Bloomberg View’s Leonid Bershidsky observes that the collapse of multiple currencies in the former Soviet Union can be traced substantially to instability from the Russian-Ukrainian conflict and from Russia’s conflicts more broadly. The costs of integration seem high.
The Moldovan leu lost more against the U.S. dollar last week than in all of 2014. The tiny nation, squeezed between Ukraine and Romania, could no longer handle a deep structural imbalance in its economy. It buys about 70 percent of all its consumer goods from abroad, so its imports are about twice as high as its exports. The shortfall was partly covered by remittances from migrant workers, which reached $1.61 billion last year. In the fourth quarter, however, the remittances fell by 20 percent, because many of the Moldovan migrants work in Russia, and as the ruble lost value, they weren’t able to send as many dollars and euros home. Moldova’s exports to Russia almost halved last year, both because of the latter’s economic problems and because Moscow was trying to pressure Moldova to stay within its economic orbit rather than integrate with the European Union.
Adding to these problems, the previous Moldovan government spent part of its meager foreign reserves to bail out three large banks, a move the country’s leftist parliamentary opposition described as a money-laundering scam. Moldova’s international reserves now stand at less than $2 billion, their lowest level since 2011. The leu devaluation is likely to continue because there’s no plausible way to stop it.
The core of Azerbaijan’s problem is that it’s an oil exporter. Since 2011, it had pegged its currency, the manat, to the U.S. dollar, but as the oil price fell, the peg became expensive to maintain. On Jan. 31, the country’s foreign reserves stood 11 percent lower than a year before. The devaluation would not have needed to be as sharp as it was, however, if Russia hadn’t been the country’s biggest export market. Those exports fell sharply last year — by 30 percent in the third quarter, the last one for which data are available.
As for Georgia, its exports to Russia actually increased last year, at least in the period for which the IMF has data. Yet exports to Ukraine, which had become a major trading partner when Georgia’s relations with Russia were particularly strained last decade, have fallen by about half over the past year. In total, Georgia’s exports in January were 20 percent lower than the year before. For this tiny economy with less than $2.5 billion in foreign reserves, that drop made devaluation inevitable.
Belarus, Russia’s closest ally, is completely dependent on Moscow for extra-cheap energy imports. So it predictably suffered more than others — except Ukraine — when Russia effectively started a price war with its neighbors by devaluing its currency.blockquote>