Despite geopolitical disturbances in the last four months, and the disruption of logistical chains all over the world, trading ties inside the Eurasian region have remained strong. According to statistics, the trade turnover between Central Asian states and Russia has increased by 14 per cent on the average since the start of the year, yet the economy development rates in the region decelerate.
Trade between neighbours
The trade statistics, as the barometer of stable relations, shows that the trade turnover of Central Asian states with Russia in the months of conflict between Ukraine and Russia keeps increasing. Thus, according to the information of EADB experts who voiced it in early June at the International Forum of People’s Diplomacy in Moscow, the general growth of mutual trade between Central Asian countries and Russia varied within 13-14 per cent in January to April. Compared to the 2021 indicators based on the low base of pandemic (plus 31 per cent), we can speak of the retardation of foreign economic activity. The analysis of data from various states shows that the indicated average figures can significantly vary by pairs “Russia-regional country”. Let’s have a closer look at them.
Kazakhstan
In the top five Central Asian states, Kazakhstan has the largest trade turnover with Russia. In January to April this year, it exceeded 7.2 billion dollars. It is only 6 per cent more than in the first four months of 2021. In fact, Kazakhstan played a passive role in this growth. Exports from the country to Russia increased just by 58 million dollars (less than 3 per cent), while imports of Russian products to Kazakhstan increased almost by 400 million dollars, from 4.7 billion to 5.1 billion dollars (9 per cent). This information was published in comparative tables of foreign trade of the Bureau for National Statistics of Kazakhstan.
This year, trade relations between Kazakhstan and Ukraine followed the expected path – Nur-Sultan increased goods delivery to Ukraine by 29 per cent. Trade flows in the opposite direction decreased by 27 per cent. Nevertheless, the general trade turnover indicator was positive (by 3 per cent). In four months, the country exchanged goods and services in the total amount of 252 million dollars.
It is noteworthy that during the war in the territory of Ukraine, some redistribution of shares between partner countries took place in the foreign economic activity of Kazakhstan took place. Despite the growth of mutual trade, Russia lost its position. In 2021, the trade intensity of Russia in the total trade turnover of Kazakhstan with all countries of the world was 24.1 per cent, and now this figure decreased by six percentage points. They were redistributed among Europe (plus 2.3 per cent, Turkey (plus 1.3 per cent) and the Americas (plus 1.3 countries).
Uzbekistan
In Uzbekistan, the dynamics of mutual trade with Russia was more rapid. In the first three months of 2022, foreign economic indicators between countries contributed to 43.8 per cent, and the trade turnover was 1.87 billion dollars. Both exports from Uzbekistan (plus 36 per cent) and Russian imports (plus 47 per cent) increased. This is the information of the State Committee for Statistics of Uzbekistan.
In general, the role of the northern neighbour has not changed in foreign trade of Uzbekistan. Russia is still on the second place of top trade partners of the country preceded by China. Uzbekistan delivers fruits and vegetables to Russia (40 million dollars in January-March 2022), textiles and clothing (252.4 million dollars). In turn, it buys vehicles and transport equipment (168 million dollars), industrial goods (143 million dollars), etc. from Russia.
Trade relations between Tashkent and Ukraine did not stop because of the geopolitical crisis. Turnover between the countries is relatively small in monetary terms (140 million dollars), and it showed growth this year (plus 7 per cent). The growth was due to the increasing imports of Ukrainian goods.
Kyrgyzstan
The Ukrainian factor did not have any impact on the exports of Kyrgyzstan to Russia. Just like in early 2021, the Kyrgyz Republic sold goods for 124 million dollars to its partner in EAEU. In general, in January to April 2022, the National Statistical Committee of the Kyrgyz Republic reported the increase in turnover between Bishkek and Moscow by 14 per cent, from 675 million to 770 million dollars. However, it happened due to the increase in import deliveries from Russia.
If we look at the structure of Russian imports in Kyrgyzstan, we can emphasise the greatest growth in value of the fuel and energy sector (petrol and its derivatives), vehicles and various equipment, food. Just like last year, Kyrgyzstan remains strongly dependent on Russian deliveries. The share of Russia is 26 per cent of total import deliveries to the country.
