Monochrome by Centil: Money doesn't smell

Despite the increasingly obvious political mismatch, the region had no intention to jeopardize relations this week.

Kazakhstan marked the week with a couple of rather notable breakthroughs in logistics. The government marked the start of the 836 km Dostyk-Moiynty railway construction, which as Astana forecasts contribute $8.8 bn to the budget over 20 years. News also came of the start of oil exports via the Baku-Tbilisi-Ceyhan pipeline, which aims to transport 1.5 million tons of oil bypassing Russia in 2023.

The country is still far from idyllic when it comes to Russia, which now demands Kazakhstan to reduce fees for grain transit. The Russian Grain Union said high transit fees make it "economically unviable" to transport through Kazakhstan to China. At the same time, Kazakh railways note that tariffs for Russian transit did not change over the past four years, despite the fact that this year the volume of transit with Russia increased by a quarter.

Kazakhstan is warming up to China, whose NFC Corporation is entering into a contract to build a $2.3b copper plant for KazMinerals' Baim project. The plant will service the copper mining project in Russian Chukotka. The project appears to have originated primarily for the Chinese market, as KazMinerals were initially in talks with China's State Development Bank to finance the whole thing.

Astana’s special attention was also given to the Chinese auto industry – this week Tokayev personally oversaw the commencement of construction of a plant that will produce Chinese cars Changan, Chery and Haval, in 2024. The $216m project will be implemented by Astana Motors and will produce more than 90,000 units per year, 60% of which will be exported to the CIS countries.

Tashkent was no less about private investment in country and hosted the first plenary session of the Foreign Affairs Council presided by Mirziyoyev himself. Attendees included the top investors of the country like ACWA Power, GE, TBC Bank, Veon and others. The meeting was also attended by the president of the EBRD, representatives of the World Bank, IFC and ADB. The President set a goal to increase the volume of foreign investments up to $70b within the next 5 years.

At the same meeting, the government resolved to establish a working group for foreign contacts under the Investment ministry, as a one-stop-shop for investors starting from their arrival and ending with issuing permits. One of the main tasks of the working group is "road map development" based on investors’ proposals. It will cover deadlines for their implementation, responsible persons, as well as necessary amendments to the legislation for their implementation.

Tashkent is also becoming increasingly interested in contacts with the EU – the discussions held at the “EU-Central Asia” meeting highlighted the importance of including Uzbekistan in the GSP+ scheme. The country aims to increase exports within this framework to $700 million in 2023, and plans to increase the range of exports to 600 items with an emphasis on agricultural products, textile, carpets, furniture, leather and jewelry.

On a less positive note, Tashkent's statement came to stop the export of the Uzbek gas to cope with winter deficit. This year turned out to be especially difficult for the country - gas production for the first three quarters decreased by 1.6%, creating a demand deficit of about 20m cubic meters of gas per day. The government has not yet specified who will it buy the gas from, however given the dynamics of relations this year, Turkmenistan might be the prime candidate.

In general, it is obvious that relations between the two countries are becoming more harmonious, as confirmed by the recent opening by Turkmenistan of cargo checkpoints for trucks from Uzbekistan. Earlier Turkmenistan opened the transit of goods between Uzbekistan and Iran, and the second Farap-Artyk corridor. The country also plans to support Uzbekistan in establishing the transit of goods through its port of Turkmenbashi.

In turn, Dushanbe had to fight off the foreign media attacks accusing Tajikistan in supplying Iranian-made drones to Russia. In this regard, Tajikistan’s Ministry of Foreign Affairs made a special publication which refutes these statements. At the same time, the government does not deny the fact of the licensed production, however the possibility of supplying the models that are specifically produced in Tajikistan is stated to be impossible.