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Eurasia Review
December 29, 2014 Monday
Crisis-Hit Russia And Three South Caucasus Musketeers - Analysis
By Mushvig Mehdiyev*
Relations between Russia and three South Caucasus countries -
Azerbaijan, Georgia and Armenia - have always had their ups and downs,
as politics tends to do, resulting in uneasiness in the region.
Russia is going through a tough period as a result of Western-applied
sanctions, that along with the falling price of oil and the
depreciating ruble, risks seeing Russia's woes travel south into the
Caucasus.
If that were to occur one might well ask what impact will Russia's
failing economy have on Azerbaijan, Georgia and Armenia ? How will it
further take its toll on the South Caucasus countries to the point
where they would start reconsidering their relations with the northern
giant?
Let's first take a brief tour to the root of the challenge facing the
world's largest country. The Ukrainian crisis made Russia discern the
first glimpses of the trouble waiting ahead when the Western forces -
Europe and U.S. - blamed it for escalating tensions in Ukraine during
the Maidan unrest. Russian authorities then rebuffed all accusations,
saying it was just trying to help Russians living in Ukraine.
Further actions by Russia revealed its active involvement in the
events in Ukraine as it annexed the Crimea peninsula in March, 2014,
prompting accusations from the West and the introduction of sanctions.
Given that a large number of Ukrainians aspire to integrate Europe
politically, Russia's intervention was labeled as an act of aggression
and Western forces vowed to back Ukraine. This does not seem to have
influenced Russia who is still reportedly involved in military
hostilities in eastern Ukraine, where it is backing the separatist
forces, according to the West's allegations. More than 1.7 million
children in conflict-torn areas of eastern Ukraine face an extremely
serious situation amid conflict and winter cold, according to UNICEF.
Although Russian President Vladimir Putin called the ongoing hardship
in his country an "unfavorable scenario" rather than accepting it as a
crisis, Moscow is trying to prevent the ruble turmoil from turning
into an economic catastrophe, and finds itself more isolated than at
any period over last 25 years.
The most recent exchange rate of the ruble against the US dollar is 57
rubles for one dollar. In addition to Western sanctions, the ruble's
overwhelming depreciation is reportedly linked to the global
depreciation in oil prices, which is a serious blow on Russia's
oil-oriented economy.
What should Azerbaijan expect from the Russian crisis? Azerbaijan's
relations with Russia has always cordial and at a relatively constant
and at a high-level.
Azerbaijan
Azerbaijan
Azerbaijan refused to join the Russia-lead Collective Security Treaty
Organization (CSTO) and Eurasian Economic Union (EEU), explaining it
with its preference to an independent course in political and economic
policies in the region, rather than bearing certain compulsory
responsibilities within a union. Positive feedback of that decision by
the Azerbaijani authorities was reflected in the International
Monetary Fund report about the impact of the Russian crisis on its
neighboring countries. The IMF claimed that Azerbaijan's economy will
be among those to have less and even intangible consequences of the
crisis in Russia.
"Both Europe and Russia are our good partners and neighbors, and we
cooperate with either side based on our national interests," said Ali
Hasanov, Head of Public and Political Department of the Presidential
Administration.
Hasanov noted that Azerbaijan sees Russia as a great player in the
region. He said Azerbaijan was not making a choice between Russia and
Europe.
Last August Russia announced it was closing its markets to European
products in retaliation to the "punishing" sanctions from the West.
Preventing Western food products from entering its markets, Russia
started to trust on more active involvement of its eastern partners by
increasing their export to Russian markets.
Azerbaijan is seen as one of the main exporters who can fill part of
the void in the Russian market after Moscow in a retaliatory move
banned European products. Foreign Minister Sergey Lavrov has even said
the fruits imported from Azerbaijan were much more tasty and
high-quality than the fruits brought from Europe.
