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Middle East

Middle East Conflict May Slow Growth, but Gold and Oil Dynamics Could Cushion Impact

The escalating conflict in the Middle East could weigh on Uzbekistan’s economic growth if it persists, though higher gold prices and oil-driven gains in key partner economies may soften the impact, according to Uzbek economist Mirkomil Kholboyev. Kholboyev shared his analysis on his Telegram channel, examining both the direct and indirect channels through which the crisis could affect Central Asia’s largest economy. “Several days of geopolitical tensions in the Middle East have already turned into open military confrontation,” he wrote. “It is still difficult to say how long this situation will last. If it is short-term and the previous status quo is restored, the impact on our economy will likely be limited and temporary. But if the war continues for a longer period, the consequences could be more significant.” Direct trade exposure appears limited. According to data from Uzbekistan’s national statistics portal, the country exported $157 million worth of goods to Iran in 2025, accounting for just 0.5% of total exports. Imports from Iran totaled $421 million, or 0.9% of overall imports. Trade with Israel was even smaller, with exports of $33 million and imports of $22 million. “Even a complete halt in trade with these countries would not significantly affect total exports,” Kholboyev wrote, though he noted that export and import growth could slow. Iran also plays a role as a transit hub. Its ports are part of broader regional logistics networks, including the Central Asia-India corridor via Chabahar and the International North-South Transport Corridor (INSTC). According to a regional analytical report, Uzbekistan accounts for 5.5% of total traffic along this route, compared with 61.1% for Kazakhstan and 29.4% for Turkmenistan. Kholboyev pointed out that while some of Uzbekistan’s trade passes through Iranian ports, the country is less dependent on them than other Central Asian countries. Still, he cautioned that prolonged fighting would inevitably disrupt both direct trade and transit flows. “I do not have precise data on how much of our total foreign trade passes specifically through Iranian ports,” he wrote. “That makes it difficult to assess the full effect. But if the war continues, both direct trade and transit through Iran will suffer serious damage.” Even if trade with the wider region, including Iran and other countries affected by hostilities, were to stop entirely, Kholboyev estimates the impact would remain moderate. The region accounts for about 2.4% of Uzbekistan’s exports and 1.5% of imports. A complete halt could slow export growth by roughly 3% and imports by about 2.5%, reducing overall GDP growth by around 0.6 percentage points. A 50% reduction in trade with the region would shave an estimated 0.2-0.3 percentage points off GDP growth. Energy markets represent a more significant risk channel. As trading resumed after the latest escalation, global oil prices rose by about 9%, driven by concerns over potential disruptions in the Strait of Hormuz, through which roughly one-fifth of global oil consumption passes. “If tensions escalate further and oil flows are restricted, or if prices continue rising amid uncertainty, this could slow...

Economic Growth

Central Asia Records Over 6% Growth as Trade with Russia Expands

Central Asian economies concluded 2025 with growth exceeding 6%, significantly outpacing major developed markets such as the United States and the Eurozone, where expansion stood at approximately 1.6% and 1.1%, respectively, according to Turkish newspaper Yeni Şafak. The figure aligns with the World Bank who puts regional expansion at 6.2% and the Eurasian who Development Bank (EDB) estimates growth at 6.6%. Economists attribute the region’s performance to strong domestic demand, active state investment programs, infrastructure development, and rising exports of raw materials and industrial goods. Kazakhstan and Uzbekistan accounted for the largest contributions to overall growth, supported by large-scale public investment initiatives and expanding foreign trade. By contrast, the U.S. and European economies experienced slower growth amid high interest rates, inflationary pressures, and weaker consumer demand. Uzbek economist Mirkomil Kholboyev, writing on his Telegram channel, said the trend reflects deeper structural factors. “In general, the average real growth in Central Asia has almost always been higher than in the United States or Europe, with the exception of 2021,” he wrote. “Beyond short-term effects, lower-income countries like ours tend to grow faster than high-income economies. In wealthier countries, the return on additional capital has declined, while in our region capital remains scarce, allowing investments to generate higher returns. Demographic growth is also higher here, and the steady expansion of the labor force serves as an additional driver of economic growth.” Trade data indicate that Central Asia’s economic ties with Russia have strengthened in recent years. In 2021, the region accounted for 3.2% of Russia’s imports. By the first 10 months of 2025, that share had risen to 4.6%. Over the same period, Central Asia’s share of Russian exports increased from 5.6% to 7%. Overall, during the first 10 months of 2025, Central Asia ranked as Russia’s third-largest import partner and fourth-largest export destination. Before the war in Ukraine, the region ranked seventh among Russia’s import partners and fourth in exports. Although Russia’s economy remains significantly larger, reaching approximately $2.1 trillion in 2024 and exceeding the combined size of Central Asian economies by about 4.4 times, the increase in trade shares over the past four years is notable. Kholboyev also noted that part of the rise in imports is attributable to re-export activity.

