BIG GAME

Central Asia (CA) should become "a united geo-economic space to facilitate various forms of cooperation" through overcoming the many differences that divide the countries of the region. This wish was voiced by the leaders of the Central Asian states at the European Union-Central Asia summit held on the shores of Lake Issyk-Kul on June 2, 2023.

The event took place right after the third China-Central Asia summit in Xi'an last month. Before that, regional foreign ministers met with the US Secretary of State in Astana as part of the C5+1 diplomatic platform. Even earlier, Samarkand hosted the summits of the Turkic Council and the Shanghai Cooperation Organisation (SCO).

The CA states pursue a multi-vector foreign policy, trying to balance their ties with the major powers. Frequent visits of the leaders of these powers to Central Asia demonstrates the growing geopolitical importance of the region.

The EU is the biggest investor and one of the biggest trading partners for the five Central Asian states. Its investment accounts for 42% of total foreign investment in these countries, followed by the US (14.2%), Russia (6%) and China (3.7%).

The EU is also a good example for Central Asia as a successful model of regional integration.

Valuable connections

The EU established formal relations with the five Central Asian states as soon as they gained independence in 1992, but contacts have been sluggish over the years. The region was seen as Russia's backyard ruled by Soviet-era autocrats.

In the mid-2000s the situation began to change, and Europe finally recognised that it should seek a closer relationship with Central Asia, despite its clear dependence on Russia. It therefore revised its policy towards Central Asia, making it more flexible and based on economic and political interests instead of insisting on democratic values. As a result, relations have intensified both regionally and bilaterally.

The EU developed its first strategy on Central Asia only in 2007. The document was updated in 2019. The EU realised the importance of the region in the areas of security, energy and stability in international trade.

In 2015, the EU signed an Enhanced Partnership and Cooperation Agreement with Kazakhstan, which is considered a reform leader in the region. Aimed at strengthening relations in a number of areas from trade and investment to the environment and climate change the agreement was ratified by a unanimous EU vote, demonstrating the value of the EU's ties with Kazakhstan.

The EU is now Astana's largest economic and trade partner, covering more than 30% of Kazakhstan's foreign trade turnover and over $160b in direct investment.

For the EU, the main imports from Central Asia are energy and raw materials: oil from Kazakhstan and Turkmenistan, uranium from Kazakhstan, gold from Kyrgyzstan and Tajikistan.

The main export partners of the CA republics in the EU are Italy, the Netherlands, France, Spain and Germany. Central Asia has a trade surplus with most EU countries. In 2021, this figure was $7.6b with Italy, $3.9b with the Netherlands and $1.4b with France. With Germany, there is a trade deficit of almost $2.4 billion in 2021. This is due to the smaller supply of raw materials to Germany compared with other EU countries.

Three reasons

The Russian-Ukrainian war caused considerable turbulence in the global economy, which negatively affected both regions and accelerated their convergence. Therefore, the EU once again revised and strengthened its Central Asian policy.

Why is the EU so keen to cooperate with the five Central Asian states?

Geopolitically, the EU is trying to change its status of a minor player in a region with strategic geographical importance right in the middle of Eurasia, bordering Russia to the north, China to the east and Afghanistan and Iran to the south.

Until now, the region has been viewed mainly through the rivalry between the three great powers—Russia, China and the United States.

Russia is trying to maintain its presence in Central Asia by creating military and economic alliances, including the Collective Security Treaty Organisation (CSTO) and the Eurasian Economic Union (EAEU). China has provided billions of dollars to Central Asia to build major import-export and energy projects as part of its One Belt, One Road initiative. The US seeks to encourage neoliberal institutions in Central Asian states to divert them towards democracy and a market economy.

In contrast, the EU has so far had no significant geopolitical interests in Central Asia and has viewed the Central Asian states as "neighbours of my neighbours".

Before her visit to Kazakhstan and Uzbekistan last October, German Foreign Minister Annalena Baerbock stated that Berlin did not want Central Asia to be "straitjacketed in Russia's backyard or dependent on China". The statement demonstrated the geopolitical aspirations of both Germany and the EU to participate in a new Great Game to prevent the rise of Russian and Chinese influence.

Secondly, the EU is interested in strengthening cooperation with Central Asian states against common security challenges such as radicalism, violent extremism, terrorism, hybrid and cyber threats, and nuclear security.

The sudden withdrawal of American troops from Afghanistan and the subsequent collapse of the Afghan government worry both Central Asia and the EU. Both sides do not want Afghanistan to become a source of threats to regional and international peace and security.

Thirdly, the EU seeks to intensify cooperation with Central Asia in pursuit of its geo-economic ambitions.

In the first 2007 version of its Central Asian strategy, the EU identified as a priority the creation of energy and transport links linking the two regions.

One more chance

The EU realises the problems associated with over-dependence on Russian energy supplies and has considered diversifying them since 2006, with the emergence of first tensions between Ukraine and Russia over the transit of gas.

That is when the Trans-Caspian pipeline, first proposed in the early 1990s, aroused interest. However, despite numerous meetings and talks, the project never got off the drawing board. The same happened in 2008 and 2014. However, since the legal status of the Caspian Sea had not yet been finalised, both Russia and Iran categorically objected to any Trans-Caspian pipeline project.

The discovery of the Shah Deniz gas field off the coast of Azerbaijan and the consequent development of rail and pipeline routes through Georgia and Türkiye have reduced the priority of Central Asian resources.

The EU's shift of emphasis towards the South Caucasus is not surprising, as it is part of the European Neighbourhood project and much closer geographically. However, with the current energy crisis and the urgent need for additional energy resources, the EU is in a difficult position. The lack of pipeline infrastructure on the Caspian Sea means that Europe should not expect sufficient raw materials from Central Asia in the near future.

Under these circumstances, the Trans-Caspian International Transport Route (TCITR) emerged as a good alternative. It is a rail, road and ferry transit system for cargo that runs through China, Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and on to Türkiye and European countries.

The Central Asian states have already started using the Middle Corridor (another name for TCITR). For example, Uzbekistan and Kazakhstan have supplied a trainload of copper and oil to Europe, respectively.

Technically, the Middle Corridor is not an easy route. Crossing the Caspian Sea is weather-dependent and limited to small vessels. Much of Georgia's inland road and rail infrastructure is in poor condition. However, the capacity of ports and terminals along the route is far greater than the current traffic load. Companies may purchase larger vessels, but they will only invest in them if there are volumes that justify them. Commercial volumes are generated by China, Japan, South Korea and other East Asian countries. Goods from Kazakhstan and Uzbekistan are still small in quantity and value.

Still, the EU is determined to give the Middle Corridor a chance. The European Bank for Reconstruction and Development announced its readiness to invest into the development of cargo routes bypassing Russia.

Alternative necessary

It is natural that amid such interest from world powers to the region, the Central Asian states have specific demands from each of them.

If the EU wants to further consolidate its status in Central Asia, it should present some alternative to the regional powers. First and foremost, it should engage more actively in addressing security threats. The EU has been hinted that it would render an invaluable service to Central Asia if it helped to stabilise Afghanistan economically and cooperate on border security issues.

The EU should also invest more resources in the Middle Corridor to make it a viable route. Infrastructure policy should be designed for the long term and not determined by current policies. Even if relations with Russia are ever restored, the Middle Corridor will certainly remain a cost-effective alternative to other routes.

Either way, much depends on the war in Ukraine, its outcome and consequences.