In 2024, Central Asia navigated the geopolitical rivalry between Russia, China, and the United States, as these major powers competed for influence and control over the region's vast natural resources, The Caspian Post reports citing foreign media.
Geopolitical Shifts
The NATO-Russia war in Ukraine effected the region’s relationships with Russia and forced it to balance maintaining economic ties with Russia and navigating Western sanctions. The region became a pathway for transshipments of European Union goods to circumvent Western restrictions, and has enjoyed healthy trade with Russia and increased use of national currencies in mutual settlements between Russia and Central Asian nations.
Water and Energy Management
There were disruptions in water and energy supply, prompting discussions on improved resource management and updates to infrastructure projects. Issues related to water scarcity and the use of water resources for energy production by countries like Tajikistan and Kyrgyzstan posed potential conflicts, particularly for the agricultural sectors of Kazakhstan, Uzbekistan, and Turkmenistan.
Economic Challenges
Kazakhstan and Uzbekistan took advantage of Russia's international isolation to strike beneficial deals, particularly in sectors like energy and raw materials. But increased trade with Russia and the influx of Russian businesses and remittances, may increase the region's vulnerability to external economic shocks, such as the Western sanctions campaign against Russia.
The World Bank is predicting “broadly slower growth” in real GDR for Central Asia economies for the next two years, averaging about 4%.
Security Threats
The republics had to be alert to security threats from neighboring Afghanistan and Pakistan, even as they broadened relations with the Taliban-ruled Islamic Emirate.
Geopolitical Tensions and Influence
The major powers - Russia, China, and the U.S., led by the assertive President Donald Trump - will seek to expand or maintain influence in the region. This geopolitical tug-of-war can lead to economic dependencies and political alignments that might not always serve the best interests of the republics which will prefer to maintain their multi-vector economic and political policies.
Initiatives like the U.S. C5 +1 Critical Minerals Dialogue, and the Group of Seven Partnership for Global Infrastructure and Investment will be welcome in the region, but those initiatives are aimed at China so the republics will have to avoid damaging relations with Beijing just to satisfy Washington and Brussels. The republics don’t just want to keep Russia and China in check but also want to restrain Europe and America.
The New York Declaration of 2023 is the definitive (so far) outline of U.S. intent for relations with Central Asia, but the U.S. has shallow roots in the region, lacking cultural ties (Russia) or sustained investment (China), though a visit by U.S. president Donald Trump - the first ever by a U.S. president - will signal serious intent for the region and shift the initiative to the U.S.
Economic Diversification
Central Asian economies have traditionally been heavily reliant on commodity exports and remittances, which are a large share of gross domestic product. The challenge is to diversify away from these to create sustainable growth by growing the manufacturing sector by more ventures like the proposed Chinese automobile factories in Kazakhstan and Uzbekistan. This involves overcoming structural challenges like the lack of access to the sea, which affects trade, and developing a more robust financial sector.
The region is keenly aware of Washington’s economic warfare campaigns against Iran and Afghanistan so may have to temper its engagement with Kabul and Tehran to avoid Washington’s ire. A future complication will be the plan by China’s Xinjiang region for closer ties with Pakistan and Central Asia to ease the effects of U.S. sanctions due to accusations of repression of the region’s Muslims.
The region's economic landscape is also influenced by the development of connectivity projects like the Middle Corridor for trade with Europe, but trade with the Middle East, Asia, and Africa will rely on access to Iranian sea ports, the International North-South Transport Corridor (INSTC), the China-Kyrgyzstan-Uzbekistan (CKU) railway, and the Uzbekistan-Afghanistan-Pakistan Railway Project to connect the region to Pakistan’s sea ports.
The recently announced economic partnership between the United Arab Emirates and Uzbekistan aims to increase mutual trade volumes tenfold and expand the investment portfolio to $50 billion by 2030. And trade between emerging and developing economies (South-South trade) is surging as these economies grow more interdependent. That won’t happen without access to southern trade routes.
The U.S. can make a positive statement by repealing the Jackson-Vanik Amendment, a centerpiece of the Cold War struggle against the Soviet Union. U.S. Secretary of State Marco Rubio supports the repeal of Jackson-Vanik and the establishment of permanent normal trade relations between Washington and the republics.
Infrastructure and Connectivity
The region's landlocked condition is a barrier to economic integration and growth. Landlockedness costs ≈10-13% in GDP/capita, on average, and landlocked countries tend to rely on the export of primary commodities, making them vulnerable to swings in market prices, hence the need to move up the value chain from natural resources exploitation to manufacturing.
Water scarcity. The region is highly vulnerable to climate change and faces significant issues with water scarcity and management, given the transboundary nature of major rivers like the Amu Darya and Syr Darya. Climate change exacerbates these problems, leading to conflicts over water resources and the need for better regional cooperation in managing these shared resources. These environmental changes pose threats to agriculture, which is a critical sector for the region's economy and accounts for a significant share of total employment.
Afghanistan’s Qosh Tepa Canal will reduce the flow of the Amu Darya by up to 15%, hurting the agriculture sectors of Turkmenistan and Uzbekistan, the latter of which has offered technical assistance to reduce the canal’s water loss, given its basic construction methods
Social and Political Stability
Internal political dynamics, including governance issues, corruption, and human rights, will challenge stability, as will the rise in nationalism, increased adherence to Islam, and the potential for religious radicalization. The region must navigate these issues while fostering a secular environment conducive to economic growth and social cohesion.
Key to stability will be reconciling slower GDP growth and the rising expectations of the region’s young who don’t remember the stagnation of the late Soviet era and are connected to their peers in Asia, Europe, and North America. Citizens under 30 years of age are more than 50% of the region’s population according to the United Nations, and David Goldman observes, “The working-age population of Central Asia is surging while Iran and Turkey are shrinking.” The region has the human capital to support future growth but those busy hands will demand an efficient and effective government.
