Central Asia’s Growing Economic Relationship With the EU

In latest years, Central Asia has discovered itself in a singular and precarious place, having to stability its robust historic ties to Russia’s sphere of affect, with latest efforts to deepen its diplomatic and financial relations with the West. Nowhere is that this more true than Kazakhstan, the biggest and most affluent nation within the area, which has discovered itself in the course of a brand new geopolitical standoff, with each East and West vying for its favor. Inside this context, Kazakhstan has risen to turn out to be a center energy by means of cautious and proactive use of diplomacy within the pursuit of its pursuits.

Because the outbreak of violence in Ukraine, and the sustained battle that has adopted Europe has paid renewed curiosity within the strategic significance of Central Asia. Dealing with the lack of key imports from Russia and the disruption of world provide traces, many European states have come to see Central Asia as an indispensable financial and commerce companion, notably as a result of its entry to East Asian markets and its wealth of key mineral vitality assets. Of the 34 predominant essential supplies that gas European industries, 18 are provided to the bloc by Kazakhstan.

Regardless of Europe’s latest reliance on Kazakhstan, ties between the 2 areas have traditionally been fairly bleak, because the EU has historically seen Central Asian as “out of bounds” – too geographically distant from its borders and inside the Russian sphere of affect. Due to this, since gaining independence in 1991, nations within the area have had little engagement with European enterprise and political stakeholders. Nevertheless, important progress was made in 2015 when Kazakhstan turned the primary Central Asian nation to ratify the Enhanced Partnership and Cooperation Agreements (EPCA) with the EU—a robust foundation for additional growth of financial and political ties.

Extra just lately, on 17 January, the European Parliament (EP) made one other effort at deepening its relationship with the now critically vital area, approving a decision on the evaluation of the European Union’s (EU’s) technique for Central Asia, during which it acknowledged Kazakhstan’s management function.

Comparable strides have been made on the facet of Central Asian nations, as they search to diversify and modify their economies to the wants of up to date markets. This has been made particularly troublesome because the battle in Ukraine, as heightened scrutiny round sanction evasion has threatened to undermine the repute of harmless Kazakhstani companies in key markets.  Nevertheless, enterprise leaders throughout the nation have usually taken these developments in stride and are studying to navigate this newly created enterprise panorama to make sure they rightfully retain entry to Western markets. 

One such enterprise chief is Yerkin Tatishev, the Founder and Chairman of the diversified conglomerate Kusto Group, who had this to say in regards to the complexities and alternatives rising from the European market:

“Because the begin of the battle in Ukraine, Kazakh companies needed to modify to the brand new political realities, together with complying with all related sanctions regimes. The European Union was not beforehand seen as a possible market for Kazakhstani items, as most commerce was achieved regionally and with Russia and China. In the present day, the EU is Kazakhstan’s greatest financial companion, accounting for 30% of complete commerce and 40% of international investments. Moreover, potential for doing enterprise and joint ventures with European entities is on the rise, particularly within the vitality, manufacturing and uncooked supplies house, but in addition rising within the tech sector”.

With such financial features at stake, Kazakhstan’s non-public sector has adopted a method of flexibility and adaptableness to stay enticing to European companions in the long run. This has particularly been the case for the nation’s vitality sector. As of 2023, a lot of the 38 billion {dollars} commerce turnover between the Kazakhstan and the EU was tied to grease and gasoline exports. Whereas such a portfolio could also be worthwhile right now, overreliance on extractive industries might threaten to undermine the longevity of the EU-Kazakhstan relationship, particularly because the vitality transition turn out to be a prime precedence for a lot of Western states. 

Inside Kazakhstan, the necessity for vitality diversification has been clearly acknowledged.  The nation’s local weather change agenda is aligned with the European Inexperienced Deal, a set of coverage initiatives by the European Fee geared toward making the EU climate-neutral by 2050. Kazakhstan, in flip, goals to attain carbon neutrality by 2060 by means of creating clear vitality initiatives and decreasing greenhouse gasoline emissions. 

With dozens of nations internet hosting elections in 2024, together with the US, it isn’t but clear what the end result of present international conflicts could be or during which course the worldwide economic system will go. Nevertheless, contemplating the rising significance of Central Asia as a area, it is vitally possible that the EU will look to turn out to be a extra dominant political and financial participant within the area.

[Photo by Glentamara, via Wikimedia Commons]

Fuad Shahbazov is a coverage analyst with a selected deal with regional safety, vitality diplomacy, and interregional partnership points. He often seems with knowledgeable commentaries on varied worldwide shops and assume tanks masking the Caucasus, Center East and Central Asian areas. He tweets at: @fuadshahbazov. The views and opinions expressed on this article are these of the creator.