The Caspian Region’s Reactions to the Current Russo-Ukrainian War: Kyrgyzstan
Author: Caspian Policy Center
Oct 28, 2022
CPC NOTE: With individual articles for each of the eight countries of the Caspian Region, the Caspian Policy Center is reporting the effects of Russia’s war in Ukraine on the countries of the region
Since the war in Ukraine unfolded earlier this year, Kyrgyzstan’s economy has experienced several challenges having to do with migrant remittances from Russia. From a security standpoint, the war has had limited effect Kyrgyzstan as the state is occupied with its own territorial dispute in the south. However, the economic impacts have rippled across all spheres of Kyrgyzstan’s internal dynamics, and it's begun to experience challenges in its security apparatus.
According to the World Bank, the Kyrgyzstani economy may be affected more than others by the inevitable decrease in migrant workers' remittances from Russia. Kyrgyzstan’s banking regulator has forecasted that remittances from labor migrants in Russia may decline by 20% in 2022 compared to 2021. Since more than 1 million Kyrgyz nationals live and work in Russia, the impact of sanctions against Russia have been immense. As Kyrgyzstan’s remittances from Russia totaled US$2.7 billion in 2021, accounting for 30% of GDP, the reduction in migrants in Russia will significantly damage Kyrgyzstan’s economy. Migrant remittances will face an unavoidable decline in the coming months, having the potential to disrupt the monetary flow between Russia and Kyrgyzstan, further impacting their overall relations.
Moreover, the drop in money flows can be explained by the sudden contraction of the Russian economy since sanctions were imposed. Following the start of the full-scale war in Ukraine, sanctions against Russia caused the ruble exchange rate to collapse sharply, which immediately affected the Kyrgyz currency. Further, US and European currencies have become high-demand since the volatility of the ruble exchange rate ensued, leading to the growth of the US dollar.
"The Russian Federation is one of the main trade and economic partners of the Kyrgyz Republic, and changes in the countries' economies may have an indirect impact on the Kyrgyz currency market," the Kyrgyz National Bank explained at the time.
Furthermore, since the beginning of Russian invasion in Ukraine, Kyrgyzstan has been grappling with its territorial conflict with Tajikistan. With hundreds more wounded, fighting has affected civilian populations in at least 12 villages located on both sides of the largely undepicted border between the two countries. Kyrgyzstan President Japarov, on September 19, 2022, addressed the conflict: “There are enough funds in the state budget, and we are able to fully provide for our soldiers and the displaced citizens. We also have funds for the rapid reconstruction of homes destroyed in the fighting. Despite the difficulties, the country is able to stand up as one against any challenges. This is the envy of our enemies, both internal and external.”
“Only two years ago there was a shortage of weapons and ammunition in our army, there was not even enough uniforms for our soldiers. Today it is not the case. Our army is being strengthened both morally and materially by efforts from various sides.” he added. However, the declining economy cannot hold up military efforts for much longer.
Russia, having sought to take the role of a mediator in several other regional disputes, was tasked with deploying a ceasefire agreement between Tajikistan and Kyrgyzstan. As Russian President Vladimir Putin continued his invasion of Ukrainian territories in September, he urged a resolution settlement “exclusively by peaceful, political and diplomatic means as soon as possible.” To prevent further escalation, Russia did, in fact, help facilitate a conflict resolution agreement. Amid international pressure, Presidents of Kyrgyzstan and Tajikistan – Sadyr Japarov and Emomali Rahmon, attended the regional security and cooperation summit in Uzbekistan, attended by Putin, and signed a ceasefire agreement during the Shanghai Cooperation Organization (SCO) Summit.
On September 23, 2022, the US Mission to the OSCE posted an announcement on the latest border clashes, stating: “We welcome and support the ceasefire and urge both sides to withdraw all forces from the shared border and engage in negotiations to resolve the issue.” However, the two countries continued to act with regard to Russian mediation tactics.
As Kyrgyzstan faces economic implications at home, stemming from sanctions placed on Russia, it’s vital that it lessens its dependence on the Kremlin. A Russian-brokered ceasefire only increases the leverage Russia has on Kyrgyzstan. Economic dependence has shocked the Kyrgyzstani economy, and diversification, in both economic and security spheres, should be considered to prevent further complications stemming from Russia.