International Affairs - The Times Of Central Asia

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Banking

National Bank of Kyrgyzstan Comments on Suspension of Money Transfers with Russia

In regard to the suspension by some Kyrgyz banks of money transfers between Kyrgyzstan and Russia, the National Bank explained to The Times of Central Asia that second-tier banks are working to prevent the negative impact of international sanctions. “To minimize the risk of secondary sanctions, measures are taken to strengthen control over clients and counterparties, to conduct thorough checks to ensure that they are not on the sanctions lists,” said representatives of the financial regulator, before adding that the National Bank is remotely supervising compliance with international sanctions. All commercial banks in Kyrgyzstan must check their counterparties in adherence to the policy “know your client,” and request documents from clients confirming the origin of funds. It should be noted that money transfers between Kyrgyzstan and Russia are still carried out through ruble details of other Russian banks, which have not fallen under sanctions. In addition, it is possible to transfer funds through money transfer systems. On June 12, 2024, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) added the Moscow Exchange, the Russian Center, and the National Settlement Depository National Cleari to its sanctions list. As a result, trading in the U.S. dollar and euro was halted at the Moscow Exchange. Then, eight commercial banks from Kyrgyzstan restricted their work to Russian money transfer systems. But after a few days, work with Russian-sanctioned banks was resumed. In April this year, Kyrgyzstan stopped accepting Russian MIR cards due to the risk of secondary sanctions. Later, the head of the Kyrgyz Cabinet of Ministers, Akylbek Japarov, said that once a processing center is created, they will continue to work with Russian banking systems. Currently, the Interbank Processing Center of Kyrgyzstan is serviced by a Latvian company providing work software.

Rogun HPP

S&P Estimates That Rogun Hydroelectric Power Plant Will Cost Over $6 Billion To Finish

The ratings agency S&P has estimated the cost of completing the construction of the Rogun hrydroelectric power plant in Tajikistan at $6.4 billion. The Tajik government is negotiating with a consortium of multilateral and bilateral creditors to provide a financing package covering about 50% of these costs. The other half of the financing is expected to come from the state budget and revenues from the plant. S&P analysts said the initial external financing package includes $1.73 billion in semi-concessional loans, $850 million in grants, and $390 million in soft loans. According to S&P, the Rogun hydroelectric power plant (HPP) already produces electricity at 10-15% of its total capacity. In 2024-2035, the income from electricity is expected to be $1.1 billion, which will be invested in further construction of hydroelectric power plants. In 2016, during the international tender to select the main contractor for the dam's construction, the plant's value was announced as $3.9 billion. In 2022, the Tajik Ministry of Energy announced that more than $5 billion would be required to complete the project. In February 2023 the ministry estimated that the plant would cost $6.2 billion to complete. Then, more than $4 billion were allocated, including through the sale of shares of Rogun HPP OJSC (890 million TJS), Eurobonds ($500 million) and the remaining part from the state budget. The Times of Central Asia has been reporting on the loans allocated for the plant's construction.

Bilateral Relations

Kazakhstan and Tajikistan Sign Allied Relations Treaty

A treaty on allied relations between Kazakhstan and Tajikistan was signed on August 22 during Kazakh President Kassym-Jomart Tokayev's state visit to Tajikistan and talks with Tajik President Emomali Rahmon in Dushanbe. Noting its significance, Rahmon stated that the treaty opens a new page in the history of Kazakh-Tajik cooperation and will become a solid foundation for strategic partnership between the two nations. President Tokayev, in turn, emphasized that “there are no problematic issues between our countries” and announced plans to increase bilateral trade to $2 billion. Over the past five years, the annual trade volume between Kazakhstan and Tajikistan has more than doubled, exceeding $1 billion. Referencing Kazakhstan's readiness to increase supplies to Tajikistan of some 85 commodities valued at $200 million, Tokayev announced: “We agreed to expand the range of goods supplied, systematically remove barriers that hinder trade and economic cooperation between our countries, and strengthen partnership in the transport and logistics sector. There is a serious potential for increasing bilateral trade in the agro-industrial sector. In the first six months of this year, agricultural trade between our countries increased by 12%, amounting to almost $300 million." Tokayev also emphasized the importance of cooperation in the water sector: “We agreed to continue the coordinated work on the rational use of resources of transboundary rivers of Central Asia. Kazakhstan is grateful to the Tajik side for timely decisions related to fulfilling obligations in the water and energy sector, particularly on [irrigation] water supplies to Kazakhstan.” During the talks, it was stated that over the past five years, Kazakhstan has invested $700 million in Tajikistan's economy. Today, more than 80 percent of Tajikistan's fruit and vegetable exports go to Kazakhstan, and Tajikistan imports large amounts Kazakh wheat, flour, and other grain products. On August 21, the eve of Tokayev’s visit, Dushanbe hosted a Kazakh-Tajik business forum, during which the parties signed 14 commercial contracts and cooperation agreements worth $1.2 billion.

