The ceremonial opening of the China-Kyrgyzstan-Uzbekistan Railway on December 27 was the latest sign of China’s growing influence in Central Asia.
Construction is expected to take six years and will enhance China’s growing trade with a strategic region that the United States has effectively abandoned since its military withdrawal from neighboring Afghanistan in 2021.
China’s trade with Central Asia, which consists of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, will reach US$89 billion in 2023, making it the region’s largest trading partner.
China’s trade was followed by the EU with $53.9 billion, Russia with $44 billion, and Turkey with nearly $13 billion. Central Asia has long been considered Russia’s sphere of influence, but due in part to the impact of the war in Ukraine, its power is clearly shifting toward China.
In 2022, the last year for which the U.S. Trade Representative released data, total trade between the U.S. and Central Asia was just $4.4 billion.
This is despite the “U.S. Central Asia Strategy 2019-2025: Advancing Sovereignty and Economic Prosperity” announced in February 2020 under the former Trump administration.
India followed with $2 billion in 2023, followed by Iran with $1.5 billion in 2022 and Pakistan with just $309 million in the same year.
The low level of Central Asia trade between India and Iran is somewhat surprising given its involvement in the International North-South Transport Corridor and the exemption from US sanctions for India to conduct trade with Afghanistan from Iran’s Chabahar port. Yes (and then probably throughout other regions as well). .
With this in mind, India and Iran signed a 10-year deal on the Chabahar port last spring, but the Biden administration surprisingly threatened sanctions despite granting an exemption for India to use the port facilities. I set it.
Pakistan’s meager trade with Central Asia is due to worsening tensions with Taliban-run Afghanistan, which scuppered plans to connect with the region after the withdrawal of US troops in 2021.
There are still plans to rebuild and modernize the Pakistan-Afghanistan-Uzbekistan Railway, but rising security-related tensions and funding issues are hampering progress.
Still, Pakistan’s maritime minister insisted in early January that Central Asian countries still want trade through Pakistani ports.
Currently, Central Asia’s most reliable trading partners are neighboring China and Russia. The EU’s trade volume exceeds that of Russia, but as Robin Brooks, a senior fellow at the Brookings Institution, has suggested, a significant portion of that is transshipped to Russia to avoid Western sanctions. There is reason to suspect that there is.
Their trade also has to go through the Caspian Sea, the South Caucasus, and the Black Sea or Anatolia. The same applies to Turkey’s trade with Central Asia, which is similarly intermodal, resulting in relatively high costs and long transit times.
Georgia plays an essential role in facilitating trade between the EU and Turkey along the so-called “middle corridor”, but the possibility of a resolution to the dispute between Armenia and Azerbaijan over what Baku calls the “Zangezur Corridor” If so, this route could be streamlined in the future.
However, if a dispute erupts over this dispute, there is a risk that trade between the two countries will be disrupted.
Azerbaijani President Ilham Aliyev told reporters last week: “(Armenia) should not get in our way. It should not act as a geographical barrier between Turkey and Azerbaijan. The Zangezur corridor should be opened. The sooner they understand this, the better.”
He also demilitarized Armenia for what the Kremlin called a “special operation” in Ukraine and called for what Russian President Vladimir Putin described as Armenia’s “fascist ideology” in similar terms. He called for its eradication.
Even if a new regional war does not break out, the EU’s trade with Central Asia will be complicated by the deterioration of EU-Georgia relations over Tbilisi’s Russian-inspired foreign agents bill and recent parliamentary elections. There is a possibility.
This could potentially cede a larger market share to Turkey over time, regardless of whether the Zangezur Corridor materializes, but ultimately China could be the biggest beneficiary, with If so, the region could slide deeper into its sphere of influence.
Most realistically, it is in the United States’ national interest to avoid that scenario by facilitating Central Asian trade with all partners except China. They would then be able to act as a collective counterweight to China.
For that to happen, the United States will have to make some tough, if not controversial, choices. First, the incoming Trump administration will need to reconsider some of its Russia sanctions, many of which are not working as intended as punitive.
Maximilian Hess of the Foreign Policy Institute wrote last month: “It may seem counterintuitive, given that one of the main purposes of sanctions imposed on Russia is to restrict trade with Russia, but trade with Russia is limited in Central Asia and the Caucasus. Much of this is due to a decline in European exports to Russia, and trade routes moving through the region instead. ”
Hess said the sanctions are causing some complications for trade between the two countries, namely Russia’s exclusion from SWIFT, and that the only real impact on the region is that some pre-war European trade has shifted to Central Asia. He pointed out that the route was effectively changed to Russia via the route.
Although exact data are difficult to find, it is clear that a significant part of the region’s trade with the EU is transshipment. This means that the actual amount of trade between the EU and Central Asia is likely to be lower than officially announced, meaning China has more influence than the data suggests.
Revoking certain sanctions, extending exemptions to European companies, and refusing to threaten secondary sanctions in response to violations, any or all of which could undermine the package deal with Russia on Ukraine. However, it could bring more economic transparency to Central Asia’s current trade practices.
This is essential to better understand and more effectively exploit the EU’s competitive advantage vis-à-vis China.
The second tough choice concerns continued granting of sanctions exemptions to India for trade with Afghanistan (and possibly Central Asia as well) through Iran’s Chabahar port.
Importantly, President Trump’s special envoy to Ukraine, Keith Kellogg, revealed over the weekend that the incoming administration plans to reinstate a “maximum pressure” policy against Iran.
India’s trade with Central Asia lags far behind its potential, and the US needs to rely in part on India as a counterbalance if it wants to curb Chinese influence in the strategic region.
But this can only happen if India and Central Asia are confident that their companies will not be exposed to secondary sanctions if they violate US primary sanctions through trade with Iran.
The ideal solution would be for Pakistan to mend relations with Afghanistan and India, thereby allowing India to open land routes to Central Asia, but this is currently politically unrealistic. That is why Iran must be relied upon as a transit country, and this requires the United States to be flexible with sanctions.
And finally, Mr. Trump should consider reversing Mr. Biden’s policy of pressure on Georgia and send a signal to the European Union to follow suit. Such closeness would ensure that the EU would be able to continue trade with Central Asia beyond Georgian territory, thereby resolving current uncertainties.
In parallel, the incoming Trump administration may also consider taking the lead in resolving the conflict between Armenia and Azerbaijan over the so-called “Zangezur Corridor” in order to avoid a new war.
Mr. Trump and his advisers are known for their pro-business worldview, and in order to counter China’s growing influence in Central Asia, Trump and his advisers are known for their strong commitment to Russia, Iran-India, and the South Caucasus (Georgia, Armenia-Azerbaijan). You might agree that compromise is acceptable.
If the United States does not act, China will inevitably become an even more dominant economic power in this strategic region, giving it greater access to energy and minerals while at the same time engaging with Iran. It would provide a ready conduit for further trade.
Such an outcome would be contrary to U.S. interests, as China’s dependence on seaborne energy imports would give the U.S. Navy leverage in potential conflicts with China, such as the blockade of the Malacca Straits chokepoint. It’s going to happen.
Meanwhile, expanding overland trade between China and Iran through Central Asia would help neutralize President Trump’s “maximum pressure” policy against Iran.
The incoming Trump administration would therefore be wise to make Central Asia a more important part of its foreign policy calculations. Otherwise, planned pressure tactics against China and Iran will be less likely to succeed.