Meanwhile, Azerbaijani officials are confident that the Russian
slowdown will not affect their economy given the stability of the
national currency, the manat. Indeed, President Aliyev has recently
said the fall in oil prices would not affect the country's economy,
due to stable rate of the national currency the manat based on strong
economic basis and well-thought economic policy.
In a nutshell, Azerbaijan's political and economic skills were not
seriously affected by the deepening crisis in Russia, so far.
Moreover, the "evil days" in the northern giant could not threaten
Azerbaijan to turn away from its neighbor and leave it alone in the
region.
Georgia
Georgia
But if relations between Baku and Moscow are cordial the same cannot
be said about Moscow and Tbilisi, who fought a brief , but bloody war
in August 2008, when Russia recognized the independence of Georgia's
breakaway South Ossetia and Abkhazia regions, causing a serious uproar
among Georgian authorities to cut diplomatic ties with Moscow.
Economic relations between the countries worsened in 2006, when Russia
banned the importation of Georgian wines, mineral water and
agricultural products, claiming low quality of such goods. The
measure, which Georgia described as politically motivated, came as
ties between the two former Soviet nations soured with the rise to
power of pro-Western Georgian leader Mikheil Saakashvili.
Russian-Georgian relations improved after the Georgian Dream Team took
power in 2012. This was characterized by Moscow's conciliatory
gestures towards Georgia, including the opening of the Russian market
to Georgian goods in 2013, resumption of direct flights, Tbilisi's
great willingness to contacts with Russia and its consideration of
Russia's some interests. This did not affect Russia's overall priority
for Georgia. Russia signed a versatile treaty with the breakaway
Abkhazia region in November to provide a multi-sided assistance to the
separatist regime, once more deteriorating the relented relations of
the two countries. Grigory Karasin, Russia's Special Envoy for
Georgian Issues, said the agreement with Abkhazia was Russia's respond
to Georgia's strong aspiration for European integration.
Political negotiations between Russia and Georgia are being held by
special representatives Grigory Karasin and Zurab Abashidze under the
Geneva Format of Talks, a coordinated negotiation framework to soften
the Russia-Georgia relations escalated after August 2008 war.
Georgia as a neighbor of Russia also has some predictions in regard to
the economic slowdown in Russia. First of all, as a small country, it
expects a smaller impact caused by Russia's troubling economy compared
to Germany, France and Italy, whose trade balance with Russia amounts
to tens of billions of dollars. Russia is the fourth major trade
partner of Georgia and the third main export market, particularly for
wine and mineral water.
If the Russian economy suffers from a sharp decline, the solvency of
Russian population will simultaneously drop to affect Georgia's export
potential, Georgian economic analysts worry. Moreover, there are
hundreds of Georgian citizens who work in Russia and send money to
their families. Soso Archvadze, an economic analyst, claims that the
deepening economic crisis in Russia threatens Georgian migrants with a
possible loss of jobs. Reduction in their income will seriously affect
money transfers to Georgia, which make up almost 60 percent of overall
remittances to the post Soviet country.
"Money transfers share one third of the Georgian residents' revenues
and roughly 14-15 percent of GDP. Nearly 60 percent of the total money
inflow comes from Russia. Therefore, Georgia should make a very
serious analysis and shift its focus to Asian markets. China, for
example, is a very attractive wine market due to its huge population,"
Archvadze said.
Georgia's national currency the lari faced a decline in its value in
recent days, which is reportedly linked to the Russian ruble's
devaluation. Nevertheless, Georgia is not threatened by financial
hassle given the sustainable support from the Western forces. Now, the
government is developing fundamental plans to build firm relations
with the European Union and NATO, accepting the west as a best roof
over its head amid aggressive Russian policy in the region. The
European Union ratified the Association Agreement with Georgia on
December 18, 2014, to push the post Soviet nation a step closer inside
Europe.
Armenia
Armenia
Armenia is most likely the main country to feel the fallout of the
Russian crisis.
