Central Asia braces for economic catastrophe

Posted: April 16, 2022 in Nikkei Asia Review
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More catch up posting from last month, this time a short piece for the wonderful Nikkei Asian Review looking at how Central Asia is likely to suffer from the chaos generated by Russia’s invasion of Ukraine. Have a few more since this which make similar points but through different lenses, but for now enjoy this.

Central Asia braces for economic catastrophe

Sanctions aimed at Russia will have serious knock-on effects

Migrant workers from Uzbekistan collect potatoes at an agrarian field in Beryozovka near Russia’s Siberian city of Krasnoyarsk: their remittances to their families back home are a crucial source of income.   © Reuters

Raffaello Pantucci is a senior fellow at the S. Rajaratnam School of International Studies in Singapore and author of the forthcoming “Sinostan: China’s Inadvertent Empire” (Oxford University Press, April 2022).

Across what is still referred to as the former Soviet space, there has been a sharp intake of breath. While many have grown accustomed to overbearing Russian behavior, few expected the dismemberment of Ukraine.

For Central Asia, the consequences go deeper than worrying whether they might be next. The intertwining of their economies with Russia means the drastic sanctions being imposed on Moscow will likely hit them too. And for a region that is increasingly being targeted by the West, this will further exacerbate economic suffering.

It is not so long ago that Central Asia was actively calling for greater Russian military support. Following the U.S. withdrawal from Afghanistan last August, Russian forces rushed in to undertake joint training exercises with Tajik and Uzbek forces, while Moscow sped through military sales to customers across the region.

In January, Kazakhstan President Kassym-Jomart Tokayev called on Russian forces, under the auspices of the Collective Security Treaty Organization, to help reestablish control in the wake of violent protests wracking his country.

For Central Asians, Russia remains an essential security partner. While China is seen as ascendant, it is Russia that remains hugely significant in political, economic and security terms.

The truth is that while Beijing may be the rising power, China tends to be quite passive, as its responses to the crises in Kazakhstan and Afghanistan have shown. Similarly now with Ukraine, Beijing appears largely content to talk rather than actually try to do something on the ground.

While China sees Central Asia as five nations it wants to do business with, Russia takes a more paternalistic view, in some cases even questioning their viability as states. Vladimir Putin has on occasion questioned Kazakhstan’s nation status, just as he has with Ukraine. This worries Central Asians.

Take Kazakhstan, which has a population of around 3.5 million ethnic Russians, nearly 20% of its population, concentrated near its border with Russia. It is very easy to envisage a scenario where Moscow stakes a claim to these people back in much the same way as in Ukraine.

Russia’s invasion of Georgia in 2008 first crystallized this concern. At the time, Moscow not only sought regional endorsement through the Shanghai Cooperation Organization, but recognition of the two breakaway republics of Abkhazia and South Ossetia that Moscow claimed it had gone in to defend. This appeal was roundly rejected, with China in particular horrified by the precedent that Moscow was setting.

Fast forward to today, and while it is clear that Central Asians are uneasy, there is a lot less condemnation. In fact, in a conversation with President Putin, Kyrgyz President Sadyr Japarov appeared to support Russia’s position, prompting Ukraine President Volodymyr Zelenskiy to withdraw his ambassador from the capital Bishkek.

Vladimir Putin shakes hands with Sadyr Japarov during a meeting in Strelna on the outskirts of Saint Petersburg, in December 2021: the Kyrgyz President appeared to support Russia’s position. (Handout photo from Kremlin Press Office)    © Reuters

Kazakhstan and Uzbekistan both found themselves pulled into the information war, with both being forced to deny that they supported Russia’s actions in Ukraine and Kazakhstan that they had been asked to participate in the fighting by Moscow. In Uzbekistan, the government issued a statement pointing out that any national who was found to be fighting for a foreign army would be prosecuted upon return home.

Ultimately though, it will be economic questions that will dominate minds across Central Asia. Millions of Central Asian citizens work in Russia, and their remittances to their families back home are a crucial source of income, something that will be hit by the abrupt drop in the value of the ruble.

The collapse in the value of the Russian currency has also led to massive knock-on devaluations across Central Asia as markets reflect on the consequences of Russia’s exclusion from the international economy.

Russia is a major investor and partner to all five countries. Russia has reportedly invested around $40 billion in Kazakhstan alone since the fall of the Soviet Union, while Kazakhstan and Kyrgyzstan are bound intimately to the Russian economy as members of the Eurasian Economic Union.

All of this means that when Russia suffers economically, Central Asia feels it. Now, the region is bracing for the worst. Central Asia may have experienced something similar following the 2014 sanctions leveled against Russia, but this time the hit is likely to be exponentially harder.

All of which comes at a moment of great flux in a region still suffering from the fallout from COVID. Add to that, Kazakhstan is still recovering from the national unrest that rocked the country in January, Turkmenistan is in the midst of a leadership transition, and Tajikistan appears to be on the cusp of something similar.

Many geostrategists may be tempted to conclude that Beijing is likely to benefit. And there is no doubt that this will strengthen Chinese options in the region. But the reality is that Central Asia will still be very much tied to Russia, with all the consequent loss of income that will entail. Central Asian migrant labor will struggle to find the same opportunities in other countries.

Now entirely encircled by countries that are being targeted by escalating Western sanctions — Afghanistan, Iran, China and Russia — Central Asia is increasingly finding itself between an economic hard place and a politically precarious one.

Pushed into a corner not of its choosing, the collateral damage to Central Asia from Putin’s Ukrainian invasion is likely to be considerable.

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