Central Asia Digest | April 2020

Political Developments

Kazakh President made a televised Address to the nation on fresh measures to soften the blow of the coronavirus epidemic on private enterprises and pledged more support for healthcare workers and vulnerable people. 

Uzbek President Shavkat Mirziyoyev went out of his way to connect with the Presidents of most neighbouring countries including Afghanistan, Kazakhstan, Kyrgyzstan and Turkmenistan to discuss collaborative plans and share Best Practices to deal with the coronavirus pandemic. He did not call Tajikistan. In fact, no President of Central Asia spoke to Tajikistan since the outbreak of coronavirus (till March 28 when Kyrgyz President called his Tajik counterpart) as Tajikistan refused to take any pro-active steps to combat the pandemic and continued with business as usual. 

Tajikistan has not taken any significant precautions and officials have done little to alter the regular activities of Tajiks who continue to travel freely between regions and shop in stores and bazaars as usual. Tajikistan held lavish Nowruz celebrations attended by 12,000 people in late March. With no recorded novel coronavirus cases, Tajik President Emomali Rahmon put his faith in hygiene saying in front of a packed sports stadium in the northern city of Khujand on Nowruz on March 22 that “keeping homes clean and observing sanitary standards is one of the finest qualities of our people.”

Such a lack of action seems to be a perfect recipe for spreading the virus and that probably makes Tajikistan’s neighbours nervous. That could possibly explain why only Kyrgyz President has spoken with Tajik President thus far, and that too only recently. Such contact was likely prompted by thought of the active border in Ferghana Valley that Kyrgyzstan shares with Tajikistan, the most densely populated area in Central Asia which is fertile for transferring the coronavirus. Uzbekistan also shares a border with Tajikistan in the Ferghana Valley and Uzbek president’s failure thus far to contact his Tajik counterpart might be evidence of Tashkent’s displeasure with his seemingly cavalier attitude toward taking action to control the possible spread in Tajikistan.

Till end of March, 2020 no coronavirus case was reported from either Tajikistan or Turkmenistan. Nowruz was celebrated with full fanfare and festivities in both the countries. Even mosques continue to function as before. Both countries continue to allow mass gatherings and social meetings.

Former President of Kazakhstan Nursultan Nazarbayev issued a call to the people of the country to actively help the country’s president and his government in these challenging times. Nazarbayev warned of a “perfect storm” for his country driven by the sudden collapse of oil prices and other shocks triggered by the virus and called for creation of a fund to fight the virus. Soon after the appeal, donation of close to US$1 million came from Saby, a charity founded by Asel Tasmagambetova, daughter of Imangali Tasmagambetov, a popular and recently retired official who served as Prime Minister from 2002 to 2003 and as heads of both Almaty and Nur-Sultan. A foundation attached to leading domestic bank Halyk Bank – controlled by Nazarbayev’s daughter Dinara Kulibayeva and her husband, Timur Kulibayev – announced that it had contributed US$10 million to the new fund, which is called Birgemiz.  Owner of another local bank and the son-in-law of a long-time Nazarbayev ally, reportedly donated US$2 million. The fund has collected over US$40 million in total.  Given high levels of corruption in Kazakhstan, many citizens feel such sums are being recycled at best. 

Kyrgyz health minister and deputy prime minister responsible for handling the coronavirus outbreak were dismissed after President Sooronbay Jeenbekov criticised their efforts to fight the spread of the virus. 

The IMF extended a US$121 million support package “the first ever to meet Kyrgyzstan’s urgent balance of payment needs stemming from the outbreak.” Kyrgyzstan created a fund for public contributions to fight coronavirus. The new fund had collected just over US$500,000 with former presidential candidate and ex-premier Omurbek Babanov leading the way with a US$50,000 donation – a move that sparked talk of a political comeback for Babanov.

In Uzbekistan President Shavkat Mirziyoyev announced a state-led anti-crisis fund of more than US$1 billion.

Turkmen authorities are extremely reluctant to utter the word “coronavirus” in public. People have reportedly been detained in capital Ashgabat for discussing the pandemic. Plainclothes police officers detain those who gossip about it. Despite sharing a border with Iran, which has reported more than 55,000 infections, Turkmenistan’s government says the country has not had a single case. The country has also banned wearing masks and has reportedly warned local media and health information brochures against using the name of the virus.