It is a member of the Russia-lead Collective Security Treaty
Organization and the Eurasian Economic Union, having irreversible
obligations under the common rules of the alliances. Russian Foreign
Minister Sergey Lavrov said Armenia should resist the Western
sanctions along with Russia in any necessary circumstance.
Russian-Armenian political relations date back to very old times, as
Russia has always been accepted as the main strategic ally and "big
brother" of Armenia, reviewing South Caucasus nation's each step in
regional and even international policy.
In return to Armenia's long-lasting loyalty, Russia, as a chief
protector, pledges to ensure the South Caucasus country's security
(under the CSTO membership terms) and welfare (under the EEU
membership terms) in the region.
Russia is also an important regional player for Armenia in regard to
the Nagorno-Karabakh conflict. Amid its regular decentralization on
the peaceful resolution to the protracted conflict, Russia is a key
power to urge the South Caucasus country to stay committed to the
peaceful negotiations, since any turmoil in the region is a threat to
the northern giant's interests. Also, Russia is playing a dual role in
the region to keep the balance in military skills of Armenia and
Azerbaijan by selling weapons to the belligerents. But, anyway, a
peaceful end to the conflict is one of the key issues in regional
policy of Russia, a co-chair country of the OSCE Minsk Group, and
Armenia obeys Russia's instructions in regard to the Karabakh knot.
Any tremor in Russia's economy means an earthquake in the economy of
Armenia - this may be the best saying to express the mutual economic
ties of the two former Soviet nations. Russia is the top destination
for Armenian-made products, since nearly 85 percent of the overall
exportations are directed to Russia. Dependence on Russian markets
paralyzes Armenia's economy on the background of the modern crisis
hitting the northern giant. Weakening purchasing power in Russia,
which is a clear result of the crisis, inflicts painful blows on the
Armenian export.
"An unpleasant causal chain started in the Russian markets
simultaneously with the ruble's fall. Drop in purchasing power in
Russia decreased orders from Armenia," said Vaahn Lazarian, Co-owner
of the Armenian Wine Company, while Avag Harutunyan, Head of Armenian
Winemakers Union, revealed a $86,000 daily loss of the Armenian
winemakers in Russia given the financial tussle.
Over 2.2 million Armenians live in Russia today, according to the
Armenian Diaspora's data. Many of them are labor migrants, who left
Armenia to earn their life and provide for their family living in the
native land. The money transfers from migrant workers in Russia take a
considerable share in the South Caucasus country's income, making up
nearly 84 percent of the overall private remittances and 15.4 percent
or $1.6 billion of Armenia's Gross Domestic Product, the Central Bank
revealed.
The bank announced that the total transfers made by Armenian migrant
workers in Russia was nearly $146 million this year, which testifies
to a sharp fall by $11 million compared to the last year. Just in
October, the remittances from Russia has dropped by 20 percent.
Current dethronement of the Armenian dram started all while the
Russian ruble began to slide to an all-time low following the
isolating sanctions by the Western forces. Experts claim that
Armenia's tightening relations with Russia, amid the partnership
within the Eurasian Economic Union, show green light for future
challenges in its economy if Russia fails to tackle the deepening
economic hassle facing it. Economic experts believe that the prices in
the Armenian markets have taken a sharp rise this year ahead of the
New Year holiday season compared to the previous years, linking it to
the dram and ruble devaluation, as well as the dollar's significant
appreciation in the global market.
President Vladimir Putin promised to overcome the "unfavorable
scenario" in two years, maybe less. Amid the ongoing developments the
three South Caucasus nations will have to take the best stand not to
sink their ships in a battle of big powers.
* Mushvig Mehdiyev is a journalist at the Baku-based AzerNews
newspaper, and is engaged in developing regular analytical articles
about the South Caucasus region.
The post Crisis-Hit Russia And Three South Caucasus Musketeers -
Analysis appeared first on Eurasia Review.
