Russia bolsters regional finances

Russia has passed a law to set up an anti-crisis fund for the Eurasian Economic Community.

The primary task of the bailout fund of Eurasian Economic Community members – Russia, Kazakhstan, Belarus, Kyrgyzstan, Tajikistan, and Armenia – is to provide credit to countries in the post-Soviet space.

Deputy Finance Minister, Dmitry Pankin, says many have fallen into difficult economic situations – brought on by the world financial crisis.

"Russia has already ratified, and other countries will probably due so by September. As soon as everything will be working, then we plan to transfer the first part of our contribution – $750 million, which has been allocated by the 2009 budget."

Russia has pledged to put up 75% of the $10 billion dollars in the fund. Stabilizing the economic situation in these countries is a key priority for Russia. The fund also provides for joint financial projects within the community.

Many of the former Soviet republics have been hit hard. Local currencies have suffered devaluation, and the fund could help promote the Rouble as a reserve currency, analysts say.

Exports in these states are also down as much as 50%, and Andrey Suzdaltsev, Vice Rector, Faculty of World Economy and Politics, at the Higher School of Economics says the worst might be far from over.

"When we get out of the crisis, consumer demand could change. If our post-Soviet neighbors aren't able to restructure their economies even by using money from the anti-crisis fund, they could be stuck in a state of crisis forever, asking for more and more loans."

The fund, which will be run by the Eurasian Development Bank, may offer a temporary solution to problems in a region crucial for Russia's interests.