The Impact of the Global Financial Crisis on Political Dynamics in Central Asia

he financial crises that swept across Asia and Russia in 1998 are reshaping the leadership politics of the former communist countries. In Russia, the financial crisis has marginalized President Boris Yeltsin and brought to the political forefront a previously disenfranchised coalition of traditionalists. Ukraine’s political leadership is leaning in the direction of Europe. The leaders of the countries of the Caucasus region are tying their political fortunes to their connections with multinational firms. Among the countries of Central Asia, however, the financial crisis has had a different impact depending on how closely the countries were linked to Russia’s markets. Leaders in Turkmenistan and Uzbekistan have been struggling for years to disengage their countries from Russian markets and Russian political influence through various autarkic economic policies. Through a policy of “permanent positive neutrality” intended to maintain as much distance as possible from Russia, Turkmenistan avoided any direct impact from the fall of the ruble. Uzbekistan achieved the same result by maintaining tight currency controls and a fixed exchange rate for its overvalued som. Russia’s financial disarray has encouraged Turkmenistan and Uzbekistan to distance themselves further from northern markets to avoid an economic downdraft like that in Southeast Asia. Tajikistan remains dependent on Russia for its regional security objectives, but its tiny economy is based largely on barter and foreign assistance from donor organizations. The ruble’s decline has not yet had a visible effect there.