Foreign Trade

Uzbekistan Releases Foreign Trade Data For 2024 So Far

The Statistics Agency of Uzbekistan has presented a report on the country’s foreign trade turnover in January-July 2024. According to the report, during this period, the country's foreign trade turnover (FTT) reached $36.8 billion and increased by $1.9 billion, or 5.3%, compared to January 2023. The volume of exports amounted to $14,786 million, which decreased by 1.1% compared to last year; imports increased by 10.1% and amounted to $22,049 million. Kazakhstan became one of Uzbekistan's largest foreign economic partners after China and Russia during this period. This may be due to a common border, trade in the CIS free trade area, and the recent liberalization of mutual economic relations. Uzbekistan has trade relations with 187 countries worldwide. A significant share of FTT was recorded in the PRC (18.6%), Russia (18.5%), Kazakhstan (6.2%), Turkey (4.6%), and South Korea (3.2%). From January to July 2024, the share of the CIS countries in the foreign trade turnover was 35.3%, which increased by 3.1% compared to the corresponding period of 2023. The total cost of FTT with these countries was $13,020.8 million. Exports reached $4,940.3 million, while imports amounted to $8,080.5 million. Uzbekistan's FTT with the Eurasian Economic Union member states amounted to $9,913.1 million. The export volume reached $3,230.5 million, and the import volume reached $6,682.5 million.

Diplomacy

Kazakhstan Summons Belarusian Ambassador After Lukashenko’s Criticism

In a significant development, Kazakhstan's Ministry of Foreign Affairs has summoned the Belarusian Ambassador in response to critical remarks made by Belarusian President, Aleksandr Lukashenko. This incident highlights underlying tensions between Kazakhstan and Belarus - two nations with a shared historical backdrop and intricate political ties – and are emblematic of wider diplomatic rifts across the post-Soviet landscape. Kazakhstan and Belarus have long enjoyed a multifaceted relationship which dates back to their time within the Soviet Union. Both are members of several regional organizations, including the Commonwealth of Independent States (CIS) and the Eurasian Economic Union (EAEU), which aim to foster economic and political cooperation among former Soviet republics. Kazakhstan ranks second in terms of foreign trade of the Republic of Belarus within the CIS countries, with exports to Belarus totaling $153.07 million in 2023. Since gaining independence in 1991, Kazakhstan and Belarus have navigated their transition to sovereign states with varying degrees of success. After brutally crushing a series of mass demonstrations in 2020-21, Lukashenko’s Belarus has drawn ever closer to its patrons in the Kremlin. Prior to suppressing these protests following what were widely deemed to be rigged elections, Lukashenko was perhaps best known in the popular Western consciousness for his suggestion that Covid could be cured by riding a tractor and drinking vodka. In sharp contrast, in recent years, following the demise of long-standing former-President Nazarbayev and his clique, Kazakhstan has followed a very different trajectory, seeking to rein in corruption, guarantee the rule of law, and adopting a multi-vector approach to its foreign policy as its global standing rises. In this latest incident, the diplomatic strain was triggered by President Lukashenko's public criticism of Kazakhstan. During an interview with Russian state television, Lukashenko stated that: “We are not starting to cheat like some post-Soviet states. They want to take something from Russia, but give nothing in return… It won't work that way… The time is not far away when you will come to the same Russia and ask for support and help. There is no one else to ask... Something happened in Kazakhstan - who was asked? China, India and Pakistan are nearby… No. Here, ‘Putin, Lukashenko – help!’ And we [CSTO troops] were transferred there.” In a statement released following a meeting between Belarusian Ambassador Pavel Utyupin and Kazakhstan’s Deputy Minister of Foreign Affairs, Murat Nurtleu, Kazakhstan expressed concern over Lukashenko’s statement and offered up a rebuke: “Kazakhstan pursues a balanced and peaceful foreign policy in accordance with the UN Charter and the fundamental norms of international law,” the statement reads. “Our country is firmly convinced that all disagreements between states should be resolved by political and diplomatic means. In the current geopolitical conditions, the foreign policy course of the country developed by the head of state has proven its effectiveness.” The summoning of the ambassador is an oft-used diplomatic tool in addressing grievances, whilst also opening a channel for dialogue and resolution. As members of the EAEU, both countries benefit from mutual trade agreements,...

International Relations

Kazakhstan Accredits Chargé D’Affaires of Afghanistan

The Kazakh Foreign Ministry has announced that the country has accredited a chargé d'affaires of Taliban-led Afghanistan to expand trade, economic, and humanitarian cooperation between the two countries. On August 21 in Astana, Deputy Minister of Foreign Affairs Alibek Bakayev met with Muhammad Ur Rehman Rahmani, head of Afghanistan’s diplomatic mission in Kazakhstan. Bakayev stated that Kazakhstan had accredited Mr. Muhammad Rahmani as chargé d'affaires. Early in June, Kazakhstan's President Kassym-Jomart Tokayev announced that his country had removed the Taliban from its list of terrorist organizations, stressing that the move was made to develop trade and economic ties with Taliban-led Afghanistan. In recent years, Kazakhstan has made efforts to increase trade with Afghanistan and participate in Afghan transport and connectivity projects in cooperation with Uzbekistan and Turkmenistan. Kazakhstan has also advocated for consolidating international efforts to provide assistance to Afghanistan and resolve its complex humanitarian problems. To this end, Kazakhstan proposed establishing the UN Regional Centre for Sustainable Development for Central Asia and Afghanistan in Almaty.