Economic Impact - The Times Of Central Asia

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Caspian Region

War Reaches the Caspian: Central Asia Faces Growing Regional Risk

The United States and Israel's war with Iran began on February 28, 2026. The intensity of the conflict has fluctuated, but daily reports of missile strikes and explosions are increasingly resonating across Central Asia. Meanwhile, Russia’s latest war against Ukraine has continued for 1,466 days since it began on February 24, 2022. Late last year, Ukrainian drones reportedly struck a Russian oil platform at the Filanovsky field in the Caspian Sea, more than 700 kilometers from Ukraine’s nearest border. Ukraine also said the operation targeted the patrol ship Okhotnik, although the extent of the damage was not independently verified. The war in Ukraine has also created serious challenges for Kazakhstan’s oil exports via the Caspian Pipeline Consortium (CPC). Repeated attacks and disruptions have threatened export flows, increased logistical risks, and added pressure on Kazakhstan’s budget revenues. The war against Iran has now brought military action to the Caspian coast of Iran, raising concern for energy producers and transit routes across the wider region. On March 5, Azerbaijan’s Ministry of Foreign Affairs stated that drones launched from Iranian territory struck the Nakhchivan Autonomous Republic. According to the ministry, one drone hit the terminal building at Nakhchivan International Airport, while another crashed near a school in the village of Shekerabad. Azerbaijan demanded a thorough investigation. Iran later stated that it had promised to investigate the incident. Azerbaijan’s Prosecutor General’s Office subsequently opened a criminal case. As of now, tensions remain high, with both sides continuing to exchange accusations, and Azerbaijan maintaining heightened alert measures. More recently, the Israeli Defense Forces confirmed carrying out airstrikes in northern Iran, targeting naval vessels in the port city of Bandar-Anzali on the Caspian coast. The straight-line distance from Bandar-Anzali to Azerbaijan’s capital, Baku, is just over 300 kilometers, and approximately 420 kilometers to Turkmenbashi, a major international seaport and the center of Turkmenistan’s oil-refining industry. The resort zone of Avaza is also located there. By comparison, the distance from Israel to Bandar-Anzali exceeds 1,300 kilometers. These developments are contributing to rising economic uncertainty across Central Asia. The consequences extend beyond transportation and logistics disruptions, with broader implications for regional economies. The U.S. and Israel have not always appeared aligned on what would constitute victory, meaning the measure of success remains difficult to gauge. While the United States and Israel have repeatedly stated that significant damage has been inflicted on Iran’s military infrastructure (including destroying a substantial part of the Iranian navy), there is no publicly available, independently verified evidence confirming the extent of the damage to Iran’s leadership structure following the death of Ali Khamenei, Ali Larijani and other senior Iranian figures, or on Iran’s ability to mount an effective defence. Analysts have described Iran’s military resilience as decentralized, sometimes using the term "mosaic defense," meaning units can continue operating under standing orders even when senior leadership is hit. It is understood that, as part of this strategy, the Iranian military has spent decades refining its ability to operate as independent nodes, each equipped to conduct strikes under...

Black Sea Tanker Attacks

Second Malta-Flagged Vessel Hit in Black Sea as Shipping Risks Rise

The Maltese government has officially condemned recent attacks on commercial vessels in the Black Sea after a second ship flying the Maltese flag was damaged in a missile strike. This marks the second such incident within a week involving Maltese-registered ships. A spokesperson for Malta’s Ministry of Transport confirmed that the latest vessel, a Malta-flagged commercial ship, sustained minor shrapnel damage during a missile strike targeting port infrastructure in the Black Sea. The ship remains seaworthy, although one crew member was injured. The earlier incident involved the Matilda, an oil tanker also registered in Malta and chartered by the Kazakh shipping company Kazmortransflot, a subsidiary of state-owned KazMunayGas. On January 13, according to a statement from the Russian Foreign Ministry, the Matilda was struck by two Ukrainian drones. In 2025, Kazmortransflot increased its transport volumes by more than 15% compared to 2024, reaching 51,400 DFE. The growth was attributed to rising demand for shipping along the Trans-Caspian International Transport Route. Both incidents occurred near the CPC marine terminal outside Novorossiysk. In a statement, Malta’s Ministry of Transport emphasized that attacks on commercial shipping present a serious threat to civilian seafarers, global shipping safety, and the uninterrupted flow of legitimate international trade. The ministry also noted that commercial vessels operating in conflict zones are increasingly exposed to elevated operational and insurance risks, even when transporting cargo fully compliant with international sanctions. The attacks near the CPC marine terminal have already had a measurable economic impact on shipping and energy exports. As of December 2025, insurance rates for merchant ships operating in the Black Sea had risen to 1% of a vessel’s value, up from 0.75% and 0.25% during more stable periods. Ships operating in areas of active military conflict are typically insured per voyage rather than annually, significantly raising operating expenses. Shipping and insurance analysts say the rise in insurance premiums is reducing profit margins on oil and petroleum product exports in the region. Although Kazakhstan’s export volumes have not yet been directly affected, traders and shippers are increasingly factoring geopolitical and logistical risks into their strategies. Repeated disruptions near one of Eurasia’s critical energy hubs are heightening concerns about the reliability of supply routes, especially given limited alternatives. Kazakhstan has already begun restructuring its oil export network due to disruptions at the CPC, its primary crude oil export channel. Authorities have turned to alternative infrastructure to maintain output and avoid production slowdowns.