Afghanistan

From Security Threat to Economic Partner: Central Asia’s New ‘View’ of Afghanistan

Afghanistan is quickly becoming more important to Central Asia, and the third week of February was filled with meetings that underscored the changing relationship. There was an “extraordinary” meeting of the Regional Contact Group of Special Representatives of Central Asian countries on Afghanistan in the Kazakh capital Astana. Also, a delegation from Uzbekistan’s Syrdarya Province visited Kabul, and separately, Uzbekistan’s Chamber of Commerce organized a business forum in the northern Afghan city of Mazar-i-Sharif. A Peaceful and Stable Future for Afghanistan The meeting in Astana brought together the special representatives of Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan for Afghanistan. The group was formed in August 2025. There was no explanation for why the fifth Central Asian country, Turkmenistan, chose not to participate. The purpose of the Astana meeting was to coordinate a regional approach to Afghanistan. Comments made by the representatives showed Central Asia’s changing assessment of its southern neighbor. Kazakhstan’s special representative, Yerkin Tokumov, said, “In the past [Kazakhstan] viewed Afghanistan solely through the lens of security threats… Today,” Tokumov added, “we also see economic opportunities.” Business is the basis of Central Asia’s relationship with the Taliban authorities. Representatives noted several times that none of the Central Asian states officially recognizes the Taliban government (only Russia officially recognizes that government). But that has not stopped Kazakhstan and Uzbekistan, in particular, from finding a new market for their exports in Afghanistan. Uzbekistan’s special representative, Ismatulla Ergashev, pointed out that his country’s trade with Afghanistan in 2025 amounted to nearly $1.7 billion. Figures for Kazakh-Afghan trade for all of 2025 have not been released, but during the first eight months of that year, trade totaled some $335.9 million, and in 2024, amounted to $545.2 million. In 2022, Kazakh-Afghan trade reached nearly $1 billion ($987.9 million). About 90% of trade with Afghanistan is exports from Kazakhstan and Uzbekistan. For example, Kazakhstan is the major supplier of wheat and other grains to Afghanistan, and Uzbekistan is the biggest exporter of electricity to Afghanistan. Kyrgyzstan’s trade with Afghanistan is significantly less, but from March 2024 to March 2025, it came to some $66 million. To put that into perspective, as a bloc, the Central Asian states are now Afghanistan’s leading trade partner, with more volume than Pakistan, India, or China. Kazakhstan’s representative, Tokumov, highlighted Afghanistan’s strategic value as a transit corridor that could open trade routes between Central Asia and the Indian Ocean. Kyrgyzstan’s representative, Turdakun Sydykov, said the trade, economic, and transport projects the Central Asian countries are implementing or planning are a “key condition for a peaceful and stable future for Afghanistan and the region as a whole.” The group also discussed humanitarian aid for Afghanistan. All four of these Central Asian states have provided humanitarian aid to their neighbor since the Taliban returned to power in August 2021. Regional security was also included on the agenda in Astana, but reports offered little information about these discussions. A few days before the opening of the meeting in Astana, Russian Ambassador to Kyrgyzstan Sergei...

Economic Growth

Trade Accounted for More Than a Quarter of Kazakhstan’s Economic Growth in 2025

The trade sector accounted for 26% of Kazakhstan’s total economic growth in 2025, according to the Ministry of Trade and Integration. Data from the National Statistics Bureau show that the country’s GDP grew by 6.5% in January-December 2025, equivalent to $20.1 billion in nominal terms, bringing the total size of the economy to $305.9 billion. More than a quarter of this growth was generated by trade. At a government meeting, the Ministry of Trade and Integration reported that domestic trade turnover reached $162.3 billion in 2025, while investment in the sector amounted to $2.6 billion. Non-resource exports totaled $41 billion, and services exports increased by 3.7% to $12.3 billion. Speaking at the meeting, Deputy Prime Minister and Minister of National Economy Serik Zhumangarin said the ministry’s objective is not only to maintain current momentum but also to raise trade to a new level of efficiency and competitiveness. Key priorities include expanding wholesale and retail turnover, increasing the share of domestically produced goods in the market, ensuring stable supplies of socially important products, shortening the supply chain between producers and retailers, boosting exports, and systematically reducing the shadow economy in the trade sector. Special emphasis was placed on measures to curb inflation and ensure adequate food supplies for the domestic market. According to Zhumangarin, a preliminary pool of approximately 1,500 projects has been formed under the “Investment Order” initiative. These projects are aimed at expanding the production of goods with high import dependence, including more than 500 in the agro-industrial complex, over 400 in manufacturing, and the remainder in infrastructure. The ministry’s key task is to secure guaranteed sales channels for products manufactured within these projects. The Times of Central Asia previously reported that trade between Central Asian countries and China exceeded $100 billion in 2025, setting a new record.

