Political Developments
At a meeting between Azerbaijan President Ilham Aliyev and Uzbek President Shavkat Mirziyoyev in Tashkent on August 23-24, the two leaders agreed on detailed roadmaps for industrial, infrastructural, and interregional development. This is another step towards Baku’s deeper engagement with Central Asia. It also sets a precedent for similar agreements with other Central Asian countries. Azerbaijan’s pivot towards Central Asia reflects the growing prominence of the latter following the outbreak of the Russo-Ukraine war in 2022. Central Asia is also attracting renewed interest from beyond the region, such as from Turkey, the United States (US), Japan and the European Union (EU). Azerbaijan is a viable partner for the landlocked Uzbekistan to get access to Turkish and European markets by joining the flagship Middle Corridor transit route. Despite geographical difficulties, Uzbekistan has sought to establish itself as a regional logistics hub, given its economic potential, human capital, and better integration than neighbours into international value chains and markets. Uzbekistan has announced its plans to increase cargo flow by 15 times to Europe via Bulgaria through the Middle Corridor route.
Uzbekistan pursues a pragmatic policy toward Afghanistan, based on the principles of close friendship and good neighborliness. After the Taliban came to power, Uzbekistan was the first country to enter into an open dialogue with the new government of Afghanistan. The past few years have been marked by a rapid growth in mutual trade; by the end of 2023, trade volume exceeded $860 million. Joint infrastructure projects are being implemented, including the construction of the Mazar-i-Sharif–Kabul–Peshawar railway, which will provide access to Pakistani ports in the Indian Ocean. Tashkent and Kabul are actively developing investment partnerships in mining, energy, and agriculture. Today, the leadership of Uzbekistan perceives Afghanistan as a country of opportunity, emphasizes its belonging to Central Asia, and advocates for the deep integration of Afghanistan into regional economic processes. Tashkent advocates maintaining a dialogue with Kabul on border security, water use, and trade development.
Uzbekistan and other Central Asian states have walked a fine line since Russia launched its invasion of Ukraine in early 2022, striving to remain on the side-lines of the conflict without riling the Kremlin and provoking Russian President Putin into taking any punitive action. Helping to keep Moscow happy is the fact that Central Asian states have acted as a backdoor trade conduit, tacitly helping Russia soften the impact of Western sanctions, and keeping the Russian war effort going.
China-Central Asia Public Security and Interior Ministers held an inaugural meeting in Lianyungang to deepen cooperation in public security and exchange experience in countering modern challenges and threats, such as transnational crime, extremism, drug trafficking, cybercrime and human trafficking.
The Eternal Brotherhood – III multinational joint Special Forces exercise was held in Turkistan region of Kazakhstan. Jordan and Kyrgyzstan were invited as observers. Azerbaijan, Kazakhstan, Türkiye, Pakistan, Qatar and Uzbekistan participated in the Exercise. Up to 300 Special Forces personnel from 6 countries took part in the multinational exercise, which involved armoured vehicles, army aviation and UAVs.
The Tajik Embassy in Russia issued a statement recommending that its citizens refrain from traveling to Russia due to enhanced entry control measures at land and air checkpoints. The embassy advised Tajik nationals to temporarily suspend trips to Russia, citing the strict border regime. A similar advisory was issued for travel to Belarus, though further details were not provided. This is not the first instance of such a warning. In April 2024, following a terrorist attack at Crocus City Hall in Moscow and the detention of Tajik nationals suspected of involvement, Tajikistan’s Foreign Ministry advised its citizens to avoid travel to Russia unless absolutely necessary. The country saw increased inspections and raids, with widespread checks on migrants. The situation was mirrored by other Central Asian countries. On September 5, Kyrgyzstan’s Ministry of Foreign Affairs also advised its citizens against traveling to Russia, highlighting growing pressure on migrants following the Crocus attack, which many say has made living and working conditions in Russia “unbearable.”
Russian PM Mishustin visited Uzbekistan with a declared aim of securing Tashkent’s commitment to becoming a full member of the Moscow-dominated Eurasian Economic Union (EAEU). Experts feel the main reason Moscow wants Uzbekistan to join EAEU is due to population numbers: Russia is facing a demographic decline exacerbated by already large, and constantly rising, wartime losses. Uzbekistan, meanwhile, has a young and rapidly growing population. Russia needs more bodies to ensure a stable economic future. Uzbekistan gave no indication that they would go along with Moscow’s wishes. A statement issued by President Shavkat Mirziyoyev’s office following a September 10 meeting with the Russian prime minister did not mention the EAEU or specific joint projects. The outcome of the Russia-Uzbek joint commission was similarly modest. There was lots of discussion about boosting trade and investment and following up on joint projects agreed upon during Putin’s visit to Uzbekistan last May. But the talks produced few results. Perhaps the most significant development arising out of the visit was the signing of a protocol concerning implementation of an agreement signed back in May under which Russia pledged to build up to six low-power nuclear reactors to generate electricity in Uzbekistan. The protocol will allow Uzbekistan to begin direct work on the construction site in the near future. Uzbek officials expressed the hope that the first reactor will be ready to go online within five years.
