Saudi Arabia welcomes the leaders of Ethiopia and Eritrea on Sunday for the signing of a peace agreement ending 20 years of intra-African hostilities in the latest sign of deepening ties between the Gulf and the Horn of Africa. Ethiopian Prime Minister Abiy Ahmed and Eritrean President Isaias Afwerki will attend a signing ceremony in Jeddah hosted by King Salman bin Abdulaziz Al Saud. Riyadh’s close ally, the United Arab Emirates, played a key diplomatic role, reportedly offering a $1 billion to Ethiopia’s central bank and a pledge of $2 billion in investments. The Saudis have offered to provide a year’s supply of oil with payment delayed up to 12 months, an Ethiopian official told Reuters.
The UAE enjoys an outsized influence in Eritrea, joining its Gulf neighbors seeking to increase their foothold in the region in recent years. Its influence, however, has waned in neighboring Somalia as Gulf tensions spill over into the increasingly militarized region. Both Saudi Arabia and the UAE rely on Eritrea and Djibouti to host bases crucial to the Saudi-led coalition’s campaign against the Iran-backed Houthis in Yemen. But as the two countries continue their blockade of Qatar, Doha has invested in the embattled Somali government. Meanwhile, Turkey, which has sided with Qatar in the Gulf dispute, has joined Doha in building ports and bases in neighboring Sudan
The story: Over the last few weeks, the Russian ruble has notably devalued (by about 10 percent since August 1), with its exchange rate to the U.S. dollar exceeding 70 rubles last week. [Kommersant]
What is going on?
- This significant fluctuation can be explained by large local purchases of foreign currency by the Central Bank. Another possible factor is the flight of foreign investors in the light of the new anti-Russian sanctions (over the Skripal attacks) and potentially others, currently underway.
- However, earlier this week, the ruble managed to stabilize. Some analysts attribute this correction to a slight increase in oil prices and a certain interference by the Finance Ministry, whose officials also tried to convince the markets in a profound undervaluation of the ruble. [Kommersant]
- Still, following the September 13 U.S. State Department’s announcement regarding the second round of sanctions over the Skripal attack, the ruble exchange rate to the dollar spiked up to 73.48 in less than two hours. [Vedomosti]
- There is also a domestic factor—the accelerated inflation rate of around 3 percent that for a year has been kept below the Central Bank’s target of 4 percent. This period might be over, as the Bank’s outlook for 2019 projects a target-beating inflation rate. [RBC]
- It is also noteworthy that since January 2018, net capital flight from Russia, according to the Central Bank, amounted to 26.5 billion rubles ($390 million), which is 2.8 times more than in the same period of 2017. [Economy Times]
- This week, the Stolypin Institute for the Economy of Growth (led by 2018 presidential candidate and ombudsman Boris Titov) published a report that revealed that the Russian economy lost 43 trillion rubles ($630 billion) of potential added value due to a catastrophic decrease in productivity. This amounts to almost half of the country’s GDP (92 trillion rubles in 2017).
- The report notes that extraction of minerals remains Russia’s most efficient industry, with fishing and trade coming second and third. The least efficient sectors are public administration, education, housing, social services and healthcare. [RBC]