Central Asia in the Aftermath of the Russia-Ukraine Conflict

Central Asia Navigates Economic Challenges and Geopolitical Tensions

Central Asia, comprising the nations of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, has found itself at the crossroads of significant economic and geopolitical shifts in recent years. The region’s economies have been significantly impacted by the ongoing fallout from the Russia-Ukraine conflict, with disruptions to trade and investment flows. Concerns are mounting about potential political instability as governments grapple with rising food and energy prices, as well as growing worries about water security and the effects of climate change.

The Ripple Effects of the Russia-Ukraine Conflict

The Russia-Ukraine conflict, which began in 2022, has had far-reaching consequences for the economies of Central Asia. As a region closely tied to Russia through trade, investment, and labor migration, the turmoil has reverberated across the region.

“The conflict has created a perfect storm of challenges for Central Asia,” explains Dr. Nadir Kerimov, a professor of economics at the University of Central Asia. “The sanctions imposed on Russia, the disruption of supply chains, and the volatility in global energy and commodity markets have all taken a significant toll.”

Kazakhstan, the region’s largest economy, has been particularly affected. The country’s exports to Russia, which had accounted for a significant portion of its total exports, have plummeted as a result of the sanctions. This has forced Kazakhstani businesses to seek new markets, often at the expense of lower profit margins.

“We’ve had to completely rethink our export strategy,” says Aliya Nurmagambetova, the CEO of a major Kazakhstani agribusiness company. “Russia was our biggest customer, but now we’re having to focus on markets in China, the Middle East, and Europe. It’s been a challenging and costly adjustment.”

The disruption to trade routes has also had a significant impact on Kazakhstan’s role as a transit hub for goods moving between Europe and Asia. The closure of key overland routes through Russia has forced businesses to explore alternative, often more expensive, transportation options.

Kyrgyzstan and Tajikistan, two of the region’s smaller and more economically fragile states, have also been hit hard by the fallout from the conflict. Both countries rely heavily on remittances from migrant workers in Russia, and the economic downturn there has led to a sharp decline in these crucial inflows of foreign currency.

“Remittances are the lifeblood of our economy,” says Gulnara Ibraeva, a economist at the Kyrgyz-Russian Slavic University. “With fewer job opportunities in Russia, many of our citizens have had to return home, and that’s put a major strain on household budgets and government finances.”

The reduced availability of Russian investment and development aid has also hindered the ability of Kyrgyzstan and Tajikistan to fund infrastructure projects and social programs, further exacerbating the economic challenges facing these countries.

Concerns about Political Stability

The economic pressures stemming from the Russia-Ukraine conflict have fueled concerns about the potential for political instability in Central Asia. Governments in the region are facing growing public discontent as they struggle to address rising food and energy prices, as well as concerns about water security and the effects of climate change.

In Uzbekistan, for example, the government has faced protests in recent months over the rising cost of living. President Shavkat Mirziyoyev has responded by implementing price controls and increasing social welfare payments, but many analysts believe these measures may only provide temporary relief.

“The Uzbek government is walking a fine line,” says Dilorom Mamatova, a political scientist at the University of World Economy and Diplomacy in Tashkent. “They need to balance the need to maintain stability with the demands of a population that is increasingly frustrated by the economic hardships they’re facing.”

Similar tensions have been simmering in Tajikistan, where the government has been accused of failing to adequately address the country’s water scarcity and food security challenges. The country’s dependence on hydroelectric power has made it particularly vulnerable to the effects of climate change, with droughts and erratic rainfall threatening the reliability of its energy supply.

“Water is the new oil in Central Asia,” says Saodat Olimova, a researcher at the Institute of Strategic and Regional Studies under the President of the Republic of Uzbekistan. “The competition for this vital resource is only going to intensify, and that could lead to conflicts both within and between countries in the region.”

Efforts to Develop New Connectivity and Energy Corridors

Amidst these economic and political challenges, many Central Asian countries are focusing on developing new transportation and energy corridors that could help diversify their trade and investment flows.

Chief among these initiatives is China’s Belt and Road Initiative (BRI), which aims to strengthen connectivity between Asia, Europe, and Africa through a network of roads, railways, and maritime routes. Central Asian countries have enthusiastically embraced the BRI, seeing it as an opportunity to bolster their economic ties with China and other parts of the world.

“The BRI represents a crucial opportunity for Central Asia to break out of its isolation and become more deeply integrated into the global economy,” says Aziz Atamanov, an economist at the International Monetary Fund. “By improving transportation links and facilitating the flow of goods, capital, and people, the BRI has the potential to spur economic growth and development across the region.”

Kazakhstan, in particular, has been a major beneficiary of the BRI, with the country serving as a key hub for overland trade between China and Europe. The construction of the Khorgos Gateway, a massive dry port and logistics center on the China-Kazakhstan border, has been a centerpiece of this effort, helping to streamline the movement of goods across the region.

“Khorgos has become a crucial node in the BRI’s overland trade network,” says Azamat Zhanuzakov, the CEO of the Khorgos Gateway. “By providing efficient customs clearance, warehousing, and multimodal transportation services, we’re helping to reduce the time and cost of moving goods between Asia and Europe.”

Alongside the BRI, Central Asian countries are also pursuing other initiatives to strengthen their connectivity and energy security. Turkmenistan, for example, has been working to develop new natural gas export routes, including the proposed Trans-Caspian Gas Pipeline, which would transport its vast natural gas reserves to European markets.

“Energy security is a critical issue for Turkmenistan and the wider Central Asian region,” says Merdan Charyyev, the director of the Center for Economic Research and Reforms in Ashgabat. “By diversifying our export routes and finding new customers, we can help to insulate ourselves from the volatility in global energy markets.”

Similarly, Kyrgyzstan and Tajikistan have been exploring ways to leverage their hydroelectric power potential to become regional energy exporters. The construction of the Rogun Dam in Tajikistan, for example, is seen as a key project in this regard, with the potential to provide electricity to neighboring countries and reduce their reliance on fossil fuels.

“Hydropower represents a tremendous opportunity for Kyrgyzstan and Tajikistan to drive their economic development and contribute to regional energy security,” says Umeda Maqsudova, an energy policy analyst at the Central Asia Regional Economic Cooperation (CAREC) Institute. “But realizing this potential will require significant investment in transmission infrastructure and cross-border cooperation.”

The Challenges of Geopolitical Rivalries

Despite the efforts to strengthen connectivity and diversify economic ties, Central Asia remains caught in the crosshairs of geopolitical rivalries between major powers, including Russia, China, and the United States.

“Central Asia has become a key battleground in the struggle for influence and control over Eurasia,” says Alisher Khamidov, a political scientist at the OSCE Academy in Bishkek. “Each of the major powers is trying to secure its own interests in the region, and that’s creating a complex and often unstable geopolitical environment.”

Russia, in particular, has sought to maintain its historical influence in Central Asia, viewing the region as a crucial buffer against Western encroachment. The Kremlin has used a variety of tools, including trade, investment, and security cooperation, to cement its ties with the region’s governments.

“Russia sees Central Asia as part of its sphere of influence, and it’s not willing to cede that ground to other powers,” says Gulnara Karimova, a political analyst based in Almaty, Kazakhstan. “That’s why we’ve seen Russia push back against the growing economic and political ties between Central Asia and China or the West.”

China, on the other hand, has been rapidly expanding its economic footprint in the region, using the BRI and other initiatives to deepen its trade and investment links. Beijing’s deep pockets and willingness to provide infrastructure financing have made it an attractive partner for many Central Asian governments.