva, the director of Insan-Leilek.

The majority of them were working in the service sector as taxi drivers, custodians and food service workers and in retail.

"Many migrants no longer see a future for themselves in Russia, and they're trying to go home or go work in another country," Derbisheva told Caravanserai.

Meanwhile, Russia has taken advantage of those who remain, attempting to send migrants to fight in Ukraine.

Ulukbek Kudaibergenov, a construction worker who returned from Moscow to his hometown of Tokmak, Kyrgyzstan, in October, told Caravanserai that he received a summons from the local draft bureau.

"I decided to leave Russia quickly because it could draft me into the war even though I'm a Kyrgyz citizen," he said.

"It is drafting many migrants from Central Asia by coercing them. The laws aren't being enforced there now."

"I'm the only breadwinner for my parents," he said. "What will happen to them if I'm drafted and I die on the front?"

Russian authorities are using every means at their disposal to draw migrant workers from Kyrgyzstan into military service, said Emil Dzhuraev, director of the Democratic Governance programme of the Soros Foundation for Kyrgyzstan.

"In Russia, especially during this crisis, compliance with the law is declining, even regarding foreigners," he said. "And government officials often violate those laws."

Punishment for Kazakhstan

Kazakhstan, the most prosperous republic in Central Asia, also has suffered acutely from Russia's war in Ukraine.

On four occasions this year, Russia has suspended the operation of the Caspian Pipeline Consortium (CPC), which it controls and through which Kazakhstan sends 80% of its export crude to Europe.

At every turn Moscow chalked the suspensions up to technical issues, but Western and Kazakh observers say the real reasons were political and included Russia's attempts to punish Kazakhstan for "displaying independence".

Amid Russia's invasion of Ukraine, Astana has refused to recognise the independence of the self-proclaimed Donetsk People's Republic and Luhansk People's Republic in eastern Ukraine, while also offering to help Europe resolve the energy crisis stemming from the shunning of Russian hydrocarbons.

With oil and gas accounting for 57% of Kazakhstan's exports, "even a short suspension of the CPC hits the country's economy," Adil Urmanov, a contributor to Caravan, an Almaty-based news site, wrote November 21.

Moreover, Moscow has lately been floating the idea of nationalising the CPC, in which American and European energy companies hold stakes of various sizes alongside Russia and Kazakhstan.

"Nationalising the pipeline could conceivably cause the Europeans to refuse to buy oil in Novorossiysk, where the CPC port is situated, and countries that do agree to buy this oil could be hit with sanctions," he said.

Russian nationalisation of the CPC could mean a loss of 5 trillion KZT ($10.6 billion) for Kazakhstan, Urmanov estimated.