Trade

Kyrgyzstan Ready to Act as a ‘Gateway’ for Tajik Goods to EAEU and EU Markets

On February 13 in Bishkek, Chairman of the Cabinet of Ministers of Kyrgyzstan Adylbek Kasymaliev and Prime Minister of Tajikistan Kokhir Rasulzoda held the first meeting of the Kyrgyz-Tajik Intergovernmental Council. Opening the session, Kasymaliev said that 2025 marked a historic milestone in bilateral relations, citing the completion of the delimitation process of the Kyrgyz-Tajik border. He described the agreement as “a decisive factor in strengthening security and stability not only in our countries but also in the entire region.” Addressing trade and economic cooperation, Kasymaliev stated that Kyrgyzstan is ready to expand supplies of meat and dairy products, clothing and textiles, coal, glass, and sugar to Tajikistan. According to official figures, bilateral trade turnover reached $36 million in 2025, representing a nearly 24-fold increase compared to 2024. Both sides have set a target of increasing annual trade to $500 million. In the field of transport and logistics, Kasymaliev emphasized the need to improve border infrastructure and enhance the efficiency of checkpoints. Proposed measures include modernizing existing border crossings, expanding capacity, developing logistics and cargo terminals, and introducing digital solutions in customs and border administration. “Kyrgyzstan is ready to act as a trade gateway for Tajik goods to the markets of the Eurasian Economic Union (EAEU), as well as the European Union through the Generalised Scheme of Preferences Plus (GSP+),” Kasymaliev said. He also highlighted the strategic China-Kyrgyzstan-Uzbekistan railway project, which he said would significantly increase Kyrgyzstan’s transit potential and strengthen its role as a logistics hub in Eurasia. According to the Kyrgyz prime minister, the new transport corridor will create additional opportunities for Tajikistan. Kasymaliev further noted positive dynamics in tourism cooperation. In 2025, 86,000 tourists from Tajikistan visited Kyrgyzstan, a 12-fold increase compared to 2024. Kyrgyzstan reaffirmed its interest in developing joint tourism initiatives, including the possible introduction of a unified visa for third-country nationals traveling across Central Asia. Rasulzoda stated that Tajikistan places particular importance on good-neighborly relations and mutually beneficial cooperation with Kyrgyzstan, confirming readiness to further strengthen the partnership. As part of his visit to Bishkek, Rasulzoda toured a recently opened waste-to-energy plant constructed by a Chinese company. He described the facility as a promising example of modern waste recycling and expressed Tajikistan’s interest in implementing similar projects.

Electricity

Central Asia Launches Regional Electricity Market with World Bank Support

On January 22, the World Bank’s Board of Executive Directors approved the 10-year Regional Electricity Market Interconnectivity and Trade (REMIT) Program, an ambitious initiative to establish Central Asia’s first regional electricity market. The program aims to boost cross-border electricity trade, expand transmission capacity, and lay the foundation for large-scale renewable energy integration across the region. Electricity demand in Central Asia is projected to triple by 2050 under a business-as-usual scenario. Yet electricity trade in the region currently accounts for only 3% of total demand. The REMIT Program seeks to harness Central Asia’s diverse and complementary energy resources: hydropower in Kyrgyzstan and Tajikistan, thermal power from coal and natural gas in Kazakhstan, Turkmenistan, and Uzbekistan, and the region’s rapidly expanding solar and wind potential. Over the next decade, REMIT aims to: Increase regional electricity trade to at least 15,000 GWh annually, enough to supply millions of consumers Triple regional transmission capacity to 16 GW Enable up to 9 GW of clean energy integration The initiative is designed to enhance regional energy security, reduce power outages, lower electricity costs, and promote a more resilient and interconnected grid system. Total indicative financing for the program is $1.018 billion, to be deployed in three phases. These funds will support the creation and operation of a regional energy market, boost transmission infrastructure, introduce digital technologies to improve grid reliability, and strengthen regional energy institutions and coordination mechanisms. Investments are also expected to generate both construction-related employment and high-skilled jobs tied to market operations. In the program’s first phase, Kyrgyzstan, Tajikistan, Uzbekistan, and the Central Asian Countries’ Coordinating Dispatch Center (CDC) Energia will benefit from grants and concessional financing totaling $143.2 million. This comprises $140 million from the World Bank’s International Development Association (IDA) and $3.2 million from the Central Asia Water and Energy Program (CAWEP). “The REMIT Program supports Central Asian countries’ ambition to deepen energy cooperation and create a regional electricity market,” said Najy Benhassine, World Bank Regional Director for Central Asia. “This will enable more efficient use of energy resources, including cross-border deployment of clean energy, improve access to reliable and affordable electricity, and support jobs. By 2050, stronger regional connectivity could generate up to $15 billion in economic benefits.” Charles Cormier, World Bank Regional Infrastructure Director for Europe and Central Asia, added that REMIT will advance energy security and unlock private sector investment. “The first phase alone is expected to enable about 900 MW of new clean energy capacity, leveraging $700 million in private investment. This will pave the way for a more resilient and interconnected power system across this dynamic region,” he said. CDC Energia will lead the implementation of market and institutional activities, while national transmission companies will be responsible for infrastructure investments.