H I G H L I G H T S
● Political Developments
● Economic Developments
● India-Central Asia Relations
Many analysts suggest that there is a strict division in Central Asia where Russia deals with security and China does economics. That division is fading. China is already a hard power in the region. This is visible in Chinese arms sales to Central Asian governments. It accounts for 18% of region’s military hardware over past five years, a dramatic increase from the miniscule 1.5% it provided from 2010 to 2014. These sales have ranged from weapons and transport vehicles to high-tech hardware such as armed drones, a highly sought-after global market traditionally cornered by United States and Israel. China has also constructed its first military facilities in the region, building up a small but growing security presence in Tajikistan, which shares a 1,356-kilometer southern border with Afghanistan and a 476-kilometer eastern border with China. Beijing also increasingly seeks to safeguard its infrastructure investments in Central Asia by expanding its security footprint. Russia’s arms sales to the region have hovered consistently around 60% for several years, meaning that China’s growth has thus far not come at expense of Russia’s market share. That could change in the coming years. As China grows as an arms supplier, it will eat into Russia’s share and that’s when tensions between Moscow and Beijing could surface.
Kazakhstan is experiencing a double attack as the coronavirus spreads and world prices fall for oil, its most important export. Already struggling on these counts, Kazakhstan is being severely impacted by outbreak of COVID-19 at major oil fields and mines. Chevron Corp, main stakeholder in Tengiz, Kazakhstan’s biggest onshore oil field, will send home two-thirds of its workers at the site. Tengiz is estimated to have reserves of 25 billion barrels and total recoverable reserves of 6 billion to 9 billion barrels. Operations at Tengiz account for one-third of Kazakhstan’s oil output. Tengiz appears to be an epicentre of coronavirus in Kazakhstan, with around 1,000 cases reported among workers at the site. Kazakhmys, Kazakhstan’s largest copper producer and one of largest in the world recorded its first coronavirus case at a mining site in early May. It is unclear how long production will be allowed to continue as mining sites everywhere have been hit hard by COVID-19 outbreaks.
Kazakh government has shown relative transparency in communicating with citizens about virus data, even if actual death toll could be higher than reported. President Tokayev is trying to cement his authority in a Kazakhstan system still dominated by former president Nursultan Nazarbayev, and recent political reforms central to his programme have so far been termed as disappointing. In Uzbekistan, media reporting remained censored. Uzbekistan’s seemingly much lower case rates than in Kazakhstan and rapidly flattening curve, weeks before its neighbour, suggest that it could have been less transparent, while its compliant media fails to hold it accountable. Turkmen government is allegedly punitively restricting reporting and discussion of COVID-19. To date it claims it has no cases despite some independent reporting to the contrary. The Tajik government lost ground in containing the virus by only feeling obliged to admit to its first case on April 30, the eve of a World Health Organization visit. Unlike its neighbours, it has not yet provided detailed breakdown of epidemiological situation and observers are sceptical about its claimed recovery rate. Meanwhile, the Kyrgyz government undertook strict measures to contain the virus, and has been open about the case numbers but there has been a lack of communication from senior levels of government.
Central Asia started returning to normal as COVID-19 slowly began loosening its grip. Countries commenced easing quarantine restrictions to quickly restore the economy affected by the pandemic. Leaderships of Kazakhstan, Kyrgyzstan and Uzbekistan are trying to support the businesspeople of their countries in every possible way. Entrepreneurs have been exempted from paying a number of taxes. They have also been provided with concessional loans. Uzbekistan abolished excise tax on imported passenger vehicles. Uzbek President signed a decree on development of the domestic automotive market. Excise tax on imported cars will be abolished from August 1 from the current 30% level. For comparison, excise tax on new cars in Russia, Kazakhstan and Ukraine is 2%.
President of Turkmenistan participated in opening ceremony of new Bicycle monument, erected in south of Ashgabat. 7,500 riders joined the parade. Thousands of tracksuit-wearing officials in Turkmenistan were brought along for the ride. Regions outside the capital held smaller-scale events. Turkmenistan – one of the few countries that has not reported a single case of coronavirus – has given little thought to social distancing in recent months, celebrating key occasions in the national calendar with customary pomp.