Trade relations of Kyrgyzstan with the second party to the conflict, Ukraine, have changed for worse this year. Logistical relations under many contracts were terminated, and minor turnover decreased by 40 per cent and amounted to 11.3 million dollars. However, almost 93 per cent of this amount was imports from Russia in January to April 2022 (10.5 million dollars). Deliveries from Kyrgyzstan decreased by more than 80 per cent.
Tajikistan
The editorial staff has failed to obtain relevant information on foreign economic position of Tajikistan directly from the Agency for Statistics of the President of Tajikistan. The latest reports on foreign economic activity of the country published on the agency’s website date back to 2017.
The evaluation of mutual trade between Tajikistan and Russia became publicly available at the meeting between the head of foreign economic cooperation office of the Ministry of Economy and Trade of Tajikistan, Dilshod Sharifi, and the representative of the government of Saint Petersburg Arbi Abubakarov this May. According to TASS with reference to the agency in Tajikistan, trade turnover between the countries in monetary terms increased by 49 per cent and reached 476 million dollars in January to April this year. Russia has been and remains trade partner No. 1 for Tajikistan.
Turkmenistan
Trade relations between Turkmenistan and Russia also strengthened in the difficult period of 2022. Russian media with reference to Vladimir Putin’s statements report the increase in trade turnover between the countries by 45.2 per cent. In the first quarter this year, the volume of export-import transactions was 117.1 million dollars. The biggest share in this indicator belongs to Russian imports (72 per cent or 124 million dollars), which increased significantly.
According to our source, Russia most often imports high value-added products to Turkmenistan such as equipment, transport, chemical goods. In turn, Ashgabat offers food, textiles and footwear to the Russian market.
Both stagnation and stagflation
Good increase in turnover of Central Asian states does not correlate with the general indicators of economic development in regional countries. Strong external shocks led to the inhibited economic growth of Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan and Turkmenistan this spring. This is the information from the macroeconomic review of experts of the Analytical Department of the Eurasian Development Bank (EADB).
Preliminary evaluations for the first quarter showed the increase in real GDP in many countries of the Eurasian region. Thus, in Kazakhstan the GDP indicator increased by 4.4 per cent, in Kyrgyzstan by 4.5 per cent, in Tajikistan by 7.5 per cent. However, analysts of the financial institute have reported some retardation since March. It happens because of interruptions in operations of Russian industrial enterprises, difficulties with export deliveries, disruptions in logistical chains.
According to the basic scenario of economic development developed by EABD analysts for 2022, by December the growth of GDP in Kazakhstan will be only 2.5 per cent, in Kyrgyzstan 1.1 per cent, Tajikistan 4.2 per cent. The inflation rate will be the highest in recent years (Kazakhstan – up to 13.2 per cent, Kyrgyzstan – up to 15.3 per cent, Tajikistan – up to 11.5 per cent).
“Secondary effects of sanctions against Russia will have impact on the retardation of economic growth in Kazakhstan. Main channels are trade and investments. Retardation in output rates in the mining and processing industry can be expected. Investment activities are like to weaken. Consumer activity is expected to decrease amid the reduction in real cash income,” according to the reports of the analytical service of EABD.
Forecasts regarding Kyrgyzstan in EABD are even less optimistic. The national economy partly depends on cash remittances from Russia and amid the reduced economic activity this channel in the crisis 2022 will “subside”. Negative factors will be lack of water, which will have impact on the commodity output in agriculture and cutback in precious metals production.
According to the bank experts, Tajikistan, compared to its neighbours in the region, will be more stable in the turbulent period. It is partly due to the high GDP rate in the first two months of the year (up to 7.5 per cent). Cutback to 4.2 per cent will be caused by reduced remittances from Russia, appreciation of imports, weakening of the Tajikistan somoni.
Expert opinion
How does the geopolitical crisis project on growth factors of Central Asian economies? What will be the scenario of integration development in Eurasian region? CABAR.asia asked these and other questions to Yersultan Zhanseitov, expert in international relations, Institute of World Economy and Politics of Kazakhstan.
