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Eurasianet is an independent news organization that covers news from and about the South Caucasus and Central Asia, providing on-the-ground reporting and critical perspectives on…

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A feud between Saudi Arabia and Russia that sent oil prices plunging on March 9 has rewritten economic forecasts across Eurasia.

Azerbaijan, Kazakhstan and Russia – the former Soviet Union’s largest oil producers – are preparing for budget shortfalls, pressure on their currencies and possibly recession. Adding to uncertainty is the panic over the quickening spread of the novel coronavirus causing COVID-19, which has cut consumer demand around the world.

Only last year Azerbaijan increased pensions and other social services to ease the pain of inflation and address rising discontent. At the time, President Ilham Aliyev said the spending would be covered by reforms to the tax system. Some of those funds would come from higher customs revenues, consumer spending (via a value-added tax), and an expected uptick in tourist arrivals. Yet these returns are now expected to fall because of COVID-19, said Gubad Ibadoglu, a senior analyst at the Economic Research Center in Baku and an assistant professor of economics at Rutgers University.

According to IMF data, Azerbaijan needs an oil price of around $53 per barrel to balance its budget. Benchmark Brent crude was trading around $36 on March 9, a market holiday in much of the former Soviet Union.

Because the government fears unrest, “it is impossible to cut social payments, which are almost 65 percent of the state budget,” Ibadoglu said in an interview. “The only way [to save] is to cut the investment budget and the defense budget. It’s not easy to cut the defense budget […] and the investment budget was already smaller [in 2020] than last year.”

After the last oil crash, in 2014, Azerbaijan devalued the manat twice. This time Ibadoglu expects Baku to manage a softer slide by spending hard currency reserves but foresees a run on banks when they open March 10 after a holiday weekend. “Nobody trusts the banking sector after the two devaluations,” he said. He also calculates that the Central Bank only has reserves to manage the manat for a few months.

Related: Can Saudi Arabia Survive The Oil Price War It Started?

In Kazakhstan, where the budget is based on an oil price around $57.80, President Jomart Kassym-Tokayev on March 9 promised to fulfill all government social obligations, but said Nur-Sultan would be forced to cut somewhere.

The oil price crash couldn’t come at a worse time. In recent days, citing force majeure due to the coronavirus, China has signaled it may slow purchases of gas from Kazakhstan, Turkmenistan and Uzbekistan.

Turkmenistan is China’s largest gas supplier and China buys almost 80 percent of Turkmen gas.

Many in the region will be glad to hear sthat at least Russia is better equipped to manage the crash this time than in 2014, though any recession would likely hurt migrant laborers.

Combined, Kyrgyzstan, Tajikistan and Uzbekistan supply Russia with 4-5 million temporary workers; Armenia adds hundreds of thousands more. These workers’ wages contribute the equivalent of over 30 percent of GDP in both Kyrgyzstan and Tajikistan, making them two of the most remittance-dependent countries in the world. After the 2014 crash, remittances to Central Asia fell over 50 percent, sowing pain in places like Naryn and Badakhshan. The transfers had largely recovered in recent years.

Today Moscow is much better prepared than it was six years ago, when the oil collapse combined with Western sanctions over Russia’s military adventures in Ukraine gutted the ruble, sending the currency to record lows. Since then Moscow has adopted a fiscal rule, basing its budget on an oil price of $42.60 per barrel; earnings above that amount are stashed in a sovereign wealth fund. When oil falls below that point, reports The Bell, the funds are spent to shore up budget deficits. (The Finance Ministry says that the amount currently in the fund, which is over 10.1 trillion rubles, will be enough to last Russia 6-10 years with oil prices at $25-30.)

This has somewhat decoupled the ruble from the oil price, though the ruble fell about 9 percent on forex markets March 9. The ruble’s fall will push down other currencies in the region.

For consumers, some of this pain may be mitigated by lower energy prices. For oil producers that price their exports in dollars, weaker currencies will make domestic spending cheaper. But any consolation will be ephemeral: Weaker currencies should stoke inflation.

Ibadoglu said Baku did not learn from previous devaluations, that it has done too little to wean itself off oil revenues. Today looks a lot like the day before the last crisis, he said: “The budget depends almost the same on the oil price and on oil revenues.”

By Eurasianet.org

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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