The Richest and Poorest Countries of the Former Soviet Union
The three poorest countries of the Former Soviet Union are all in the Central Asia. Notice that these
countries are much poorer than the poorest countries of Europe. Read through the excerpts from the
CIA Factbook. Write an essay that outlines why the poorest countries of the Former Soviet Union are so
poor. Be sure to include any physical factors that may apply.
Uzbekistan (pc GDP = $1680): "Russia conquered Uzbekistan in the late 19th century. Stiff resistance to
the Red Army after World War I was eventually suppressed and a socialist republic set up in 1924.
During the Soviet era, intensive production of "white gold" (cotton) and grain led to overuse of
agrochemicals and the depletion of water supplies, which have left the land poisoned and the Aral Sea
and certain rivers half dry. Independent since 1991, the country seeks to gradually lessen its
dependence on agriculture while developing its mineral and petroleum reserves. Current concerns
include terrorism by Islamic militants, economic stagnation, and the curtailment of human rights and
democratization.
"Uzbekistan is a dry, landlocked country of which 11% consists of intensely cultivated, irrigated
river valleys. More than 60% of its population lives in densely populated rural communities. Uzbekistan
is now the world's second-largest cotton exporter and fifth largest producer; it relies heavily on cotton
production as the major source of export earnings and has come under increasing international criticism
for the use of child labor in its annual cotton harvest. Other major export earners include gold, natural
gas, and oil. Following independence in September 1991, the government sought to prop up its Sovietstyle command economy with subsidies and tight controls on production and prices. While aware of the
need to improve the investment climate, the government still sponsors measures that often increase,
not decrease, its control over business decisions. A sharp increase in the inequality of income
distribution has hurt the lower ranks of society since independence. In 2003, the government accepted
Article VIII obligations under the IMF, providing for full currency convertibility. However, strict currency
controls and tightening of borders have lessened the effects of convertibility and have also led to some
shortages that have further stifled economic activity. The Central Bank often delays or restricts
convertibility, especially for consumer goods. Potential investment by Russia and China in Uzbekistan's
gas and oil industry, as well as increased cooperation with South Korea in the realm of civil aviation, may
boost growth prospects. In November 2005, Russian President Vladimir PUTIN and Uzbekistan President
KARIMOV signed an "alliance," which included provisions for economic and business cooperation.
Russian businesses have shown increased interest in Uzbekistan, especially in mining, telecom, and oil
and gas. In 2006, Uzbekistan took steps to rejoin the Collective Security Treaty Organization (CSTO) and
the Eurasian Economic Community (EurASEC), which it subsequently left in 2008, both organizations
dominated by Russia. Uzbek authorities have accused US and other foreign companies operating in
Uzbekistan of violating Uzbek tax laws and have frozen their assets" (CIA Factbook).
Tajikistan (pc GDP = $1710): "The Tajik people came under Russian rule in the 1860s and 1870s, but
Russia's hold on Central Asia weakened following the Revolution of 1917. Bolshevik control of the area
was fiercely contested and not fully reestablished until 1925. Much of present-day Sughd province was
transferred from the Uzbek SSR to the newly formed Tajik SSR in 1929. Ethnic Uzbeks form a substantial
minority in Sughd province. Tajikistan became independent in 1991 following the breakup of the Soviet
Union, and experienced a civil war between regional factions from 1992-97. There have been no major
security incidents in recent years, although the country remains the poorest in the former Soviet sphere.
Attention by the international community since the beginning of the NATO intervention in Afghanistan
has brought increased economic development and security assistance, which could create jobs and
strengthen stability in the long term. Tajikistan is in the early stages of seeking World Trade Organization
membership and has joined NATO's Partnership for Peace.
"Tajikistan has one of the lowest per capita GDPs among the 15 former Soviet republics.
Because of a lack of employment opportunities in Tajikistan, nearly half of the labor force works abroad,
primarily in Russia, supporting families in Tajikistan through remittances. The exact number of labor
migrants is unknown, but estimated at around 1 million. Less than 7% of the land area is arable. Cotton
is the most important crop, but this sector is burdened with debt and obsolete infrastructure. Mineral
resources include silver, gold, uranium, and tungsten. Industry consists only of a large aluminum plant,
hydropower facilities, and small obsolete factories mostly in light industry and food processing. The civil
war (1992-97) severely damaged the already weak economic infrastructure and caused a sharp decline
in industrial and agricultural production. Tajikistan's economic situation remains fragile due to uneven
implementation of structural reforms, corruption, weak governance, widespread unemployment,
seasonal power shortages, and the external debt burden. A debt restructuring agreement was reached
with Russia in December 2002 including a $250 million write-off of Tajikistan's $300 million debt.
