Nazarbayev warns of global economic crisis if sanctions against Russia escalate31 august 2014, 12:34
The West must stop racheting up sanctions against Russia or there will be a new global economic crisis, President Nursultan Nazarbayev has warned.
Painfully aware that the international recession of 2008 brought Kazakhstan’s economy to a standstill, the president is clearly worried that Kazakhstan will be one of the countries that suffers if sanctions against Russia escalate.
“Primarily it will be us – Europe and Asia, the Eurasian subcontinent – who will suffer,” the Turkish news agency Cihan quoted President Nazarbayev as saying last week.
Sanctions have already hurt Kazakhstan, officials in Astana have acknowledged, lowering growth from a projected 6 percent in the first half of 2014 to actual growth of 3.9 percent. That’s because Kazakhstan’s economy is closely tied to that of Russia, which accounts for 36 percent of Kazakhstan’s imports and 7 percent of its exports.
In spite of President Nazarbayev’s plea against additional sanctions, it looks like they’re coming.
After supporting Ukrainian separatists with equipment and irregular forces for months, Russia invaded the country last week with modern armament and thousands of regular troops, the West has charged. Russia has long denied helping the separatists.
Angry American and European leaders scoff at the latest denial, saying there is irrefutable evidence of an invasion, including Russian troops captured in Ukraine. They promise a new round of sanctions to punish Moscow.
The latest round of sanctions in late July, which targeted entire sectors of the Russian economy, has clearly done damage. Russian banks, facing billions of dollars in red ink, have asked for government bailouts, and Aeroflot just reported a $52 million loss for the first half of 2014 against a $1.2 million profit in the same period of 2013.
Sanctions hurt the economies of not just the nation being sanctioned but of other countries as well, President Nazarbayev said. He was presumably talking both about trading partners of the sanctioned country plus countries that suffer from regional or global economic downturns precipitated by sanctions.
“People suffer, and social tensions grow, a new round of global crisis begins,” he said.
The president’s remarks came after he flew from Minsk, Belarus, to Istanbul to attend the inauguration of Turkey’s first elected president, former Prime Minister Recep Tayyip Erdogan.
President Nazarbayev had been in Minsk to attend talks with leaders of the Customs Union countries – Russia and Belarus – and talks about the Ukraine conflict. The Ukraine discussions included the Customs Union countries, Ukraine and the European Union.
Presidents Vladimir Putin of Russia and Petro Poroshenko of Ukraine broke away from the others at the gathering to hold two hours’ worth of one-on-one discussions about Ukraine.
It wasn’t immediately clear whether President Nazarbayev’s remarks about sanctions came in an interview with Cihan or at a press conference in Turkey.
One thing is certain: The comments were his strongest yet about the damage sanctions pose to the regional and global economic systems, and the importance of preventing another round.
Offering to play mediator, the president said Kazakhstan was ready to lead discussions on ways to normalize “multilateral trade relations.”
“It is necessary to gradually eliminate penalties,” he said. “I call for a return to constructive cooperation on the principles of economic pragmatism and mutual benefit.”
Underscoring his concern about the damage that sanctions can do, President Nazarbayev joined Belarussian President Alexander Lukashenko this month in refusing to apply counter-sanctions that Russia imposed on the West.
Russia had wanted Kazakhstan and Belarus to join in the counter-sanctions as a way of displaying a united Customs Union front against the West.
Such a move could have done great damage to Kazakhstan, whose biggest trading partner is the European Union, which buys 40 percent of its imports. Any sanctions that Kazakhstan would have imposed on the EU might have invited EU retaliation.
This is the second time in seven years that forces beyond Kazakhstan’s control have hurt its economy.
The first was in 2008, when the U.S. sub-prime mortgage crisis spawned an American recession that spread across the globe. The mortgage crisis stemmed from lenders making too many loans to home buyers with poor credit, lots of whom ended up defaulting.
Kazakhstan’s economy was roaring between 2000 and the crisis of 2008, with annual growth rates of 10 percent or more.
The downturn shrunk growth to a meager 1.2 percent in 2009, but it had rebounded to 6 percent by 2013.
Troubled that an economic crisis that originated in another country could infect a growing Kazakhstan economy, President Nazarbayev called for more countries to be involved in setting international financial policy.
The world’s richest nations, the Group of 20, set policy in their collective interest, not that of the world as a whole, he contended.
He suggested creating a G-Global system that would expand the number of nations setting international economic policy to 70 or more.
Although many international economists agree that the global economic system needs mending to prevent a new meltdown, no collective effort – such as at the United Nations -- has been started to address the issue.