- What is the influence, in your opinion, of the conflict in Eastern Europe on the economic development of Kazakhstan and other Central Asian states?
- Speaking of Kazakhstan, the geopolitical tension in Europe has definitely affected the slowdown in the national economic growth. As all transport corridors, including Europe, which are used by the republic, go through Russia. The disruption in logistic chains will have its inevitable influence.
We need to take into account that some states in Central Asia – Kazakhstan, Kyrgyzstan – are part of the EAEU, are located in the common economic space, and any shocks and disturbances faced by Russia reach all members of the union like waves.
Speaking of the economy of Central Asia, we need to take into account that in Uzbekistan, Tajikistan, Kyrgyzstan, and to a lesser extent in Kazakhstan, the major part of GDP is composed of cash remittances from migrant workers from Russia. For example, they amount to 8 per cent in Uzbekistan. It has a strong impact on the economic growth. According to the latest evaluations by Fitch Ratings, the economic growth in Uzbekistan in 2022 will not exceed 3.1 per cent, the inflation rate will be 12.7 per cent. Kazakhstan, in the first quarter, has demonstrated the growth of the gross domestic product by 4.4 per cent, but the situation can change for the worse at the year-end. This is the direct impact on the Russian-Ukrainian conflict on the economies of Central Asia.
- Do you agree with the opinion that Russia promotes its influence in the territory of Central Asia because of its major import share in the total trade pattern with the five CA countries?
- Central Asia, as a macroregion, is mistakenly taken as one economic unit, but the Central Asian states do not have the coordinated politics. National countries act differently depending on economic ties, transport corridors. For example, in Kazakhstan, Russia’s share in imports has decreased in the first four months this year, while the export of goods “made in Kazakhstan” has increased. The northern neighbour replaces the imports from Europe by supplies from other countries, and it contributes to the increasing Kazakhstan exports to Russia.
- Last year, the turnover of commodities among the Central Asian states increased by 40 per cent. It turns out that the process of economic regionalisation in the region has started long before the military actions in Ukraine. How do you judge this trend now? Will it continue in the future?
- The whole world heads toward regionalisation. It was globalisation in the past, but now neighbouring countries prefer to unite by regions. And this is not the choice of Central Asia only. It’s just our response to what is happening in the world. Central Asia will also encounter the process of uniting economic and political efforts at the level of one region. This is what is discussed by the leaders of the five Central Asian states, we need to cooperate closer, resolve issues between ourselves without any foreign influence. Of course, this is not a fast process, but the trend is obvious now. On July 21 this year, Kyrgyzstan is holding the fourth Consulting Meeting of the heads of Central Asian states. It will show which common decisions will be made in the future at the level of one region.
- What do you think about future trends of economic integration in the Eurasian space? Do you think that the EAEU could collapse?
- I don’t think the EAEU will collapse. At least, Kazakhstan does not raise this issue. Since 2010, the state has taken great efforts to join the organisation. Moreover, Kazakhstan has close ties with Russia. The largest oil pipeline of Kazakhstan (Caspian main pipeline – author’s note) runs through the territory of Russia. It exports 80 per cent of Kazakhstan oil. Therefore, Kazakhstan does not even think about the withdrawal from the EAEU.
- What are possible scenarios of further economic development for Central Asian states given the fast-changing business environment in global markets and the existing uncertainty about the outcome of the conflict in Ukraine?
- In the short-run (during the second half of 2022 and all 2023), it will be the shock as many Central Asian states still depend much on cash remittances from Russia. Now Russia closes the labour market for migrants, it does not have many jobs, and people will have to come back home or seek other vacancies. And it would not be that easy.
Generally speaking, there is the trend towards making Central Asian region into a transport hub in the heart of Eurasia. The role of the Trans-Caspian international route (through the Caspian Sea, Azerbaijan, Turkey) will be important as an alternative access to European markets. The influence of China will also increase in Asian markets. As the economic power of Russia will subside, the role of China will strengthen in the region.
Main photo: cootfreight.co.uk