During his annual state of the nation address Kazakh President announced that Kazakhstan will hold a referendum on October 6 to determine whether to proceed with the construction of a nuclear power plant. This has been in the works for sometime. Tokayev first raised the idea in 2019 as part of a broader strategy to address the country’s energy needs, reduce reliance on fossil fuels, and decrease greenhouse gas emissions. The proposal gained momentum due to frequent power outages and the nation’s vast uranium resources. Kazakhstan relies heavily on coal, oil, and natural gas to meet its energy demands, posing significant environmental risks. The proposal to construct a NPP in Kazakhstan has garnered mixed response from the public. According to a survey conducted in August, only a slight majority (53.1 percent) support the idea.
There have been diplomatic efforts to normalise relations with the Taliban and both Kazakhstan and Kyrgyzstan have already dropped their “terrorist state” designation, but progress is slow. Uzbekistan has been leading the effort and opened up a flourishing new trade centre on the border at Termez as a practical step to bringing the two countries closer as well as exporting electricity to Afghanistan, but problems persist. More recently, the Taliban finalised trade and investment deals worth $2.5 bn with Uzbekistan on August 17. The agreements were signed during a visit to Kabul by Uzbek Prime Minister, the highest-level foreign official to visit Afghanistan since the Taliban regained control three years ago. Uzbekistan has spearheaded diplomatic efforts to come to terms with the Taliban government. Tashkent has done this by providing humanitarian assistance, promising economic investment, and hosting the largest global conference featuring Taliban participation. Kyrgyzstan and Turkmenistan maintain regular official meetings with the Taliban, and even Tajikistan, which has not formally recognized the group, and has its own terrorist problem, continues to provide electricity to Afghanistan despite unpaid bills. Russia has used fear of terrorism to assert its role as the security guarantor in Central Asia, a region it still considers its “near abroad.” It is becoming evident to Central Asia that Russia has taken advantage of this concern about extremist spillovers into Central Asia from Afghanistan to maintain robust military presence in the region. It maintains bases in Tajikistan andKyrgyzstan and extensive infrastructure in Kazakhstan.
Azerbaijani President Ilham Aliyev attended the sixth consultative meeting of the Central Asian leaders held in Astana, the capital of Kazakhstan, on Aug. 9, 2024, for the second time as an honorary guest. The consultative meetings of the Central Asian leaders began in 2017 upon the proposal of Uzbek President Shavkat Mirziyoyev and have already been held in Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyzstan and Tajikistan.
Taking into account his current visit to Uzbekistan on Aug. 22-23, Azeri President Aliyev has visited Central Asian countries 17 times between 2022-2024, and Central Asian leaders visited Azerbaijan 15 times. With their participation in the COP29 summit meeting to be held in Baku on Nov. 11-21, the number of visits by Central Asian leaders to Azerbaijan will increase further.
Economic Developments
Moody’s upgraded Kazakhstan’s long-term credit rating from Baa2 to Baa1 with a “stable” outlook – the highest rating the agency has assigned to the country since its independence. Moody’s acknowledges the ongoing improvement in Kazakhstan’s institutional and political environment, combined with sustained economic diversification. These factors have contributed to an enhanced economic stability and improved credit worthiness. Experts at Moody’s expect these improvements to continue and credit resilience to further strengthen. Ongoing reforms both at the institutional and economic levels can make Kazakhstan a more attractive destination to invest. Development in the transportation and logistics sector, according to Moody’s, is one of the key drivers of growth and diversification, highlighting the rapid growth in cargo transit activity across the Trans-Caspian International Trade Route or the Middle Corridor.
