By Richard Pomfret*
In 1991, the five Central Asian economies were republics of the Soviet Union, with trade and transport oriented towards Russia. Over three decades of independence, Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan have built railways, roads and pipelines to the east and south and diversified trade partners, distancing themselves from Russia. The war in Ukraine is accentuating these processes.
The immediate effect of the war will be to disrupt trade and labour flows. While Russia remains an important trade partner for the Central Asian countries, in 2020, it was less important than the European Union or China. The most serious logistical challenges will be for Kazakhstan, the only one of the countries that borders Russia. A large share of oil and grains have been exported through Russia and the Black Sea but alternative pipelines and railway lines are available. Central Asian imports from Russia are mainly manufactured goods for which substitutes are readily available.
A bigger shock will be the reduced demand in Russia for migrant workers whose remittances have been important for Tajik and Kyrgyz households. The collapse of the Russian rouble will exacerbate the war’s negative effect on exports to Russia and on remittances.
A casualty of the war has been the rapidly growing China–EU rail services through Kazakhstan and Russia. The substantial transit fees earned by Kazakhstan ceased in March 2022 as the Russian railway company was hit by sanctions. The silver lining for Central Asia is that to maintain the western ‘belt’ of the BRI, China has stepped up its search for alternative routes to Europe. The greater use of more southerly routes will benefit Uzbekistan and Turkmenistan, and strengthen links with Turkey and Iran.
The war could have positive economic implications for energy exporters Kazakhstan and Turkmenistan if oil prices remain high. Both countries have oil or gas pipelines to China and options for exporting oil across the Caspian Sea or gas to Iran that should be sufficient to offset the disruption to transit through Russia. But higher energy prices will exacerbate the war’s negative impact on the Kyrgyz Republic and Tajikistan.
Another silver lining may be a brain drain of young technocrats and entrepreneurs who are disillusioned with Russia and find Tashkent or Almaty an attractive alternative. But the numbers are hard to track, given the visa-free travel in the Commonwealth of Independent States. Many short-term visitors just establish a non-Russian bank account with a credit card and a Central Asian address.
The length of the conflict and the post-war settlement will influence the long-term impacts of the war. The most likely outcome will be for 2022 to be another step in the Central Asian countries’ path away from their Russian-centred history. After the 1860s, the major economic decisions were taken in Saint Petersburg or Moscow, but since 1991 the Russian connection has been steadily loosened.
The five countries’ political relations with Russia since the dissolution of the Soviet Union have varied. Turkmenistan proclaimed its neutrality, which the United Nations endorsed. Uzbekistan wavered between the GUAM (Georgia, Ukraine, Azerbaijan and Moldova) group, and Russian-led initiatives that generally included Kazakhstan, the Kyrgyz Republic and Tajikistan.
In 2010, Kazakhstan and Belarus formed a customs union with Russia. When this was extended to become the Eurasian Economic Union in 2015, the Kyrgyz Republic also joined. The economic consequences of joining a customs union with Russian-inspired external tariffs were negative, albeit offset for the Kyrgyz by more favourable treatment for migrant workers. Despite the latter inducement, Tajikistan stayed out.
Kazakhstan, the Kyrgyz Republic and Tajikistan, together with Russia, Belarus and Armenia, are members of the Collective Security Treaty Organisation. The Organisation has been viewed as weak, although Kazakhstan did call on it for assistance in January 2022.
All five countries refused to acknowledge the independence of Abkhazia and South Ossetia after the 2008 Russia–Georgia war or Russian sovereignty over Crimea in 2014. In 2022, they all declined to vote against the UN motion criticising the Russian invasion of Ukraine — Turkmenistan and Uzbekistan did not vote and the other three countries abstained.
Even more strikingly, addressing Uzbekistan’s Senate on 17 March, Foreign Minister Abdulaziz Kamilov said that ‘firstly, the military actions and violence must be stopped right away. The Republic of Uzbekistan recognises Ukraine’s independence, sovereignty, and territorial integrity. We do not recognise the Luhansk and Donetsk republics.’
Kazakhstan, with a substantial Russian-speaking majority along the country’s long border with Russia, and the Kyrgyz Republic, with its large migrant workforce in Russia, are more cautious but unwilling to provide unconditional support.
The economic foundation for the process of distancing from Russia is the diversification of the five countries’ external economic relations since 1991. New transport facilities and trade links have been established. The disruption of economic links to Russia will hurt Kazakhstan and remittance-dependent households. But there are few other areas where Russian markets or suppliers of goods and services are not easily replaced — or where this has not already happened.
*About the author: Richard Pomfret is Adjunct Professor of International Economics at the Johns Hopkins University SAIS Europe in Bologna and Professor of Economics Emeritus at the University of Adelaide
Source: This article was published by East Asia Forum