Economic Growth

World Bank Warns of Slowing Tajikistan Economy

Tajikistan’s economic growth may slow in the coming years due to mounting foreign policy and regional risks, according to a new report from the World Bank. Vulnerability to External Shocks The report highlights several external vulnerabilities that could impact Tajikistan’s economy. These include shifts in Russia’s migration policies, heightened global instability, and ongoing armed conflicts. “Tighter migration policies and restrictions on Tajik workers in Russia threaten to significantly reduce remittance flows, leading to lower economic growth, increased poverty, and worsening fiscal and external balances,” the World Bank stated. Growing global protectionism is also expected to raise Tajikistan’s foreign trade costs. The report notes that recent U.S. tariff increases on imports from several of Dushanbe’s key trading partners have triggered retaliatory measures from countries like China. These developments could drive up import costs and intensify logistical pressures. Additionally, volatility in global commodity prices is expected to impact Tajik exports. While falling oil and raw material prices could reduce export earnings, especially for aluminum, zinc, and ores, high global gold prices in 2025 may provide a partial offset through increased revenues. Impact of Regional Conflicts The World Bank also warns that ongoing conflicts in Ukraine and the Middle East could further disrupt global supply chains, raising energy and logistics costs. These challenges would translate into higher import prices for Tajikistan. Conversely, the report suggests that a potential easing of sanctions and normalization of relations between the U.S. and Russia could destabilize Central Asian economies. However, the implications of such a shift remain uncertain and difficult to forecast. Medium-Term Outlook Despite these headwinds, the World Bank expects Tajikistan’s economy to remain stable, albeit with a decelerating growth trajectory: 8.4% in 2024 7.0% in 2025 4.9% in 2026 4.7% in 2027 The projected slowdown is gradual and not expected to result in a recession. Similar concerns have been echoed by other institutions. The Asian Development Bank and the Eurasian Fund for Stabilization and Development have also forecast a gradual slowdown in Tajikistan’s economic growth over the medium term.

Caspian Sea

The Caspian Sea Hits Historic Low

The Caspian Sea has dropped to its lowest recorded level, now sitting at less than 29 meters below sea level. The northern basin, bordering Russia and Kazakhstan, is shrinking particularly rapidly. As the water recedes, the exposed seabed is threatening key marine ecosystems. Experts warn the decline is already causing serious disruption to biodiversity in the region. Declining Volga Flow and Climate Change The downward trend in sea levels began in the 1990s and has accelerated since 2020, with a nearly 80-centimeter drop in the past four years. The primary factor is a decrease in the annual flow of the Volga River, which supplies approximately 80% of the Caspian's inflow and contributes 64% to the lake's total water balance. In recent years, the Volga’s annual discharge has ranged between 210 and 232 cubic kilometers, well below the historical average of around 250 cubic kilometers. At the same time, rising air temperatures are increasing evaporation rates, further depleting water levels. Scientists link these changes to global climate change and the ongoing rise in greenhouse gas emissions. Ecological and Economic Impact Human activity is compounding the problem. Significant water extraction from rivers for agriculture, industry, and municipal use is reducing the volume of water reaching the sea. Russia’s Ministry of Natural Resources is currently developing a comprehensive program to adapt to these shifting environmental conditions. The initiative aims to enhance forecasting, mitigate the consequences of shallowing, and adjust economic activities to reflect the new hydrological realities. Experts suggest that only a sustained annual inflow of around 270 cubic kilometers, comparable to levels recorded in the 1970s and 1990s, can halt the lake's ongoing decline. Changing Coastlines and Public Concern A recent video by Kazakh filmmaker Adai Myrzatay has stirred widespread attention on social media. The footage juxtaposes images of the Caspian coastline in 2013 and 2025. Twelve years ago, the pier was surrounded by open water and untouched shoreline. Today, the water has receded dramatically. Bushes now encircle the pier, and high-rise buildings stand where the shoreline once lay. The video has been viewed over 1.5 million times. The falling water level is leading to the loss of biological diversity and shrinking spawning grounds for species such as the Caspian seal and sturgeon. The shallowing is also disrupting shipping and fishing operations and raising the risk of international disputes over increasingly scarce water resources. A Shared Challenge for Five Nations The Caspian Sea, the world’s largest enclosed inland body of water, receives inflow from more than 130 rivers, including the Volga, Ural, Terek, Sulak, and Samur. Its coastline is shared by five countries: Russia, Kazakhstan, Turkmenistan, Azerbaijan, and Iran. While the Volga's inflow increased slightly to 232 cubic kilometers in 2024, it remains insufficient to reverse or even stabilize the sea’s decline. Experts agree that regional cooperation and a coordinated, long-term strategy for water resource management are essential to confronting this environmental crisis.

