The major devaluation of its national currency notwithstanding, Kazakhstan reported a 23.5 percent drop in trade with its partners in the Moscow-led Eurasian Economic Union in 2016, compared to the year before.
Finprom.kz reported gloomily on March 28 that despite efforts by Kazakhstani producers to slash prices for their goods, the overall value of exports is falling, and falling hard.
The situation is an altogether paradoxical one.
In 2016, the price for finished goods exported within the EEU were 1 percent lower than the year before — the price for raw goods was 8 percent down. Only the cost of semi-finished products was up by 2.8 percent. So in total, Kazakhstan exported $3.9 billion worth of goods to its EEU partners.
Over that same period, the price of goods imported from EEU nations rose across all categories: raw goods by 14.7 percent, semi-finished products by 9.5 percent and finished goods by 14 percent. But overall imports fell by 13.7 percent to $9.7 billion, which still represents a hefty trade imbalance.
Reducing the cost of exports was made possible by the weakening of the national currency, the tenge, which has been in a free-float since August 2015. Proponents of devaluation had argued that the the policy would be a boon to Kazakhstan’s producers and, conversely, dampen demand for cheap imports, particularly from Russia.
Kazakhstan’s government is now turning its attention to what it is grandly dubbing its “Third Modernization,” which implies the prioritization of developing the non-raw material sector. The aim is to double the export of non-raw goods by 2025.
Before then, the EEU may not be bringing much joy to Astana.
The yawning, decades-long divide between Uzbekistan and Tajikistan will get that little bit narrower next week when a senior Uzbek delegation travels to Dushanbe for talks on trade and economic cooperation.
The delegation will travel to Tajikistan on December 26 and be led by Uzbek deputy prime minister Rustam Azimov, whose recent removal as finance minister appears for now to signal his transition to a role as the lead on development of Uzbekistan’s external economic ties.
Talks will focus on reopening railway and road links that have now been closed for several years. At the heart of the historic disaccord is Tajikistan’s plan to build a giant hydropower dam that Uzbekistan could threaten its access to vital irrigation water. Tashkent has tried by multiple means — mainly by imposing a de facto transit embargo — to hinder progress on that dam and force Dushanbe to back down.
Dushanbe-based news website Asia Plus reported that the Uzbek-Tajik intergovernmental commission convening in Dushanbe will agree on the reopening of specific railway and road links, suggesting the talks may go beyond an rhetoric exchange of goodwill messages. The website cited unnamed Tajik government sources as saying the two sides will agree on the opening on new border crossings.
This comes on the heels of an announcement in November that flights are set to resume between the two countries in January for the first time in 24 years.
As Russian President Vladimir Putin revealed this week during a visit from Uzbekistan’s President Islam Karimov to Moscow, Russia has lost its top trading partner status with the Central Asian nation for the first time since the fall of the Soviet Union.
Unsurprisingly, it was China that took that title in 2015 after it did $3 billion worth of trade with Uzbekistan. And that was even lower than in 2014, when the figure stood at $4.7 billion.
As Putin noted ruefully, the fall was down to the currency devaluation brought on by the slump in global prices for oil.
“Russia occupies the second place among external trade partners for Uzbekistan. Our share in Uzbekistan’s external trade is 17 percent,” Putin said on April 26, according to a Kremlin transcript.
It’s not all bad news for Moscow though. The volume of bilateral goods trade has actually increased in the first quarter of this year, by 7.9 percent.
According to Russia’s Federal Customs Service, Russia’s trade with Uzbekistan in 2015 hit $2.8 billion. Uzbekistan has a substantial trade deficit with Russia, importing $2.2 billion worth of goods, while exporting $602 million in 2015.
Uzbek political analyst Kamoliddin Rabimov said that although the nominal drop in trade was indeed down to the collapse of the ruble, the overall trend was unmistakeable.
“The scale of the trade turnover between China and Uzbekistan has become so big that we will see it, mostly likely, only continue to increase. Russia is gradually losing its economic presence in Central Asia to Russia, and that is notwithstanding the fact that countries in Central Asia have not entirely opened their doors to China,” Rabimov said.
The shift inevitably bears geopolitical significance as well.