The Qosh Tepa Canal project in Northern Afghanistan aims to divert water from the Amu Darya, potentially impacting Uzbekistan and Turkmenistan by reducing water flow in their shared river system. This could strain regional water resources, affecting agriculture and local economies in both countries. Upon completion, the 285-km-long Qosh Tepa Canal is expected to convert 550,000 hectares of arid land into farmland. Uzbekistan is already dealing with water depletion mainly due to droughts, desertification and climate change. With approximately 40 percent of Uzbekistan’s population depending directly or indirectly on the country’s agricultural sector, where cotton is the main crop and contributes to around 17 per cent of the country’s GDP, further diversion of water could exacerbate water scarcity in the country. For Turkmenistan, the two main crops—cotton, primarily grown for export, and wheat, which is consumed domestically—create sub-dependency on a vast amount of water used for irrigation. Agriculture accounts for approximately 10 per cent of Turkmenistan’s GDP. It also employs nearly half of the country’s workforce. Cotton production thus plays a prominent role in the economies of both Uzbekistan and Turkmenistan. Any further decrease in water supply might have far-reaching implications for both countries’ agriculture and food security.
Uzbekistan and Kazakhstan are already suffering due to the aridification of the Aral Sea. Over the last 50 years, the total flow of rivers into the Aral Sea has dropped to an average of 12.7 cubic kilometres or by almost 4.5 times. This has led to the formation of vast salt fields on the dessicated parts of the Aral Sea, turning into what is now known as ‘Aralkum desert’. The desertification has also impacted the socio-economic situation through the loss of the sea’s fishing industries. There are also changes in the demographic situation and health conditions of the local populations. As a result of exposure to significant pollutants, there has been a rise in infant mortality, tuberculosis and bronchitis among the population.
Turkmenistan and Afghanistan started work on the multibillion-dollar Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project with the ceremony at the Turkmen-Afghan border being attended by Chairman of the People’s Council of Turkmenistan and Prime Minister of the Taliban-led Afghan government. The pipeline, once completed, will transfer 33 billion cubic meters of Turkmen natural gas annually to Afghanistan, Pakistan, and India. At an estimated cost of $10 billion, the TAPI pipeline will span 1,814 kilometers. Turkmenistan currently exports natural gas to China and Russia but once completed, the TAPI project will enable the country to diversify its export routes. Initially signed in the early 1990s to provide natural gas to energy-deficient South Asia, the TAPI project has faced repeated delays due to years of insecurity, instability and hostilities in Afghanistan and Pakistan. The much-delayed project was first signed in 2010, but work was stalled because of technical and financial complications and disagreements.
In January-July, 2024 Kazakhstan’s tourism sector saw a significant increase in investments. During this period, the volume of investments in fixed assets reached 467.6 billion tenge (US$969.3 million), which is almost twice as much as in the same period last year, when the volume of investments was 238.9bn tenge (US$495.2m). This growth demonstrates the tourist industry’s sustainable development, as seen by increased investor interest in this sector of the economy. Investments are aimed at creating new tourist facilities, modernizing existing infrastructure and improving the quality of services, which ultimately contributes to increasing the attractiveness of Kazakhstan as a tourist destination.
Kazakhstan aims to boost output of metals needed for electric vehicle (EV) batteries and is issuing hundreds of new exploration licences to attract fresh investment in the sector. Kazakhstan promotes itself as a dependable supplier of the majority of critical materials at a time when Russia has threatened to curb exports and China is tightening control over rare earths. Kazakhstan has deposits of 90% of elements of the periodic table and is already a significant exporter of ferroalloys, gold, and copper.
Kazakh President Kassym-Jomart Tokayev travelled to Tajikistan on August 22. During his visit, Kazatomprom and state company Tajik Rare Metals (Tajredmet) signed a memorandum of understanding on “expanding cooperation in the field of mining and processing of uranium, rare and rare-earth metals.” Kazatomprom already has a dozen large uranium fields and is working with foreign partners from Canada, China, France, Japan and Russia to develop them. Tajikistan will benefit from working with a fellow Central Asian country. China and Russia have dominated investment in Tajikistan and, especially in the case of China, Tajikistan has accrued a substantial debt. Kazakhstan’s state atomic company Kazatomprom, is planning to expand its uranium mining beyond Kazakhstan’s borders. Kazatomprom’s deal with Tajikistan also indicates that Kazakhstan is looking to become not just a source of critical raw materials (CRM) that nearly every country in the world is now seeking, but also a processor of these materials and supplier of products ready for use.
Kazakhstan is the largest producer of natural uranium worldwide. In 2022, the energy-rich nation produced the largest share of uranium from mines (43% of world supply), followed by Canada (15%) and Namibia (11%). In spite of that, Astana could eventually start purchasing the radioactive element from Tajikistan. Given the global resurgence of nuclear energy and the ensuing “race for uranium,” Kazatomprom is keen to assess the current status of Tajikistan’s uranium reserves, and, if feasible, expand its resource base. Uranium is considered one of the main natural resources of Tajikistan. It is believed that the first atomic bomb developed by the Soviet Union contained raw materials from Tajikistan. But after the collapse of the USSR, uranium mining was curtailed in the country. According to various estimates, 14% of the world’s reserves of uranium are located on the territory of Tajikistan. But compared to other nations, Tajikistan does not have significant uranium mining operations, meaning its uranium deposits remain underdeveloped. However, the fact that Russian companies are interested in exploration and mining of uranium in Tajikistan suggests that Kazatomprom might have serious competition. It is entirely possible that other foreign corporations will also eventually join the “race for uranium” in Tajikistan.