Situation in Tajikistan is currently causing the greatest concern, with World Bank recently warning of up to 230,500 severe Covid-19 infections and as many as 21,000 deaths (the country’s population is about 9.3 million). The Tajik authorities are apparently beginning to recognise the danger. Recently it was reported that Rustam Emomali, son of the President and mayor of capital, Dushanbe, had addressed residents and urged them not to panic, assuring them that the state had enough resources to combat the pandemic.
Covid-19 has also created a serious problem for the estimated 4-5 million Central Asian migrants who live and work in Russia. Most of them are from Uzbekistan, Tajikistan, and Kyrgyzstan, and are a major source of remittances. Indeed, Tajikistan and Kyrgyzstan received remittances totalling about 30% of their GDP in 2019, and are among the world leaders in remittances per capita.
Central Asia’s oil exporters are being hit by a dual blow to their fiscal and external positions from the plunge in oil prices by more than 50% since January, reaching its lowest level in nearly twenty years. At the same time, stay-at-home rules and other COVID-19 containment measures are disrupting tourism, transportation, and construction. As a result, fiscal balances will likely turn negative, exceeding 10% of GDP in several countries.
ADB approved a US$1.0 billion assistance package to help Kazakhstan mitigate impact of coronavirus pandemic. ADB said this would “support the comprehensive COVID-19 health policy response, social protection and employment protection measures, and economic stimulus plan introduced by the government to mitigate the adverse impacts of the pandemic”. The pandemic has caused Uzbekistan’s economic growth projections to drop to 1.5% this year from 6% forecast previously, while the economy of Kazakhstan, also suffering from a drop in the price of oil, its key export, is expected to shrink.
ADB approved a US$500 million loan to Uzbekistan to mitigate the adverse health and economic impacts of COVID-19 pandemic. COVID-19 and its subsequent economic shock are dramatically reducing employment, income, and well-being of Uzbek citizens. This loan will provide critical budget support as the government works to contain the spread of the virus, support businesses, and expand social safety nets. The loan will support initiatives to help businesses affected by the downturn and minimize job losses. These include tax measures and loan repayment deferments to support SMEs, of which around 40% are owned or managed by women. Additional capital for the State Fund for Support of Entrepreneurship will enable government to provide loan guarantees to SMEs. Small-scale public works will be funded in the regions to help create temporary jobs, 75% of which will employ members of low-income households. The loan will also help expand Uzbekistan’s existing social protection system during the pandemic. The number of low-income households receiving social and childcare assistance from the government will increase from 595,400 to 843,000 with priority given to single mothers, divorced women, and widows. Temporary disability benefits, covering 100% of the average monthly salary, will be provided to quarantined parents and individuals caring for children. The salaries of schoolteachers, of whom at least 70% are women, will continue to be paid.
The United States Government has committed an additional US$500,000 to support Turkmenistan’s COVID-19 prevention efforts.
Chinese Foreign Minister stated during 13th National People’s Congress that impact of Covid-19 on Belt and Road (BR) cooperation is temporary and limited. Covid-19 will only strengthen and re-energize BR cooperation and open up new possibilities. In regions like Central Asia, such promises resonate. Central Asian countries have been making all the right noises about wanting to get Belt and Road Initiative–type projects and ideas moving once again. They are already proving to be one of the first stepping stones of the Health Silk Road. Having sent aid to China as the virus first emerged in Wuhan, Central Asians are now beneficiaries of Chinese aid, which has come in form of shipments of PPE, doctors, video conferences, aid to military etc. China is of course not universally popular. While medical diplomacy has dominated, there have been considerable tensions, too. Ethnically Chinese people have been harassed in markets in Kyrgyzstan, Kazakhstan and Tajikistan, with a Kyrgyz MP making a call in parliament for their isolation and for them to wear masks in public. In mid-February, relations in Kyrgyzstan boiled over to the point that a planned $280 million Chinese-built logistics centre project had to be suspended. In Kazakhstan, the Ministry of Foreign Affairs hauled in the local ambassador after an article appeared in the Chinese media saying that Kazakhstan wanted to return to China.