Kazakhstan ordered most companies in Nur-Sultan and Almaty to suspend work between March 30 and April 5, as part of measures to prevent the spread of coronavirus. Only state bodies, healthcare organisations, media, food retailers, pharmacies and other essential service providers would be allowed to continue work.

Kazakh government will pay doctors involved in anti-coronavirus campaign monthly bonuses of US$500 to $2000, depending on their qualifications and proximity to patients, as well as extra pay-outs in case of infection and disability or death caused by the virus.

In February, more than 1,000 protesters, including some on horseback, forced plans for a US$280 million Chinese trade and logistics centre in eastern Kyrgyzstan to be cancelled over fears of Chinese expansionism. 

Central Asian governments have been eager to show their support for China during the coronavirus crisis, with Kazakhstan and Uzbekistan dispatching medical supplies in February to help contain the epidemic. Supplies are now heading in the reverse direction, most recently with a batch of surgical gloves and goggles, thermometers, and test kits sent to Tashkent.

The sharp fall in oil prices and economic slowdown in China have increased difficulties for Central Asia’s energy exporters. Kazakhstan saw its currency, the tenge, lose 14% of its value against the US dollar since early March. Along with Uzbekistan and Turkmenistan, it has suffered from declining demand for gas exports after PetroChina issued a force majeure notice on March 5, saying that it was cutting imports due to the epidemic.

Kazakhstan announced that it plans to impose limits on amount of wheat for export to ensure there are sufficient grain stocks to tide over during the period of coronavirus-related emergency.

Beyond the devastating toll on human health, the pandemic is causing significant economic turmoil in the region through simultaneous shocks—a drop in domestic and external demand, a reduction in trade, disruption of production, a fall in consumer confidence, and tightening of financial conditions. The region’s oil exporters face the additional shock of plummeting oil prices. Travel restrictions following the public health crisis have reduced the global demand for oil, and the absence of a new production agreement among OPEC+ members has led to a glut in oil supply. As a result, oil prices have fallen by over 50 percent since the start of the public health crisis. The intertwined shocks are expected to deal a severe blow to economic activity of Central Asian States, at least in the first half of this year, with potentially lasting consequences.

Jack Ma Foundation and Alibaba Foundation, both based in China announced that inter alia Bhutan, India, Kazakhstan, Kyrgyzstan and Uzbekistan will receive essential medical supplies for fighting coronavirus. The seven countries will collectively receive a total of 1.7 million face masks, 165,000 test kits, protective clothing and medical equipment, including ventilators and forehead thermometers. The two Foundations have thus far donated essential medical supplies to 23 Asian countries, including Azerbaijan and Kazakhstan, totalling 7.4 million masks, 485,000 test kits, 100,000 sets of protective clothing and other necessary medical equipment.

Kazakhstan’s National Security Committee detained a man suspected of planning a bomb attack in the capital, Nur-Sultan, on behalf of Islamic State. The man had an improvised explosive device. Hundreds of Kazakhs joined the radical Islamist group when it controlled large parts of Syria and Iraq.

In thinly veiled criticism on social media, Chinese Ambassador to Kazakhstan ridiculed the U.S. government’s initial reaction to the coronavirus crisis and its “inability” to contain it. He hit out at an unnamed country on Facebook in March, 2020 for wasting “valuable time” in the early days of the crisis while “China was winning the battle” against the virus in an effort to save the world from the pandemic. He added that the unnamed country was, instead, engaged in “geopolitical games” and mud-slinging against China, calling it the “Chinese virus” until the coronavirus “spread to all its states.” The Chinese Embassy in Kazakhstan frequently uses social media to attack the United States on various subjects. The latest posts however sparked unprecedented, angry reactions from many Kazakhs on social media, who hit back at Chinese Ambassador by calling the comments “misplaced” and “undiplomatic.” The ambassador and embassy’s accounts avoided criticism of US after the backlash from Kazakhs.