A cargo train carrying a test shipment along the recently completed China-Kazakhstan-Turkmenistan-Iran railway is bearing in on its final destination in a landmark event for Eurasian trade.
State media in Turkmenistan reported that the train, which departed from the Chinese city of Yiwu, just south of Shanghai, at the end of January covered 7,908 kilometers over nine days, and crossed the border into Iran on February 10.
The entire railroad extends around 10,000 kilometers and requires two weeks to cover, which is estimated to be around twice as fast as the sea route.
“The cargo, loaded with all kinds of consumer goods, traversed the Turkmen section in 28 hours, instead of two days, as had been expected. This significant reduction in travel time translates into substantial savings on transportation costs and makes the route more cost-effective,” state news agency TDH reported.
The overall route could, as its proponents argue, radically increase the efficiency in the transportation of goods from China’s eastern seaboard to markets in the Persian Gulf.
A final link in the mammoth railroad was put into place in December 2014 when the presidents of Kazakhstan, Turkmenistan and Iran officially inaugurated a 930-kilometer line running from Ozen in western Kazakhstan through Turkmenistan to Gorgan in northwestern Iran. That sped up cargo transit between the countries by cutting 600 kilometers off the journey on the previously existing route from Beyneu in western Kazakhstan to Mashhad in northern Iran.
As an air of economic despondency descends over Central Asia, Turkmenistan and Uzbekistan have decided to eat their way out crisis.
A government meeting in Turkmenistan on August 28 examined areas in which the country might be able to pursue an import substitution policy, which would mean banning imported goods in favor of locally produced equivalents.
Deputy prime minister Palvan Taganov said the bulk of imported goods was accounted for by technical industrial goods, but the state news agency report on the Cabinet discussion gave no details about what those mostly comprise.
Instead, more talk was seemingly devoted to the purportedly more promising area of food imports.
Import substitution was initially touted as Turkmenistan’s ticket out of economic doldrums in a government meeting in April, when President Gurbanguly Berdymukhamedov instructed officials to develop a program on the policy. He also used that meeting to complain of excess spending and the bloated state of the government.
But figures produced by Taganov indicate that if the import substitution agenda is to be applied mainly to food, its benefit will be virtually negligible, if not detrimental in the long term. The policy favors local producers in the immediate term, but typically ends up yielding poor returns to the consumer.
As Taganov explained in his presentation, food accounts for 6.1 percent of imports. The state news agency cited state on four goods and the proportion that the consumption of locally produced goods takes up in the domestic market: fruit juices - 96.9 percent; non-alcoholic drinks - 91.8 percent; tinned foods goods - 87.2 percent; and sausage goods - 61.8 percent.
Kazakhstan is poised to become part of the World Trade Organization (WTO) nearly two decades after it first applied to join. The Central Asian nation has completed entry talks that have been among the most “challenging” the global body has faced with any country.
Kazakhstan “finalized the negotiations of its WTO membership terms with WTO members at the Working Party meeting on Kazakhstan’s accession on 10 June,” the international trade body said in a statement issued the same day.
Farida Batyrbayeva, spokeswoman for Minister of Economic Integration Zhanar Aytzhanova, confirmed to EurasiaNet.org the completion of talks that started back in 1996.
Astana will not release details of the accession package until after a meeting in Geneva on June 22 at which the WTO’s 161 member states will consider formal approval of the draft accession package, Batyrbayeva added.
The WTO announcement came on the same day that the Agriculture Ministry had declined to put a date on Kazakhstan’s long-delayed accession, hinting at behind-the-scenes disagreements over agricultural subsidies.
The size of subsidies Kazakhstan would be permitted to retain for the agricultural sector – which contributes some 5 percent of GDP and employs around a quarter of the workforce – remained “unresolved,” as Kazakhstani negotiators tried to secure “the maximum possible domestic support,” the ministry told Tengri News on June 10, shortly before the WTO issued its statement on the completion of the accession talks.
Evidently, negotiators overcame the stumbling block to conclude the deal, which WTO Director-General Roberto Azevedo hailed as a “historic step.”
The accession talks with Kazakhstan were among “the most challenging negotiations” in the WTO’s 20-year history, the statement said.
