Central Asia – GCC summit. The field for Russia in the region continues to narrow
Investment attraction
On April 15, a summit on the “Central Asia – Gulf Cooperation Council (GCC)” took place in Tashkent. The event was held in a ministerial format, but essentially combined the foreign policy “Strategic Dialogue” and an investment forum. In addition to the delegations from the GCC members themselves, there was also a delegation from Azerbaijan led by Foreign Minister D. Bayramov.
Over the past two years, the Central Asian Five summits have become a familiar international format. The five are Kazakhstan, Turkmenistan, Kyrgyzstan, Uzbekistan and Tajikistan, which have found for themselves a very convenient model for working on international platforms, as well as a good way to attract investment.
Multilateral regional guarantees from five participants at once allow investors, both from state sovereign funds (Arab countries) and transnational financial structures, to discuss several interrelated projects at once, without worrying too much about possible frictions and skirmishes between the G5 countries, especially border conflicts.
The last serious clash based on territorial affiliation in the Fergana Valley between Kyrgyzstan and Tajikistan occurred in the fall of 2022 and was settled primarily through internal regional negotiations. The influence of third-party neutral forces as moderators here was small.
Central Asia moved towards this format gradually, but the North-Eastern Military District accelerated these integration processes, and the countries eventually covered the path from “get-togethers” to formal coordination in the same 2022. Now the Group of Five acts as a fully formed regional player, even if this player does not yet have full institutionalization, like the EAEU or the SCO.
In mid-April, we again see the work of the Five as the third iteration of the negotiation processes in the “Central Asia - Gulf Cooperation Council (GCC)” format.
The last summit took place in July 2023 in Saudi Arabia. You can refresh its results in the corresponding material on VO “Central Asia – Gulf Cooperation Council Summit”.
Promises to invest
Then the Group of Five brought home many “targeted” investment agreements and promises to seriously invest in regional infrastructure. At that time, Uzbekistan attracted the most funds (over $12 billion), but it should be noted that Tashkent, out of all five, had previously worked with the Arabians more than others.
Promises are promises, but the Arabians are actually looking at new projects, although they are well aware that there are many “mouths” in the world for the colossal resources (that’s more than two trillion dollars) in their sovereign funds alone.
Turkey circles around them every year, the United States, through various platforms, invites them to take part either in the creation of a new technological cluster with India, or in logistics projects alternative to the Chinese ones, like PGII. The European Union either lights up or loses interest in the Global Gateway project.
The interests and demands are clear, but multi-stage guarantees and evidence of benefits are needed, otherwise the investments of the Arabians usually have a local character and rather reflect a general political vector.
For Central Asia, trade itself and even production, usually the main and traditional subject of negotiations, are now beginning to fade into the background. Two words come to the fore: “water” and “energy”.
Both are becoming scarce, the forecasts are not the most rosy, and the needs are increasing every year. And the more regional players try to attract investors with new production facilities and initiatives in the field of logistics, the more acute this deficit becomes. The growing demographic indicators of the region also work for him.
Thus, over the past few years, the Group of Five has come to a rather logical conclusion that without full-fledged (and clearly visible) coordination, external players simply will not give money to the region, and the situation is such that it is necessary to audit projects that previously could not be implemented due to either internal contradictions or inertia.
The current April summit showed that it was not in vain that the Group of Five spent two years engaged in audit and coordination - funds for infrastructure, even from such complex partners as the Arabian monarchies, will begin to flow into the region.
It is hardly a coincidence that the results of the summit correlated with the results of the G5 negotiations with the European Union this January, as well as statements by the group and the EU regarding the future EU-Central Asia summit, which is scheduled for the end of April (“Preparation for the EU-Central Asia summit and the problems of the Russian concept of multipolarity”).
The point is not that GCC financiers need any special “valuable instructions” from Brussels or even the United States, but that there is a need to ensure that the major players are committed to including the region in their strategic production and trade chains.
This is a guarantee of the efficiency of the funds allocated to Central Asia, and here for the Arabian funds it is not so important from which party competing for the region such intentions will be confirmed: China or the EU. Brussels is now number one here (at least for now).
Trans-Afghan Railway
The fact that the Arabs now look quite confidently at Central Asia is shown by the fact that, on the one hand, at the summit Qatar offered its assistance in implementing the Trans-Afghan railway project, and on the other, that Azerbaijan was invited to the summit.
Representatives of Baku were in the status of honored guests of the event, but it is obvious that the invitation to stay was connected with issues of options for the future gas route, as well as strengthening trans-Caspian maritime logistics.
Currently, part of the port in Azerbaijan is being reconstructed for the needs of Uzbekistan; the Group of Five also wants to increase the capacity of the ports of Turkmenistan and Kazakhstan to the Caucasus.
For more than ten years now, Qatar has been one of the main platforms for negotiations with the Taliban movement (banned in the Russian Federation). Now the process of recognizing the Taliban at the level of full-fledged diplomatic missions has gradually moved forward.
Despite incidents in April last year, the Taliban still managed to build an internal hierarchy between the two main power branches (conditionally “Kandahar” and the “Haqqani network”).
And this means that Vakhansky route, and the passage through the center and west of Afghanistan is gaining prospects for construction.
Actually, the effectiveness of the Taliban’s fight against the Afghan structures of ISIS (banned in the Russian Federation) largely depended on such coordination within this movement. It is possible that this is a coincidence, but practically during the Central Asia-GCC summit, Taliban security forces detained two Russian citizens of Tajik origin, who were heading from the central regions of the Russian Federation through Afghanistan to Pakistan.
Here, of course, the Taliban are simultaneously deciding a number of foreign policy issues, for example, to “emphasize” Pakistan, with the new old government of which the movement has extremely difficult relations, to show their capabilities in terms of intelligence, to demonstrate zero tolerance towards the “black international” on their territory , put another weight on the scale in terms of relations with Moscow, which has its own “anti-Taliban faction.”