An estimated 50,000 stateless people in Uzbekistan are set to acquire citizenship following passing of a new law in the country. A provision in the Citizenship Law came into effect on 1 April, conferring citizenship to registered stateless people who were granted permanent residence in Uzbekistan before 1 January 1995. Around half of Uzbekistan’s stateless population, or some 49,228 people, will benefit from the new provision. UN Secretary-General António Guterres congratulated Uzbekistan on the passage of legislation. This development is a signal of Uzbekistan’s strong commitment to leave no one behind as the world enters the Decade of Action for the Sustainable Development Goals (SDGs). 

Tajikistan and Uzbekistan conducted their third annual military exercises. The countries have taken turns hosting the exercise and this year Tajikistan hosted the five-day event. An elite company of Uzbek special forces and three companies of Tajik special forces participated. The exercise scenario involved militants from a neighboring country crossing into Tajikistan, seizing hostages, and government troops responding with air attacks. Military exercises between Tajikistan and Uzbekistan have taken place because both countries are motivated by the common threat perceived from bordering Afghanistan. Russia frequently warns about danger in the region, for example stating in 2019 that the situation in Central Asia could turn dire as the Afghanistan-Central Asia borders had amassed 5,000 militants. Central Asian governments barely respond to such statements perhaps from a belief that Moscow wants to whip up fear and exaggerates the situation to push them closer to Moscow’s military embrace.

Kazakh Parliament approved the first reading of draft legislation to simplify the process for holding public rallies, but activists say it does little to address the existing restrictions. Dismissing such negative assessments, speaker of the lower house argued that the proposed changes were “in conformity with the concept of a ‘listening government.’” Many are skeptical that the government is serious about its stated liberalization agenda.

Economic Developments

Kazakhstan is expected to produce 86 million tonnes (mt) of oil in 2020, down from the previous forecast of 90 mt. Large slumps are anticipated in the mining, manufacturing, agriculture, construction and service industries, as well as in trade. Kazakhstan’s exports, dominated by oil, are set to be US$16.3 billion lower than earlier expected. Outlook for budget revenue has been slashed by US$3.7 billion. Kazakh government will tap the US$60-billion Emergency Reserve National Fund for $10.6 billion this year, significantly up from the amount it had planned earlier. This is designed to soften the blow from the coronavirus outbreak and plunge in the price of oil. US$740 million will go towards measures to boost employment. Kazakhstan plans to borrow US$3 billion on foreign capital markets to finance its budget deficit this year. 

Situation in Kazakhstan due to oil price decline appears concerning, not least because any efforts made to diversify the economy after the last oil crisis have only led to the agricultural sector and infrastructure expansion becoming more vulnerable to China, now suffering its own economic woes. Kazakhstan has, in the light of unfolding coronavirus pandemic and concomitant fall in global oil prices, revised its economic projections for this year to forecast a 0.9% contraction. Before the current crisis, GDP had been expected to expand by 4%. Exports will drop by US$16.3 billion to US$35.1 billion. Imports will decline by US$7.5 billion to US$26.6 billion. Nominal GDP is estimated at US$155 billion, which is US$10.6 billion lower than the earlier forecast. Annual inflation is expected to be around 9-11%. 

A joint Kazakhstan-Uzbekistan auto assembly line of new Chevrolet brand models was launched in Kostanay city in northern Kazakhstan. More than one thousand jobs will be created as part of the project. Several models of the Chevrolet brand car will be assembled on the new production line. The plant will manufacture 26,000 vehicles per year at first which will increase to 100,000 units in future. From the first batch to be produced this year, nearly 13,000 vehicles will be exported to neighboring countries.

Italian oil major Eni commenced commercial operations at its first large-scale wind power investment in Aktobe, northwest Kazakhstan, producing 48 megawatts (MW) of renewable energy. The Badamsha wind farm has an overall CO2 emissions savings of 172,000 tonnes per year. The project marks Eni’s first step of “an extensive renewable presence in the country,” which includes a second expansion phase for Badamsha and a 50-MW solar photovoltaic farm. Eni is targeting a portfolio with 3,000MW wind and solar capacity by 2023 and up to 5,000MW by 2025. It currently produces 180,000 barrel of oil equivalent per day in Kazakhstan.

Kazakhstan introduced an embargo on imports of gasoline, diesel fuel and jet fuel from Russia for a period of three months to try and ease oversupply of gasoline in the domestic market as demand has slumped due to the coronavirus outbreak.

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