Petrol prices and concomitant inflation are set to skyrocket again in the poverty-stricken Central Asian country after Moscow suddenly decided yesterday to reimpose a duty on fuel deliveries. The new rate -- about $408/ton, according to 24.kg -- is considerably higher than the one that had been in effect earlier this year, and any meager gains the Kyrgyz economy has experienced in the past few months would be wiped out by the increase, set to start May 1.
Even before this latest blight, the World Bank was warning of Kyrgyzstan’s susceptibility to worldwide inflation, brought on in part by rising petrol and food prices. One bit of good news, a World Bank representative said just today, had been the recent end to these very duties.
So why now? Only a few weeks ago the Kremlin told Prime Minister Almazbek Atambayev that Russia would drop fuel duties, which it had first imposed in April 2010 in a move that helped push former President Kurmanbek Bakiyev out of office. Depending on how you count, this would be the third or fourth time Moscow has imposed duties in the past year or so, only to drop them later.
Atambayev, ever eager to please Moscow, has been pushing hard for Kyrgyzstan to join the Russia-led Customs Union that also includes Kazakhstan and Belarus. What Kyrgyzstan brings to the union, besides more cheap labor and space for Russia to extend its soft power, is unclear. But Atambayev is banking on those laborers. Hundreds of thousands of them sent home $1.6 billion (more than a third of GDP) last year. Entering the Customs Union will “simplify” their lives, according to Atambayev: “Entry into the Customs Union is inevitable; it’s a necessity, an important and bold step.”
Critics, including the opposition in parliament, say joining the Customs Union is incompatible with Kyrgyzstan’s World Trade Organization membership, and could cost the country $1.5 billion per year in fines to WTO members. They point out that Russia accounts for only 32 percent of Kyrgyzstan’s current trade.
But if fuel prices suddenly jump by a third, as 24.kg calculates, Kyrgyzstan will have no choice but to do whatever Moscow likes. And judging by the events of last year, the surest way for Kyrgyz politicians to get chased from office is by letting tariffs rise too high too fast.