Page 58 - bne IntelliNews monthly magazine October 2024

58 I Eurasia bne October 2024
The war in Ukraine has caused destruction and death and pushed Europe into recession, but it has been an economic and geopolitical windfall for most of Central Asia. / bne IntelliNews
Central Asia is a big winner from the Ukraine war
Ben Aris In Samarkand
The outbreak of war has caused devastation in Ukraine, major economic distortions in
Russia that will doom it to long-term stagnation and sent Europe into recession as it starts to deindustrialise. But there is one group of countries that have done very well from the war: Central Asia.
Largely sitting on the fence, the five ‘Stans – Kyrgyzstan, Uzbekistan, Kazakhstan, Tajikistan and Turkmenistan – have seen their trade volumes surge and demand from Russia, now cut off from traditional suppliers in Europe, is fuelling a manufacturing and investment boom.
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But it hasn’t been plain sailing. The countries of the Silk Road have been through some seismic changes in recent years, not limited to the war. Central Asia is also caught up in the growing tension between Washington and Beijing and the Taliban’s return
to power in Afghanistan, which is threatening the security of the region.
But even before the war in Ukraine started, most of the ‘Stans were flourishing as three decades of economic reforms begin to pay dividends. Now the extra trade income and mushrooming demand is supercharging change, and they are ploughing the proceeds back into development.
The biggest change is the hundreds of millions of dollars of trade re-routed via one of the five ‘Stans on its way to Moscow is by passing the extreme sanctions
on Russia imposed by the West. But the bulk of the trade is not sanctions busting; simply the export of goods that Russia can’t get due to self-sanctioning by Western firms that don’t want to do business with Russia any more.
Kyrgyzstan in particular has seen budget revenues double in the last year and is using the windfall to invest into massively expanding its hydropower generation capacity to turn the small mountainous republic into an energy epicentre for the rest of the region.