Metallurgy

Kazakhstan’s Surge in Metallurgical Output Raises Alarm in Russia

Kazakhstan is poised to double its copper ore production to 300 million tons by 2030, with the Aidarly, Koksay, and Benkala deposits leading the expansion. This ambitious plan was announced by Deputy Minister of Industry and Construction Olzhas Saparbekov during a recent government meeting. A Strategic Shift Toward Processing Alongside copper, Kazakhstan plans to expand iron ore production by 40%, aiming for 52 million tons. This increase will be driven by enterprise modernization and new projects producing hot-briquetted iron. In 2024, metallurgical ore production grew by 7.8%, while total metal output rose by 6.9%. Authorities are shifting focus from raw extraction to deep processing and the development of medium- and high-tech industries. By 2025, copper processing is expected to double, aluminum processing will increase by 50%, lead processing will more than double, and zinc output will rise by 11%. According to Saparbekov, these efforts will allow Kazakhstan to “utilize domestic production capacities and expand the output of finished products,” including wire rod, cable and wire products, batteries, window profiles, fittings, and bimetallic radiators. New projects also aim to produce brass components and industrial batteries. Economic Impact and Investment Plans The mining and metallurgical sector currently contributes 8% to Kazakhstan’s GDP, generating over $26.4 billion annually. The industry employs approximately 224,000 people. In 2024 alone, more than $3.2 billion was invested in metallurgy, while labor productivity increased by 9.4%, reaching $102,000 per worker. In 2025, Kazakhstan plans to implement 190 industrial projects worth a combined $3 billion. Of these, 28 projects in the mining and metallurgical sector, valued at $837 million, are expected to create 6,500 new jobs. Priority initiatives include the production of seamless pipes and aluminum radiators in Karaganda, aluminum profiles in the Turkestan Region, ferroalloys in Pavlodar, and cathode copper in the Zhambyl Region. Rising Tensions with Russia However, Kazakhstan’s rapid metallurgical growth is stirring concern in neighboring Russia. In the first half of 2025, domestic steel demand in Russia fell by 14-15%, with the machine-building and energy sectors seeing a sharper decline of 25%. Severstal CEO Alexander Shevelev told Kommersant that increasing supplies from Kazakhstan, alongside imports from China, are straining Russia’s market and may force plant closures. He identified particularly intense competition in Siberia and the Russian Far East. Severstal has warned that, without protective measures under the Eurasian Economic Union (EAEU), pressure from Kazakh imports could spread to other Russian regions. In response, Russia is considering launching an anti-dumping investigation into Kazakh steel imports. Such a move could significantly impact Kazakh exporters, who are looking to increase shipments amid weak domestic demand in neighboring markets. According to the World Steel Association, Russia’s steel production declined by 5.2% between January and May 2025. The drop is attributed to low global prices, high interest rates, rising production costs, and sluggish industrial activity.

Gold Deposit

Kyrgyzstan Launches Major Gold Exploration at Historic Makmal Deposit

Kyrgyzstan has initiated large-scale geological exploration at the historic Makmal gold deposit in the Jalal-Abad region, marking the first such effort in decades. The announcement was made by Kyrgyzaltyn, the state-owned enterprise responsible for gold and precious metals mining. According to the company, its subsidiary, Makmal Gold Company, has begun exploratory drilling in the southwestern section of the mine, an area previously untouched by mining operations. Soviet-era geological surveys suggest that this zone may hold up to four tons of gold reserves. "Extensive work is underway to extend the life of the Makmal mine," the Kyrgyzaltyn press service stated. "We plan to drill 19 wells at depths ranging from 140 to 400 meters. This will help us better define reserves and create additional employment opportunities." The exploration will proceed in two phases. In the first stage, geologists will drill a total of 3,275 meters. If results are favorable, a one-kilometer tunnel will be constructed to allow for precise reserve estimation, laying the groundwork for future industrial extraction. Kyrgyzaltyn also plans to evaluate other previously unexplored areas of the deposit. Historic and Economic Significance The Makmal deposit, one of Kyrgyzstan’s earliest gold mining sites, began industrial operations in 1986. Originally projected to last ten years, the discovery of new veins has kept the mine active to the present day. Currently, the mine contributes more than 95% of budget revenues for the Toguz-Toro district. Makmalzoloto, the operator, has also invested significantly in regional infrastructure, allocating 54 million Kyrgyz som (approximately $618,000) over the past three years, with an additional 50 million som ($572,000) directed toward charitable initiatives. The company employs more than 500 workers, nearly all of whom are local residents. While the annual output is modest, less than one ton, Makmal remains among the ten largest operational gold mines in the country. Kyrgyzstan has around 2,500 registered mineral deposits, of which 46 are classified as large.