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Central Asia Takes Economic Hit From Russian War In Ukraine Sooner Than Expected

A man stares in surprise at a board at an exchange office in Bishkek on February 24.
A man stares in surprise at a board at an exchange office in Bishkek on February 24.

As the ruble tumbles amid the unprecedented Western sanctions being levied on Russia, remittance-dependent households in Central Asia are taking a big hit.

In the Tajik city of Khujand, retired teacher Usmonkhon Oqilov visits his local bank branch near the Rohi Abreshim bus station once a month to collect the 20,000 rubles (about $220) his migrant worker son sends from Russia.

Late in the afternoon on February 28, it cost nearly nine rubles to buy a somoni, the Tajik currency, nearly a 20 percent dip for the Russian currency in just a few days.

"The cashier told me that I would have gotten more money in the somoni had I come a few days earlier, because the rate was seven rubles against the somoni then," Oqilov tells RFE/RL. "I'm upset, but how would I know?!"

With close economic ties and millions of migrants working in Russia, it was widely expected that Central Asia would see the negative impact of Russia's war in Ukraine and the Western sanctions that followed to punish Moscow for the unprovoked invasion.

But that impact came a lot sooner and hit much harder than most predicted. It dealt a swift, serious blow to the region's currency market that had already been very volatile in recent weeks as the Ukraine crisis escalated.

Even the region's largest economy, energy-rich Kazakhstan, felt the strain as its national currency, the tenge, rapidly lost its value, largely following the ruble.

It prompted Kazakhstan's National Bank to inject $138 million from its currency reserves into the domestic market to ease pressure on the tenge just hours after Russia attacked Ukraine on February 24. In total, the National Bank invested $176 million last week to support the tenge amid the financial fallout from the war and the sanctions on Russia, Kazakhstan's key trading partner.

Another $98 million injection followed on February 28, although experts warned that the National Bank cannot support the tenge for long.

On March 1, Prime Minister Alikhan Smailov said the government and the National Bank had launched a joint action plan "aimed at maintaining control over inflation and stability in the foreign-exchange market, supporting employment and creating new jobs, [and] developing entrepreneurship."

A member of the Russian-led Eurasian Economic Union (EEU), Kazakhstan has strong political, economic, and trade ties with northern neighbor Russia. The trade turnover between the two countries was $21 billion last year.

Fellow EEU member Kyrgyzstan's som moves in sync with the ruble and therefore plummeted along with it. But Tajikistan and Uzbekistan actually saw the ruble fall in value against their national currencies.

Not much is known about the situation in secretive Turkmenistan, where the state media hasn't even mentioned the brutal war in Ukraine.

WATCH: Russian consumers are facing higher prices and fewer imported goods after Western sanctions over Moscow's invasion of Ukraine sent their currency, the ruble, plummeting.

Russians 'Not Happy' About Plunging Currency As Ukraine Sanctions Bite
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0:00 0:01:25 0:00

Poorer Neighbors

The weaker ruble means less money for millions of households who depend on remittances from Russia, the main destination for Central Asian migrant workers.

According to Russian government figures, more than 7.8 million migrants from Uzbekistan, Tajikistan, and Kyrgyzstan were registered Russia in 2021, citing "work" as their reason for entering the country. More than 4.5 million of them were from Uzbekistan, some 2.4 million from Tajikistan, and nearly 900,000 from Kyrgyzstan.

The remittances accounted for 30 percent of Tajikistan's gross domestic product (GDP) and nearly 28 percent of Kyrgyzstan's GDP last year, according to the World Bank. Uzbekistan, the most populous country in Central Asia, received about $7.6 billion -- 11.6 percent of the country's GDP -- in remittances between January and November 2021. Russia accounted for most of the money sent from abroad.

According to Russian government figures, more than 7.8 million migrants from Uzbekistan, Tajikistan, and Kyrgyzstan were registered in 2021.
According to Russian government figures, more than 7.8 million migrants from Uzbekistan, Tajikistan, and Kyrgyzstan were registered in 2021.

The World Bank predicted late last year that remittances to the region would increase by 3.8 percent in 2022. The war in Ukraine has, of course, altered that forecast.

The labor migration season in Russia hasn't yet peaked, but several million Central Asian workers are believed to already be there. Many others have purchased their plane tickets for March and April.

There is not yet any panic in Central Asia about the situation in Russia and its potential impact on the migrants. But people say they're beginning to worry.

On February 24, several charter flights from Tajikistan to Russia were cancelled and many scheduled flights suspended at least until March 2, RFE/RL's Tajik Service reported. "Flights to six or seven Russian cities, including Krasnodar, Rostov-on-Don, Voronezh, and other places close to the Ukrainian border have been halted," it reported, citing the Dushanbe ticket office.

"I worry that there will be less jobs in Russia this year, especially for those who get seasonal work, like building or renovating privates houses or cottages," says Malohat, a resident of the Asht district in northern Tajikistan.

Such jobs are popular with many Tajik and Uzbek migrants who want to work only for some months in Russia and return home during the cold season.

Malohat and her husband, both in their early 40s, had worked in a private cottage in the Orenburg region for several years. She says their job -- which lasted from May to mid-September -- mainly consisted of cleaning, taking care of the vegetable garden, and cooking for the cottage owners, who visited during weekends and vacations.

"There were Tajiks and Uzbeks working in the cottages in our neighborhood that belonged to not very rich but relatively [well-off] Russians," Malohat said on February 28. The couple is planning to go to Russia in May and hope middle-class Russians like their previous employer will still be able to afford domestic workers.

Most migrants will stay in Russia, as there are few prospects back home.
Most migrants will stay in Russia, as there are few prospects back home.

In Khujand, Oqilov is more concerned about the value of the plummeting ruble. The remittances are sent in rubles, but Tajik banks release them in the local currency.

A portion of the 20,000 rubles he gets from his son in Russia every month goes to repay installments of the bank loan his son got to buy a ticket to Russia in August 2021.

The rest, Oqilov says, is for food and other living costs for the big family that includes Oqilov's wife, their daughter-in-law, and three grandchildren. His construction worker son has been hoping there would be more work and a bigger income when it gets warmer in Russia.

"I don't know what we'll do if the ruble falls badly, or if there won't be more work for my son because of that war. We must pay our loan back. Perhaps, we'll have to eat less. I don't know," Oqilov said.

RFE/RL contacted Oqilov's son, Alisher, in Surgut to ask about his plans. He said he hadn't yet felt any changes in his everyday life in Russia but, "like any other person," is worried about how the situation will unfold.

"The only thing I'm sure about is that I will stay in Russia even if the ruble falls further, or I'd have to work more hours, because I don't have a better alternative at home," Alisher said.

"If the [economic] situation gets bad in Russia it will be even worse in Tajikistan."

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    Farangis Najibullah

    Farangis Najibullah is a senior correspondent for RFE/RL who has reported on a wide range of topics from Central Asia, including the impact of Russia’s invasion of Ukraine on the region. She has extensively covered efforts by Central Asian states to repatriate and reintegrate their citizens who joined Islamic State in Syria and Iraq.

RFE/RL has been declared an "undesirable organization" by the Russian government.

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