It is clear that Qatar would not have given the go-ahead for investment in such a project if it had not had, through its own channels, an understanding of the Taliban’s capabilities and desire to provide it in terms of security. But, in addition to the Taliban, Qatar had to receive certain guarantees from Western “partners”.
Moscow also showed interest in the Trans-Afghan Railway; Uzbekistan discussed its construction with us at the end of February, when, for its part, it launched the reconstruction and expansion of one of the previously built sections.
The route “Termez – Mazari – Sharif – Kabul – Peshawar – Karachi”, purely for commodity logistics, is of interest to Pakistan, China and Central Asia itself. For now, Moscow’s main goal is to launch a land section through Iran as part of the North-South international transport corridor. However, the Trans-Afghan route looks more capacious, and decent dividends can be received from its construction and operation in the future.
In general, the negotiations between Central Asia and the GCC regarding the railway through Afghanistan reflect fairly significant foreign policy changes. Billions will not immediately flow along these routes, but the changes are very serious. After all, Iran, Pakistan, Afghanistan and Central Asia are gaining full logistics connectivity.
And it’s not just that Arabian financiers are ready to substantively discuss projects, and the European Union and China have entered into competition there. If the United States does not intend to interfere with the acquisition of this connectivity (and we see from Pakistan and Iran that they do not), then this opens up significant prospects, and here the question for Russia is how to fit its participation into this trade network: fully or limitedly.
In order to fully enter this system and influence the processes in it, a major player is required to provide an answer regarding participation in the issue of energy and water. Actually, we see that China and the European Union are offering participation here on a competitive basis.
HEPS
Again, it can hardly be called a mere coincidence that simultaneously with this summit, already at the IMF, the head of the Cabinet of Ministers of Kyrgyzstan presented an updated project for the construction of the Kambar-Ata-1 hydroelectric power station on the river. Nurek.
In fact, Russia was engaged in this large (5,5 billion kW) long-term construction; later Kyrgyzstan bought our assets, but did not find the resources ($6 billion). But in the end, Uzbekistan, Kyrgyzstan and Kazakhstan formed a tripartite consortium, which restarted the project.
The fact that it is being proposed for consideration by the IMF simultaneously with the GCC negotiations speaks volumes. After all, they were discussing Arabian investments in rational water consumption and electricity generation. Saudi Arabia had previously provided part of the funds to Tajikistan for the completion of the Rogun hydroelectric power station - also a monstrous (330 m dam and as much as 13 billion kW per year) long-term construction.
There is, however, another layer in negotiations with structures like the IMF, and it’s not just about new money.
In the past, Kyrgyzstan and Tajikistan, as the main holders of water generation resources, signed up to participate in the CASA-1000 project, i.e., to export electricity to Afghanistan and Pakistan. And the point is not that they don’t pay for energy - they pay, but the electricity itself is not enough. The capacity is no longer enough, and the water supply has decreased.
As a result, CASA-1000 seems to be an important element of strategy for different players, but this energy must be obtained somewhere. And in Central Asia itself there is now an average deficit of 25–26% per year for water and at least 5 billion kW per year for electricity. With the needs by 2035, another plus 50% (minimum). Well, CASA-1000 asks for up to 1,3 billion kW.
Russia participated in the reconstruction of the Sangudinskaya hydroelectric power station (2,2 billion kW), which provides this project; Russian companies continue to work there in shares. Another thing is that CASA-1000 consumes more than half of the output.
What is characteristic is that if the construction of the Kambarata HPP-1 and the Rogun HPP were completed, then we would not be talking about a shortage of energy, but its surplus and the possibility of full exports, even taking into account seasonal fluctuations.
But the two long-term construction projects remained long-term construction for decades, the development programs remained programs, and the capacities were put into operation with local, not even regional, volumes.
Common economic space
Russia is not everywhere marked by an inert approach; rather, on the contrary, there are more questions about governance in the G5 countries. But now it is obvious that the group has completely changed its paradigm, and in terms of introducing generation, these countries will work with investors at an accelerated pace.
It is clear that the countries of Central Asia are now doing everything to attract Arabian money. Before this, projects were mainly financed by the World Bank, the Asian Bank, and the Eurasian Bank. Now the Group of Five has a real opportunity to attract other sources: investment funds and sovereign wealth funds, and it is not going to miss it.
Should Russia watch how Central Asia collects funds for generation and water under new conditions and taking into account the changes described above, or should it fully engage in this process? The question is quite interesting. The Eurasian Bank (EAEU Bank) has long had a project “Water and Energy Complex of Central Asia”.
In Kyrgyzstan, through it, the construction of the Kulanak hydroelectric power station is being implemented, but it is only 100 MW, there is participation in thermal power plants in Kazakhstan, but this is generally on a regional scale.
While the EAEU is a working structure, then it may be worth fighting for really large objects. After all, control over generation will make it possible to collect added value from commodity flows, for which China and the European Union are now beginning to fight in the region.
We ourselves, with our realities, will not ensure commodity flows there, gas and oil projects in Central Asia have natural limitations, transit projects for these types of raw materials are not obvious to us there, rather, on the contrary, Turkmen raw materials clusters have a great opportunity for implementation there.
But in terms of generation, Russia really has the necessary competencies and technologies, and if you look, then sufficient finances, and the design is based on a common scientific base. By and large, this is the last resource we have to claim a “common economic space.”
The new political realities described above are interesting because in their conditions the Group of Five will eventually find third-party financial resources for energy, and summits like the “Central Asia-GCC” confirm this. So it is not very advisable for Russia to continue stalling for time if the “common economic space” really still matters to us.
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