December 29, 2014 Monday
Crisis-Hit Russia And Three South Caucasus Musketeers - Analysis
By Mushvig Mehdiyev*
Relations between Russia and three South Caucasus countries -
Azerbaijan, Georgia and Armenia - have always had their ups and downs,
as politics tends to do, resulting in uneasiness in the region.
Russia is going through a tough period as a result of Western-applied
sanctions, that along with the falling price of oil and the
depreciating ruble, risks seeing Russia's woes travel south into the
Caucasus.
If that were to occur one might well ask what impact will Russia's
failing economy have on Azerbaijan, Georgia and Armenia ? How will it
further take its toll on the South Caucasus countries to the point
where they would start reconsidering their relations with the northern
giant?
Let's first take a brief tour to the root of the challenge facing the
world's largest country. The Ukrainian crisis made Russia discern the
first glimpses of the trouble waiting ahead when the Western forces -
Europe and U.S. - blamed it for escalating tensions in Ukraine during
the Maidan unrest. Russian authorities then rebuffed all accusations,
saying it was just trying to help Russians living in Ukraine.
Further actions by Russia revealed its active involvement in the
events in Ukraine as it annexed the Crimea peninsula in March, 2014,
prompting accusations from the West and the introduction of sanctions.
Given that a large number of Ukrainians aspire to integrate Europe
politically, Russia's intervention was labeled as an act of aggression
and Western forces vowed to back Ukraine. This does not seem to have
influenced Russia who is still reportedly involved in military
hostilities in eastern Ukraine, where it is backing the separatist
forces, according to the West's allegations. More than 1.7 million
children in conflict-torn areas of eastern Ukraine face an extremely
serious situation amid conflict and winter cold, according to UNICEF.
Although Russian President Vladimir Putin called the ongoing hardship
in his country an "unfavorable scenario" rather than accepting it as a
crisis, Moscow is trying to prevent the ruble turmoil from turning
into an economic catastrophe, and finds itself more isolated than at
any period over last 25 years.
The most recent exchange rate of the ruble against the US dollar is 57
rubles for one dollar. In addition to Western sanctions, the ruble's
overwhelming depreciation is reportedly linked to the global
depreciation in oil prices, which is a serious blow on Russia's
oil-oriented economy.
What should Azerbaijan expect from the Russian crisis? Azerbaijan's
relations with Russia has always cordial and at a relatively constant
and at a high-level.
Azerbaijan
Azerbaijan
Azerbaijan refused to join the Russia-lead Collective Security Treaty
Organization (CSTO) and Eurasian Economic Union (EEU), explaining it
with its preference to an independent course in political and economic
policies in the region, rather than bearing certain compulsory
responsibilities within a union. Positive feedback of that decision by
the Azerbaijani authorities was reflected in the International
Monetary Fund report about the impact of the Russian crisis on its
neighboring countries. The IMF claimed that Azerbaijan's economy will
be among those to have less and even intangible consequences of the
crisis in Russia.
"Both Europe and Russia are our good partners and neighbors, and we
cooperate with either side based on our national interests," said Ali
Hasanov, Head of Public and Political Department of the Presidential
Administration.
Hasanov noted that Azerbaijan sees Russia as a great player in the
region. He said Azerbaijan was not making a choice between Russia and
Europe.
Last August Russia announced it was closing its markets to European
products in retaliation to the "punishing" sanctions from the West.
Preventing Western food products from entering its markets, Russia
started to trust on more active involvement of its eastern partners by
increasing their export to Russian markets.
Azerbaijan is seen as one of the main exporters who can fill part of
the void in the Russian market after Moscow in a retaliatory move
banned European products. Foreign Minister Sergey Lavrov has even said
the fruits imported from Azerbaijan were much more tasty and
high-quality than the fruits brought from Europe.