According to the IEA, as of 2021, 48.8% of Kazakhstan’s total energy supply comes from coal, followed by oil at 24.9%, and natural gas at 24.7%. Hydropower accounts for 1.2%, with 0.4% from renewables like solar and wind. Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan all have Critical raw material (CRM) deposits. There are also processing plants such as the Kara-Balta Ore Mining Combine in Kyrgyzstan. It currently handles gold and molybdenum, but it was used for uranium processing during the Soviet era. Uzbekistan’s Navoi Mining and Metallurgical Plant has four metallurgical plants, while there is a uranium processing facilty at Surgraly that was opened in 2014.
Kazakhstan’s national reserves are valued at around $150 billion. The Kazakh government says that it should attract investment “without risking the reserves and funds that are designated for the use by future generations” and can rely on the instruments existing at the Astana International Financial Center.
The United States has expressed its support for Tajikistan’s involvement in the Trans-Caspian International Transport Route (TITR or Middle Corridor) project, which aims to connect China with Europe via the Caspian Sea, Asia, and the Caucasus countries. This development comes as a strategic move to strengthen trade ties while circumventing Russia’s influence in the region.
India-Central Asia Relations
India’s Commerce Secretary (CS) virtually attended the 23rd meeting of Commerce Ministers of Shanghai Cooperation Organization (SCO) held in Islamabad, Pakistan. The Commerce Secretary, in his address, mentioned that India’s priorities in SCO are shaped by the vision of PM Modi of a ‘SECURE’ SCO, where SECURE stands for Security, Economic Development, Connectivity, Unity, Respect for sovereignty and territorial integrity, and Environmental protection. CS emphasised that digitalisation holds the promise for rapid economic development and prosperity. He added that India had successfully created a strong digital public infrastructure platform for financial inclusion, education and improving overall governance in the country. The use of digital technology as ‘public goods’ has led to widespread benefit across the population irrespective of their position in the economic hierarchy which can be replicated in the area of green energy transition, which is a necessity to meet our net zero targets and in our common pursuit to reduce carbon footprints for sustainable growth. CS focused on the importance of efficient logistics for international trade, in which, paperless trading is a critical step towards streamlining cross-border transactions. CS emphasised on the need for strong connectivity to foster trade and economic development. However, while making such efforts to bolster connectivity projects, it is essential to build in trust as well as transparency in the co-operative efforts. In this context, he emphasised the importance of respect for sovereignty and territorial integrity of the member states. It was highlighted that 21st century is the century of technology and India is among a few countries to formulate national strategy on Artificial Intelligence and launch an AI Mission. He reiterated that India’s commitment to ‘AI for all’ in achieving responsible development for the larger good of our society could be realised by working closely together to make AI transparent, fair, secure, accessible and responsible.
During the meeting, the Ministers approved 3 documents covering different areas of cooperation viz., Framework for Cooperation of the SCO Member States in the sphere of Development of the Creative Economy, Concept of Cooperation between the Trade Promotion Organizations of the SCO Member States and the Concept for the creation of Economic Preferences Base of the SCO Member States and also adopted a statement on issues of fair trade and sustainable development.
A recent report by MakeMyTrip highlights changing trends in Indian travel preferences. Covering June 2023 to May 2024, the report lists the top ten international destinations for Indian tourists, with Kazakhstan leading, followed by Azerbaijan and Bhutan. Surprisingly, traditional spots like the US and UK are absent. Interest in Kazakhstan and Azerbaijan surged by 491% and 404%, respectively. Kazakhstan’s popularity has surged since it instituted a 14-day visa-free regime for Indian citizens in 2022, leading to a remarkable influx of visitors. Chairman of the Kazakh Tourism Committee, reported that the flow of Indian tourists has ‘rocketed,’ with 28,300 Indian nationals visiting the country in 2023 alone. The MakeMyTrip report attributes Kazakhstan’s appeal to improved connectivity, with direct flights available from New Delhi to Almaty—Kazakhstan’s largest city—taking just three hours. The rise of social media influencers promoting Kazakhstan as a travel destination has further fuelled its popularity among Indian travellers.
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