Wedged between China and Russia, Central Asia has suffered a triple whammy of a slump in commodities prices, a drop in remittances from migrant labourers usually in Russia (which is also suffering a major Covid-19 outbreak as well as slump in oil prices) and economic slowdown in China. These are countries whose economic future is inevitably tied to China in some way. The result has been a fertile terrain for seeking more BRI. At the front of the queue is Kyrgyzstan whose President has already reached out to China to renegotiate their debt burden with China under the rubric of BRI. He also sought to reopen Kyrgyzstan’s land borders with China as soon as possible to get trade moving once again. Uzbekistan has also been eager to make things happen. During a conference call meeting that Uzbeks convened with Kyrgyz and Chinese counterparts, they sought to hurry the construction of a rail link connecting them all. It was announced that China Development Bank will approve a loan of US$309 million to allow Uzbekistan Airlines to purchase three Boeing 787-8 Dreamliners.
First Kazakh President Nazarbayev, who stepped down from the position last year after nearly three decades in power, tested positive for the coronavirus. He remained in self-isolation. Kazakhstan has seen an increase in cases from mid-April recording hundreds of new daily cases. In addition, the health minister, Yelzhan Birtanov, recently tested positive for coronavirus and was hospitalised for COVID-19.
Kyrgyzstan’s former president Almazbek Atambayev was sentenced to 11 years and two months in prison for his alleged complicity in abetting unlawful release of a convicted mobster in 2013. Atambayev had refused to attend his own trial, dismissing the entire process as a sham. The verdict represents the culmination of just one of the trials facing the former president, whose precipitous downfall has been caused by a rancorous falling-out with his successor and one-time protégé Sooronbai Jeenbekov.
An activist in Kazakhstan has received a sentence of three years of limited freedom for insulting the country’s ruling party. As a result, the defendant will escape time in prison, but will have to obtain permission from police if he wants to relocate and will be required to perform 300 hours of community service spread over three years. He will also be banned from engaging in any political activities for five years.
More than 100 opposition activists were detained by police in Kazakhstan where two opposition parties had planned to hold rallies in several cities to demand democratic reforms in the country. Reports spoke of dozens being detained in Almaty as also in other cities, including the capital, Nur-Sultan. The detentions come despite a more liberal law on demonstrations coming into force. The DVK and the Democratic Party had organized the rallies, which authorities said breached COVID-19 social-distancing rules. They also said a new law not requiring groups to obtain permission for rallies would still need a five-day notice period before being applied in practice. The protesters’ demands included freeing of political prisoners, ban on selling land to foreigners and removing the designation of opposition movement Democratic Choice as an extremist organization. A state of emergency declared over the coronavirus expired in May, but human rights activists say the government is using the pandemic to stifle dissent.
Uzbekistan has detained a group of people belonging to Hizb ut-Tahrir, an Islamic group that the government has historically equated to violent militant groups like al-Qaeda. fOther supporters of the group are being sought in Ferghana Valley cities of Andijan and Namangan and in other cities.
Violence among residents on the border of Kyrgyzstan and Uzbekistan left dozens hurt and prompted a bout of rapid, high-level diplomacy between leaders of the two nations. Fighting broke out between villagers appears to have arisen out of a dispute of access to water. Stone-throwing eventually escalated into something more serious as buildings were set alight. The Kyrgyz Health Ministry said 25 people on its side of the border were injured, with four needing hospitalization. Kyrgyz First Deputy Prime Minister and Uzbek Prime Minister quickly travelled to the scene of the unrest to hold talks and pledge a joint investigation. The pair agreed those responsible should be prosecuted. Kyrgyzstan and Uzbekistan share a long and jagged 1,370-kilometer border that has been a source of tension since independence. Matters have improved greatly, however, since 2017, when around 80 percent of the border was demarcated following a bilateral agreement. The breakthrough has been commonly attributed to Uzbek President Shavkat Mirziyoyev, who came to power in 2016 amid pledges to develop a good neighbor policy. The swift manner in which Mirziyoyev reached out to his Kyrgyz counterpart over this incident attests to the increased level of mutual confidence since earlier days.