Meanwhile, Azerbaijani officials are confident that the Russian
slowdown will not affect their economy given the stability of the
national currency, the manat. Indeed, President Aliyev has recently
said the fall in oil prices would not affect the country's economy,
due to stable rate of the national currency the manat based on strong
economic basis and well-thought economic policy.
In a nutshell, Azerbaijan's political and economic skills were not
seriously affected by the deepening crisis in Russia, so far.
Moreover, the "evil days" in the northern giant could not threaten
Azerbaijan to turn away from its neighbor and leave it alone in the
region.
Georgia
Georgia
But if relations between Baku and Moscow are cordial the same cannot
be said about Moscow and Tbilisi, who fought a brief , but bloody war
in August 2008, when Russia recognized the independence of Georgia's
breakaway South Ossetia and Abkhazia regions, causing a serious uproar
among Georgian authorities to cut diplomatic ties with Moscow.
Economic relations between the countries worsened in 2006, when Russia
banned the importation of Georgian wines, mineral water and
agricultural products, claiming low quality of such goods. The
measure, which Georgia described as politically motivated, came as
ties between the two former Soviet nations soured with the rise to
power of pro-Western Georgian leader Mikheil Saakashvili.
Russian-Georgian relations improved after the Georgian Dream Team took
power in 2012. This was characterized by Moscow's conciliatory
gestures towards Georgia, including the opening of the Russian market
to Georgian goods in 2013, resumption of direct flights, Tbilisi's
great willingness to contacts with Russia and its consideration of
Russia's some interests. This did not affect Russia's overall priority
for Georgia. Russia signed a versatile treaty with the breakaway
Abkhazia region in November to provide a multi-sided assistance to the
separatist regime, once more deteriorating the relented relations of
the two countries. Grigory Karasin, Russia's Special Envoy for
Georgian Issues, said the agreement with Abkhazia was Russia's respond
to Georgia's strong aspiration for European integration.
Political negotiations between Russia and Georgia are being held by
special representatives Grigory Karasin and Zurab Abashidze under the
Geneva Format of Talks, a coordinated negotiation framework to soften
the Russia-Georgia relations escalated after August 2008 war.
Georgia as a neighbor of Russia also has some predictions in regard to
the economic slowdown in Russia. First of all, as a small country, it
expects a smaller impact caused by Russia's troubling economy compared
to Germany, France and Italy, whose trade balance with Russia amounts
to tens of billions of dollars. Russia is the fourth major trade
partner of Georgia and the third main export market, particularly for
wine and mineral water.
If the Russian economy suffers from a sharp decline, the solvency of
Russian population will simultaneously drop to affect Georgia's export
potential, Georgian economic analysts worry. Moreover, there are
hundreds of Georgian citizens who work in Russia and send money to
their families. Soso Archvadze, an economic analyst, claims that the
deepening economic crisis in Russia threatens Georgian migrants with a
possible loss of jobs. Reduction in their income will seriously affect
money transfers to Georgia, which make up almost 60 percent of overall
remittances to the post Soviet country.
"Money transfers share one third of the Georgian residents' revenues
and roughly 14-15 percent of GDP. Nearly 60 percent of the total money
inflow comes from Russia. Therefore, Georgia should make a very
serious analysis and shift its focus to Asian markets. China, for
example, is a very attractive wine market due to its huge population,"
Archvadze said.
Georgia's national currency the lari faced a decline in its value in
recent days, which is reportedly linked to the Russian ruble's
devaluation. Nevertheless, Georgia is not threatened by financial
hassle given the sustainable support from the Western forces. Now, the
government is developing fundamental plans to build firm relations
with the European Union and NATO, accepting the west as a best roof
over its head amid aggressive Russian policy in the region. The
European Union ratified the Association Agreement with Georgia on
December 18, 2014, to push the post Soviet nation a step closer inside
Europe.
Armenia
Armenia
Armenia is most likely the main country to feel the fallout of the
Russian crisis.