For a landlocked country, Turkmenistan is getting into the seafaring spirit: Ashgabat’s new showpiece ferry Berkarar has been shuttling its way around the Caspian Sea – defined by geographers as an inland lake – making trips to both Azerbaijan and Russia so far this year.
The ferry was built in the Uljanik Shipyard in Pula, Croatia – which has produced ferries for the Caspian littoral states since communist times – and delivered to the reclusive Central Asian country in December. Ashgabat has also commissioned a second, smaller ship, Bagtiyar, which is scheduled to arrive this summer. They carry both freight and passengers.
Azerbaijani newswire Trend.az gushed about Berkarar’s latest voyage, from Turkmenbashi to the Azerbaijani capital: “The ferry impresses with its dimensions; it has a length of 155.8 meters, width of 17.5 meters, and height of 12.2 meters,” Trend reported on January 14.
Berkarar can carry “56 trucks loaded with 40-foot containers,” according to News Central Asia’s detailed report on the vessel.
So, provided there are enough goods to fill them, the ferries could help expand regional trade across the contested waters of the Caspian.
A Turkish company is currently modernizing Turkmenistan’s Turkmenbashi port, a commission that is expected to finish in 2017.
The presidents of Kazakhstan, Turkmenistan, and Iran have opened a long-anticipated railroad link connecting landlocked Central Asia to the Persian Gulf.
On the Turkmen-Iranian border, Gurbanguly Berdymukhamedov of Turkmenistan, Hassan Rouhani of Iran, and Nursultan Nazarbayev of Kazakhstan donned white gloves to bolt together a final section of track that was symbolically colored gold, the Associated Press reported, inaugurating the last stage of the freight link that they hope will herald a boom in trade between the three Caspian littoral states.
Highlighting those expectations, the first cargo to cross the border between Turkmenistan and Iran on December 3 was a wagonload of wheat from Kazakhstan.
The line – which carries only freight but may carry passengers later – has an initial capacity of 5 million tons per year, projected to rise to 12 million tons. Forecasts suggest the new line could triple trilateral trade in the short term from 3 million to 10 million tons, and double it again by 2020 to 20 million.
President Nursultan Nazarbayev is in Brussels putting the finishing touches to a landmark agreement with the European Union, cementing ties with Europe even as Astana pushes ahead to join the Russian-led Eurasian Economic Union.
Nazarbayev met Jose Manuel Barroso, president of the European Commission, on October 9, to “confirm the conclusion of negotiations” on the Enhanced Partnership and Cooperation Agreement, the EU said.
The agreement – three years in the making – aims to boost cooperation in around 30 policy areas including trade and foreign and security policy, it said, and will “significantly deepen political and economic ties” between Kazakhstan and the EU (Astana’s largest trade partner and a major consumer of its energy exports).
The agreement is a far weaker deal than the Association Agreement signed by Ukraine this year, but is still the most ambitious deal to be concluded between the EU and any Central Asian state.
It “puts a strong emphasis on democracy and the rule of law, human rights and fundamental freedoms,” the EU stated, although it failed to specify how.
The visit was marred by news that France is investigating possible kickbacks involving a helicopter deal with Kazakhstan, and probing allegations that Nazarbayev put indirect pressure on Brussels to close a bribery case against Kazakhstani oligarchs.
There was also controversy over Kazakhstan’s human rights record.
The idea of linking Turkmenistan, Afghanistan and Tajikistan by rail appears to have wheels once more, following reports earlier this year that the project was running short of steam.
Back in January, Turkmenistan went cold on the estimated $2 billion link, slated to be part financed by the Asian Development Bank. Ashgabat faulted Afghanistan and Tajikistan for not keeping the Turkmen leadership in the loop with regard to the route the railroad would follow. As EurasiaNet.org reported:
On January 29, the head of state-owned Tajik Railways, Amonullo Khukumatullo, announced that Dushanbe and Kabul had themselves decided on the route for the Afghan section of the rail. The announcement apparently caught Ashgabat by surprise because on January 31, the Turkmen Foreign Ministry protested that Khukumatullo’s declaration was "tendentious and absolutely unacceptable" and "counterproductive."