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International News Title: Russia's financial crisis may bury Putin's Eurasian dream Russia's financial crisis may bury Putin's Eurasian dream By Andrei Makhovsky, Dmitry Solovyov and Margarita Antidze MINSK/ALMATY/TBILISI Wed Jan 14, 2015 6:40am EST (Reuters) - Growing damage from Russia's financial crisis on neighboring former Soviet states could bury President Vladimir Putin's dream of creating an economic union to rival the United States and European Union. From Belarus on the European Union's fringe to Kazakhstan on the border with China, some of those once firmly in Moscow's grip are now questioning whether Russia has what it takes to lead. While some, such as Belarus, have been forced by the economic blowback from Russia to devalue their currencies, others, such as Azerbaijan, are spending millions of dollars to keep exchange rates steady. Officially, the heads of the neighboring states are sympathetic to Russia's plight and several outwardly back Putin's Eurasian Economic Union (EEU), which he hoped could recoup the potential lost when the Soviet empire collapsed more than two decades ago. But the Russian ruble's more than 40 percent fall against the dollar in 2014 and its continued weakness this year has loosened some tongues, most notably that of President Alexander Lukashenko in Belarus, which briefly imposed a 30 percent tax on buying foreign currency to prevent a run on dollars. It has now lowered the tax to 10 percent for companies and scrapped it for individuals. "The task has been set - to trade not in rubles but in dollars ... With Russia, we should have long ago worked with and demanded that they should pay us in hard currency," Lukashenko said in December. He later criticized Russia's "stupid and brainless" curbs on the transit of meat products from Belarus, a move intended to stop attempts to sell banned Western produce in Russia. Russia curbed imports in retaliation for U.S. and EU sanctions over Ukraine. While much of Lukashenko's bluster is aimed at a local electorate that has seen the Belarussian rouble fall 25 percent against the dollar since mid-December, trade restrictions and demands to use foreign currency strike at the heart of the EEU, which offers free movement of labor and trade. "REALLY HAPPY" The Kremlin saw Ukraine, the third biggest economy behind Kazakhstan and Russia in the Commonwealth of Independent States, a loose grouping of 11 former Soviet republics, as a vital member of the new union. But after Crimea was annexed by Russia in March last year and Moscow supported separatists in eastern Ukraine, the country's central bank chief, Valeriia Gontareva, summed up Kiev's position toward Moscow. "As a person I am really happy about what's happening with the Russian rouble," she said in December. "But as a central bank head it can't make me happy, as Russia remains an important trade partner." Russia accounted for 19 percent of Ukraine's exports and 25 percent of its imports in the first nine months of 2014, official data show. The hryvnia fell about 50 percent against the dollar last year. Few if any of Russia's former Soviet neighbors can escape the impact of its crisis, deepened by oil prices plunging to almost six-year lows, and the pain may encourage some to think more independently. Oil-producing Azerbaijan, which sold nearly $1.13 billion to support its manat currency in December, has shown no interest in joining Putin's Union and Georgia, also in the South Caucasus, says the turmoil in Russia should cement its Western-leaning policies. (Additional reporting by Alessandra Prentice and Natalia Zinets in Kiev, Alexander Tanas in Chisinau, Raushan Nurshayeva in Astana, Olga Dzyubenko in Bishkek, Hasmik Mkrtchyan in Yerevan, Nailia Bagirova in Baku, Writing by Elizabeth Piper, Editing by Janet McBride) Post Comment Private Reply Ignore Thread |
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