It is a member of the Russia-lead Collective Security Treaty
Organization and the Eurasian Economic Union, having irreversible
obligations under the common rules of the alliances. Russian Foreign
Minister Sergey Lavrov said Armenia should resist the Western
sanctions along with Russia in any necessary circumstance.
Russian-Armenian political relations date back to very old times, as
Russia has always been accepted as the main strategic ally and "big
brother" of Armenia, reviewing South Caucasus nation's each step in
regional and even international policy.
In return to Armenia's long-lasting loyalty, Russia, as a chief
protector, pledges to ensure the South Caucasus country's security
(under the CSTO membership terms) and welfare (under the EEU
membership terms) in the region.
Russia is also an important regional player for Armenia in regard to
the Nagorno-Karabakh conflict. Amid its regular decentralization on
the peaceful resolution to the protracted conflict, Russia is a key
power to urge the South Caucasus country to stay committed to the
peaceful negotiations, since any turmoil in the region is a threat to
the northern giant's interests. Also, Russia is playing a dual role in
the region to keep the balance in military skills of Armenia and
Azerbaijan by selling weapons to the belligerents. But, anyway, a
peaceful end to the conflict is one of the key issues in regional
policy of Russia, a co-chair country of the OSCE Minsk Group, and
Armenia obeys Russia's instructions in regard to the Karabakh knot.
Any tremor in Russia's economy means an earthquake in the economy of
Armenia - this may be the best saying to express the mutual economic
ties of the two former Soviet nations. Russia is the top destination
for Armenian-made products, since nearly 85 percent of the overall
exportations are directed to Russia. Dependence on Russian markets
paralyzes Armenia's economy on the background of the modern crisis
hitting the northern giant. Weakening purchasing power in Russia,
which is a clear result of the crisis, inflicts painful blows on the
Armenian export.
"An unpleasant causal chain started in the Russian markets
simultaneously with the ruble's fall. Drop in purchasing power in
Russia decreased orders from Armenia," said Vaahn Lazarian, Co-owner
of the Armenian Wine Company, while Avag Harutunyan, Head of Armenian
Winemakers Union, revealed a $86,000 daily loss of the Armenian
winemakers in Russia given the financial tussle.
Over 2.2 million Armenians live in Russia today, according to the
Armenian Diaspora's data. Many of them are labor migrants, who left
Armenia to earn their life and provide for their family living in the
native land. The money transfers from migrant workers in Russia take a
considerable share in the South Caucasus country's income, making up
nearly 84 percent of the overall private remittances and 15.4 percent
or $1.6 billion of Armenia's Gross Domestic Product, the Central Bank
revealed.
The bank announced that the total transfers made by Armenian migrant
workers in Russia was nearly $146 million this year, which testifies
to a sharp fall by $11 million compared to the last year. Just in
October, the remittances from Russia has dropped by 20 percent.
Current dethronement of the Armenian dram started all while the
Russian ruble began to slide to an all-time low following the
isolating sanctions by the Western forces. Experts claim that
Armenia's tightening relations with Russia, amid the partnership
within the Eurasian Economic Union, show green light for future
challenges in its economy if Russia fails to tackle the deepening
economic hassle facing it. Economic experts believe that the prices in
the Armenian markets have taken a sharp rise this year ahead of the
New Year holiday season compared to the previous years, linking it to
the dram and ruble devaluation, as well as the dollar's significant
appreciation in the global market.
President Vladimir Putin promised to overcome the "unfavorable
scenario" in two years, maybe less. Amid the ongoing developments the
three South Caucasus nations will have to take the best stand not to
sink their ships in a battle of big powers.
* Mushvig Mehdiyev is a journalist at the Baku-based AzerNews
newspaper, and is engaged in developing regular analytical articles
about the South Caucasus region.
The post Crisis-Hit Russia And Three South Caucasus Musketeers -
Analysis appeared first on Eurasia Review.