Originally published January 19 2015
Collapse contagion? Former Soviet Republic devalues currency by 18% as currency wars ignite
by J. D. Heyes
(NaturalNews) Most Americans could never find the tiny former Soviet Republic of Turkmenistan on a map, but the energy-rich nation recently something that could certainly have global implications.
As reported by Agence France-Presse (AFP) and financial analysis website Zero Hedge, Turkmenistan just devalued its currency against the U.S. dollar -- for now, still the world's reserve currency -- by 18 percent. It was a move described by financial experts as "contagion" tied to the recent devaluation of Russia's currency, the ruble, which is plunging due to falling oil prices and Western economic sanctions over Moscow's annexation of Crimea.
As AFP noted:
The highly secretive Central Asian country has vast oil and gas reserves while most of its five million people live in poverty.
On [Jan. 1], the website of Turkmenistan's central bank published the rate of 3.50 manats to the US dollar, from 2.85 manats, a depreciation of 18.6 percent.
The fall continues
As the manat has been devalued, so, too, has the ruble against the dollar, which is being viewed with ire by average Russians and certainly by Russian President Vladimir Putin.
The day of the currency devaluation, all of Turkmenistan's monetary exchange centers were closed, officially for a public holiday (New Year's Day).
The official exchange rate set by the Asian nation's central bank for the manat had been 2.85 to the U.S. dollar, a rate that had stood since 2009. Earlier that same year, Turkmenistan had removed zeros from the manat in a redenomination after the official exchange rate reached 14,250 to the U.S. dollar.
President Gurbanguly Berdymukhamedov has led the country since 2006, after the death of an eccentric dictator, Saparmurat Niyazov. He built a golden statue of himself that rotated in order to face the sun.
There is additional economic turmoil in Turkmenistan, all tied to the devaluation of the currency. Earlier on Jan. 1, the country's oil and gas ministry announced that gasoline prices had risen 60 percent, though that dramatically higher price had not yet led to long lines at gas stations.
One liter of a type of gas on New Year's Day cost one manat, but previously it cost 62 tenge (or 22 cents under the previous manat-U.S. dollar exchange rate). Though some analysts believe the price increase is tied to the devaluation of the country's currency, AFP reported that no official explanation had been given.
Turkmenistan -- which provided drivers with 120 liters of fuel free per month from 2007 until July 2013 -- claims to be holding the world's fourth-largest reserves of natural gas and has vast oil deposits as well.
The country's former Soviet neighbors have also taken economic fallout from the fall of the ruble, which dropped 41 percent against the dollar last year.
Just the beginning?
For instance, as AFP reported:
Kyrgyzstan saw its local currency, the som, fall more than 17 percent in value against the dollar in 2014, while Tajikistan's currency, the somon, lost nearly 14 percent against the dollar. Kazakhstan's central bank back in February devalued its currency, the tenge, by about 19 percent.
In addition, the central bank in another ex-Soviet Republic, Belarus, has adopted emergency measures to stave off further economic damage. In addition, President Alexander Lukashenko has dismissed the Belarus prime minister.
Martin Armstrong, of Armstrong Economics, a financial analysis firm, sees more contagion ahead.
"Turkmenistan is energy-rich and this is the latest sign of seriousness of the collapse in oil," he wrote on his website. "This will contribute to now force the dollar higher as commodities decline, the energy producing nations will be compelled to devalue their currencies in an effort to try to make ends-meet. Devaluations will result in an attempt to create inflation to offset the deflation. We are in a major economic collapse on a global scale. Most people do not understand that this is the real threat we face."
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