Key Political Risks Facing Central Asia
Implications for International Investors

January 29, 2024
2024 will bring a complex political environment for Central Asia, with a range of challenges and opportunities for the countries of the region. This year is expected to see continued dynamic political developments, with Kazakhstan and Kyrgyzstan both likely to experience notable shifts in their respective political landscapes. These changes will influence the business environment, underscoring the importance of adapting to the evolving political climate.

Russia's war against Ukraine will continue to impact Central Asia as the countries of the region strive to balance between cooperation with Moscow and complying with Western sanctions imposed on the Kremlin. While Moscow will maintain a strong influence in the region (through increasing investment, growing trade, energy supplies, as well as greater involvement in the region’s internal politics and international organizations), Russian soft power has undoubtedly taken a hit since February 2022. Along with Central Asia’s intention to balance between Russia and other powers, this trend is likely to continue in 2024. More importantly from a business perspective, regional countries are actively focusing on
adhering to Western sanctions and are getting more involved in developing new regional trade routes such as the Middle Corridor, which would run through the Caspian Sea and Azerbaijan to Georgia, Türkiye and further to the EU.

Central Asian countries must continuously navigate between key global and regional powers, including the US, EU, Russia, China, Türkiye, India and the Gulf states. Beijing is seeking to strengthen its economic and political influence in the region, while Russia aims to maintain its traditional status. This year, Aretera expects that cooperation with Western European countries regarding recently announced investment projects will continue, while economic and business cooperation with the US along the so-called C5+1 track will intensify. Simultaneously, transit from China along the increasingly popular
Middle Corridor will increase, while large-scale energy investments from Russia will continue.

2024 will also see the continuation of Kazakhstan’s rivalry with Uzbekistan for regional leadership. Politically, this competition will be centered around which country should represent the region during negotiations with global and regional powers. Economically, this will play out via competition for attracting regional investment, as well as Russian and international businesses relocating from Moscow.
Although investment flows to Kazakhstan are significantly higher, the gap to Uzbekistan is likely to narrow in the long run as the latter targets investment cooperation with China and Russia. While Kazakhstan’s EAEU membership offers large market access, Uzbekistan’s investment climate is receiving increased attention. Europe, particularly France, is showing interest in securing partnerships with both countries in the uranium sector to diversify its sources. The $50 billion-worth green hydrogen project of the German-Swedish Svevind Energy Group in Kazakhstan also reflects the rising international investment interest and potential of Central Asia, with Kazakhstan notably aiming to go carbon neutral by 2060.

Overall, considering the various challenges and opportunities, Central Asia continues to demonstrate a relatively stable development trajectory amidst these complexities. Large international companies are increasingly choosing Kazakhstan or Uzbekistan as a regional hub after leaving Russia. Large Russian businesses, which have decided to leave the country, also consider Almaty and Tashkent as relatively reliable locations for their regional headquarters and positioning.

These are the main regional takeaways from Aretera's Annual Forecast for 2024, in which we unpack the key political and geopolitical risks facing Central & Eastern Europe, the Western Balkans, Türkiye, Central Asia and the South Caucasus.

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Dominik Istrate, Research Director at