Tajikistan’s war on independent journalists is reaching a new pitch, not just growing in intensity, but also taking on new forms. State television broadcast a three-part series focusing on the regime’s perceived enemies. Two episodes were devoted to government bête noire Muhiddin Kabiri, an exiled opposition politician who leads the banned Islamic Renaissance Party of Tajikistan, or IRPT, and his alleged but undocumented subversive activities. In the third, one-hour-long episode, attention turned to journalists said to be working for Prague-based outlet Akhbor. The program referred to reporters by name and detailed the amounts of money they are meant to have earned from working for the website. Tajikistan routinely resorts to demonizing Iran as a would-be sponsor of destabilizing activities, something it does in part by supposedly financing the IRPT. Since the two countries are currently experiencing relatively cordial relations, however, state media has refrained on this occasion from actually naming Iran. Pressure on reporters has taken on more direct forms in recent weeks. Around a dozen independent journalists have been summoned to the Prosecutor General’s Office and the State Committee for National Security, or GKNB, the successor agency to the KGB, for lengthy interrogations.
The tragic failure of Sardoba dam sparked fresh debate around water conflicts and need for cooperation between countries in Central Asia. After five days of severe storms, a dam wall at the Sardoba reservoir in the region of Sirdaryo, Uzbekistan, collapsed and water poured through a breach onto cotton fields and villages. To reduce water pressure on the walls of the reservoir and prevent further collapse of dam walls, its gates were opened. The capacity of the canal was overwhelmed, and the flood expanded.
Kazakhstan will spend 8% of country’s GDP on post-crisis economic recovery. According to experts, pandemic not only spurred already emerging trends in the global economy, but also launched new ones. One of these trends is a technological race, somewhat reminiscent of the arms race during the Cold War in the field of access to new technologies. It will lead to both migration restrictions and the creation of new mechanisms for protecting intellectual property. Another trend will be the increased role of nation-states and actions of country blocs taking coordinated measures to protect the databases of their citizens. In the post-viral period, transfer of manufacturing from China back to other countries is likely to continue: states have decided that they cannot depend on supplies from only one country and remain secure.
This optimism is based on the fact that Kazakhstan has rather modest public debt, in addition, it has accumulated large quantities of sovereign reserves. This has enabled it to effectively roll out short term emergency measures to respond to the challenges of the pandemic. Desperate to buy food and medicine, some residents of eastern Turkmenistan have resorted to selling their cars, jewellery, livestock, and household items to survive. They claim that they have no money left to feed their children or buy medicines for elderly parents.
Whilst the world was in a lockdown, Uzbekistan was busy reforming its banking sector. Government announced a reform strategy for 2020-2025, where it described the pain points of the sector without mincing words. It has set specific steps to reform the sector with set target dates for concrete banks and given staff clear responsibilities to implement the policies. This strategy was based on World Bank’s recommendations.
Kazakhstan’s sovereign wealth fund, Samruk Kazyna, sold a 6.27% stake in Kazatomprom, the world’s top state-owned uranium miner for US$206 million to take advantage of improved market sentiment. This is part of an ambitious Privatization Plan to shore up finances. Kazatomprom recently cut its 2020 output guidance because of coronavirus pandemic. It now expects to produce about 4,000 tonnes, or 17.5% less this year. Previous estimates were between 22,750 and 22,800 tonnes. Last year, Kazakhstan produced more than 42% of world’s uranium output. Uranium prices have been on the rise since late March as investors worry about ongoing disruption to supply, which is divided between a handful of major companies.
Uzbekistan and Russia set up an economic cooperation program that would take into account the influence of coronavirus pandemic on their trade. Enterprises of the two countries plan to implement projects worth US$7.3 billion over the short term. At the end of 2019, bilateral trade turnover had already increased by 17% compared to 2018.
India-Central Asia Relations
Under phase three of the Vande Bharat Mission starting June 15, Air India ferried 550 Indians, stranded in Kyrgyzstan, back home through 10 flights to various Indian cities. India has taken all possible steps to ensure that its nationals stranded and facing hardships for various reasons are able to return home.