Completion of the Sangtuda I hydropower dam - built with Russian investment - and the Sangtuda II and
Rogun dams will add substantially to electricity output. If finished according to Tajik plans, Rogun will be
the world's tallest dam. Tajikistan has also received substantial infrastructure development loans from
the Chinese government to improve roads and an electricity transmission network. To help increase
north-south trade, the US funded a $36 million bridge which opened in August 2007 and links Tajikistan
and Afghanistan. While, Tajikistan has experienced steady economic growth since 1997, nearly twothirds of the population continues to live in poverty. Economic growth reached 10.6% in 2004, but
dropped to below 8% in 2005-08, as the effects of higher oil prices and then the international financial
crisis began to register - mainly in the form of lower prices for key commodities and lower remittances
from Tajiks working in Russia, due to the declining economic conditions in that country" (CIA Factbook).
Kyrgyzstan (pc GDP = $1950): "A Central Asian country of incredible natural beauty and proud nomadic
traditions, most of Kyrgyzstan was formally annexed to Russia in 1876. The Kyrgyz staged a major revolt
against the Tsarist Empire in 1916 in which almost one-sixth of the Kyrgyz population was killed.
Kyrgyzstan became a Soviet republic in 1936 and achieved independence in 1991 when the USSR
dissolved. Nationwide demonstrations in the spring of 2005 resulted in the ouster of President Askar
AKAEV, who had run the country since 1990. Subsequent presidential elections in July 2005 were won
overwhelmingly by former prime minister Kurmanbek BAKIEV. The political opposition organized
demonstrations in Bishkek in April, May, and November 2006 resulting in the adoption of a new
constitution that transferred some of the president's powers to parliament and the government. In
December 2006, the Kyrgyzstani parliament voted to adopt new amendments, restoring some of the
presidential powers lost in the November 2006 constitutional change. By late-September 2007, both
previous versions of the constitution were declared illegal, and the country reverted to the AKAEV-era
2003 constitution, which was subsequently modified in a flawed referendum initiated by BAKIEV. The
president then dissolved parliament, called for early elections, and gained control of the new parliament
through his newly-created political party, Ak Jol, in December 2007 elections. Current concerns include:
privatization of state-owned enterprises, negative trends in democracy and political freedoms, reduction
of corruption, improving interethnic relations, electricity generation, rising food prices, and combating
terrorism.
"Kyrgyzstan is a poor, mountainous country with a predominantly agricultural economy. Cotton,
tobacco, wool, and meat are the main agricultural products, although only tobacco and cotton are
exported in any quantity. Industrial exports include gold, mercury, uranium, natural gas, and electricity.
Following independence, Kyrgyzstan was progressive in carrying out market reforms such as an
improved regulatory system and land reform. Kyrgyzstan was the first Commonwealth of Independent
States (CIS) country to be accepted into the World Trade Organization. Much of the government's stock
in enterprises has been sold. Drops in production had been severe after the breakup of the Soviet Union
in December 1991, but by mid-1995, production began to recover and exports began to increase. The
economy is heavily weighted toward gold export and a drop in output at the main Kumtor gold mine
sparked a 0.5% decline in GDP in 2002 and a 0.6% decline in 2005. The government made steady strides
in controlling its substantial fiscal deficit, nearly closing the gap between revenues and expenditures in
2006, before boosting expenditures more than 20% in 2007-08. The government and international
financial institutions have been engaged in a comprehensive medium-term poverty reduction and
economic growth strategy. In 2005, Bishkek agreed to pursue much-needed tax reform and, in 2006,
became eligible for the heavily indebted poor countries (HIPC) initiative. Progress fighting corruption,
further restructuring of domestic industry, and success in attracting foreign investment are keys to
future growth. GDP grew more than 6% annually in 2007-08, partly due to higher gold prices
internationally, but growth is likely to decline from that level in 2009, due to declining demand and
lower commodity prices in the wake of the international financial crisis" (CIA Factbook).
The three richest countries of the Former Soviet are somewhat poor by European standards but still
quite affluent when compared to most of the other countries that were once part of the Soviet Union.
