Central Asia, the South Caucasus and Mongolia face electoral, constitutional and economic transitions this year that will redefine their geopolitical alignments. The struggle between Western, Russian and Chinese influence remains the dominant external pressure, while internally, the concentration of executive power and structural economic vulnerabilities pose the greatest threats to stability. Kazakhstan, the region’s largest economy, is striving to maintain its “multi-vector” foreign policy amidst pressures to align with either Russia or Western sanctions regimes. A significant internal risk is the 2026 implementation of a new Tax Code, which raises the VAT to 16% and introduces progressive income taxes to fund a record social budget. A planned referendum on transitioning to a unicameral legislature could weaken checks and balances and fuel public distrust if representation for independent candidates is reduced. The country’s joining of the Abraham Accords seeks to diversify strategic partners, though it risks complicating relations with regional powers such as Iran and Türkiye.
In Uzbekistan, authority concentrates within a narrow circle surrounding President Shavkat Mirziyoyev and his daughter, Saida Mirziyoyeva. This personalization of power may diminish institutional independence and merit-based governance. Economically, the country must balance WTO standards against the norms of Eurasian Economic Union (EAEU) as it approaches its March 2026 WTO accession. In parallel, severe energy deficits continue to constrain industrial growth. Turkmenistan continues under the strict authoritarian control of President Serdar Berdimuhamedow, with stability coming at the cost of modernization, while its neutrality is being tested by tension on the Afghan border.
Azerbaijan maintains political stability under President Ilham Aliyev following his 2024 re-election. However, massive spending on Karabakh reconstruction (projected at $9.4 billion for 2026–2029) interacts with risks from declining oil prices, as energy still accounts for 90% of export revenues. Geopolitical relations with Russia remain strained following the 2024 downing of a civilian aircraft. Georgia is mired in a legitimacy crisis following the contested 2024 elections and the suspension of EU accession talks. The government’s repressive measures against dissent have led to a decline in Western support, pushing the country further into Russia’s orbit. While FX reserves reached a record $5.8 billion in late 2025, high dollarization and labour shortages due to mass emigration remain primary economic threats for 2026. Neighbouring Armenia faces a pivotal June 2026 parliamentary election that will act as a referendum on Prime Minister Nikol Pashinyan’s Western-oriented trajectory. A victory for the ruling party could lead to a referendum to remove Nagorno-Karabakh references from the constitution, potentially sparking civil unrest. Meanwhile, Russia’s influence over 80% of Armenia’s energy supplies provides Moscow with significant leverage to disrupt Yerevan’s EU rapprochement.
Kyrgyzstan remains governed by the duopoly of President Sadyr Japarov and security head Kamchybek Tashiyev, a model that risks entrenching clan politics. The establishment of the Tamchy “local offshore” territory with English law and full tax exemptions has raised concerns about its use as a channel for Russian capital to bypass sanctions. Additionally, a worsening energy deficit, fueled by a 90% reliance on hydropower and low water levels in the Toktogul reservoir, remains a primary socio-economic risk. Neighbouring Tajikistan is preparing for an hereditary transfer of power from President Emomali Rahmon to his son, Rustam Emomali. The country’s extreme economic dependence on labour migration remains a critical vulnerability, especially as 85% of its migrants go to Russia. Furthermore, legislative bans on religious practices for minors could fuel radicalization and future unrest.
Mongolia enters 2026 reeling from a constitutional crisis triggered by teachers’ strikes and a power struggle between Parliament and President Ukhnaagiin Khürelsükh. Although Prime Minister Gombojavyn Zandanshatar was reinstated after a presidential veto, the resulting executive-legislative deadlock threatens vital reforms. Climate risks such as the 2024 livestock losses place further strain on an economy already heavily dependent on mining exports to China.
Aretera's Annual Forecast for 2026 - Central Asia, Mongolia & the South Caucasus