Read through the excerpts from the CIA Factbook and then write a short essay summarizing why these
countries are relatively rich. Be sure to include any physical factors that may apply.
Estonia (pc GDP = $19,680): “After centuries of Danish, Swedish, German, and Russian rule, Estonia
attained independence in 1918. Forcibly incorporated into the USSR in 1940 - an action never
recognized by the US - it regained its freedom in 1991, with the collapse of the Soviet Union. Since the
last Russian troops left in 1994, Estonia has been free to promote economic and political ties with
Western Europe. It joined both NATO and the EU in the spring of 2004.”
“Estonia, a 2004 European Union entrant, has a modern market-based economy and one of the
highest per capita income levels in Central Europe. Estonia's successive governments have pursued a
free market, pro-business economic agenda and have wavered little in their commitment to pro-market
reforms. Tallinn's priority has been to sustain high growth rates - on average 8% per year from 2003 to
2007. The economy benefits from strong electronics and telecommunications sectors and strong trade
ties with Finland, Sweden, and Germany. The current government has pursued relatively sound fiscal
policies, resulting in balanced budgets and low public debt. Rapid growth, however, has made it difficult
to keep inflation and large current-account deficits from soaring, putting downward pressure on the
country's currency. The government has not given up on adopting the euro, but has repeatedly
postponed its target date. Estonia's economy slowed down markedly and even fell into recession in mid2008, primarily as a result of an investment and consumption slump following the bursting of the real
estate market bubble” CIA Factbook).
Lithuania (pc GDP = $17,180): “Lithuanian lands were united under MINDAUGAS in 1236; over the next
century, through alliances and conquest, Lithuania extended its territory to include most of present-day
Belarus and Ukraine. By the end of the 14th century Lithuania was the largest state in Europe. An
alliance with Poland in 1386 led the two countries into a union through the person of a common ruler. In
1569, Lithuania and Poland formally united into a single dual state, the Polish-Lithuanian
Commonwealth. This entity survived until 1795, when its remnants were partitioned by surrounding
countries. Lithuania regained its independence following World War I but was annexed by the USSR in
1940 - an action never recognized by the US and many other countries. On 11 March 1990, Lithuania
became the first of the Soviet republics to declare its independence, but Moscow did not recognize this
proclamation until September of 1991 (following the abortive coup in Moscow). The last Russian troops
withdrew in 1993. Lithuania subsequently restructured its economy for integration into Western
European institutions; it joined both NATO and the EU in the spring of 2004.”
“Lithuania's economy grew on average 8% per year for the four years prior to 2008, driven by
exports and domestic consumer demand. Unemployment stood at 4.8% in 2008, while wages grew at
double digit rates. The current account deficit rose to roughly 15% of GDP in 2007-08. Lithuania has
gained membership in the World Trade Organization and joined the EU in May 2004. Despite Lithuania's
EU accession, Lithuania's trade with its Central and Eastern European neighbors, and Russia in particular,
accounts for a growing percentage of total trade. Privatization of the large, state-owned utilities is
nearly complete. Foreign government and business support have helped in the transition from the old
command economy to a market economy” (CIA Factbook).
Latvia (pc GDP = $16,890): “The name "Latvia" originates from the ancient Latgalians, one of four
eastern Baltic tribes that formed the ethnic core of the Latvian people (ca. 8th-12th centuries A.D.). The
region subsequently came under the control of Germans, Poles, Swedes, and finally, Russians. A Latvian
republic emerged following World War I, but it was annexed by the USSR in 1940 - an action never
recognized by the US and many other countries. Latvia reestablished its independence in 1991 following
the breakup of the Soviet Union. Although the last Russian troops left in 1994, the status of the Russian
minority (some 30% of the population) remains of concern to Moscow. Latvia joined both NATO and the
EU in the spring of 2004.”
“Latvia's economy experienced GDP growth of more than 10% per year during 2006-07; but
entered a recession in 2008 as a result of an unsustainable current account deficit and large debt
exposure amid the softening world economy. The IMF, EU, and other donors provided assistance to
Latvia as part of an agreement to defend the currency's peg to the euro and reduce the fiscal deficit to
about 5% of GDP. The majority of companies, banks, and real estate have been privatized, although the
state still holds sizable stakes in a few large enterprises. Latvia officially joined the World Trade
Organization in February 1999. EU membership, a top foreign policy goal, came in May 2004. The
current account deficit and inflation remain major concerns” (CIA Factbook).