Global Uncertainty is Bringing Central Asia and the Gulf States Closer Together

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The countries of Central Asia are eager to capitalise on their strategic location but need investment from capital-rich donors.

In mid-July the heads of state of the Gulf Cooperation Council (GCC)—Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, and the United Arab Emirates (UAE)—and the five Central Asian republics (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan; C5) convened in Jeddah for the first summit between the two regions.  

The summit was held as uncertainty about agricultural exports from Ukraine and Russia—and other supply chain disruptions from the war in Ukraine—increase Gulf and global interest in Central Asia as a producer of grain and energy and in Middle Corridor trade routes as alternatives to shipping via Russia.

The Central Asian states are eager to capitalise on their strategic location and the opportunities of the geopolitical moment but need investment from capital-rich donors such as the Gulf states to develop the infrastructure and logistics needed to scale up commercial capacity.  

Despite the complementary interests of Central Asia and the Gulf, trade in 2021 between the two regional blocs amounted to only 0.27 per cent of the Gulf states’ total trade.  

While there have been recent bilateral meetings between leaders from the two regions, the summit aimed to pave the way for increased collaboration ensuring “the flexibility of supply chains while improving transportation and communication, food security, energy security and water security” and “creating business opportunities, supporting investment opportunities and increasing trade.” 

The benefits of an interregional approach 

This inaugural GCC + C5 summit came two months after the first C + C5 summit hosted by Chinese leader Xi Jinping and nine months since the first summit with the heads of state of Russia and all five Central Asian countries. There have been C5+1 meetings of foreign ministers of the Central Asian republics and the United States Secretary of State every year since 2015. 

The recent push towards regional engagement comes as new leaders in Uzbekistan and Kazakhstan pursue economic reforms and a more open foreign policy amidst increasing consensus that many of the challenges—from water security to transit logistics—faced by each country in Central Asia require transnational solutions.  

Encouraging other regions and countries to engage with Central Asia as a bloc also helps its smaller countries get in on bigger projects, as other world powers often prioritise bilateral ties with only the largest markets and energy producers in the region. 

“The market for Tajikistan is 10 million people, the Kyrgyz Republic is eight million, and Kazakhstan is 20 million, but if we are talking about a market of 75 million people [as a whole], it is more attractive,” said Sanat Kushkumbayev, deputy director of the Kazakhstan Institute for Strategic Studies (KazISS).  

“Therefore, the ‘region with region’ model of cooperation becomes more interesting. The synergy of combining different potentials gives a more cumulative long-term effect. That’s why this format is very beneficial.” 

Similarly, each of the Gulf states has a fairly small population but are together home to 70 million people.

“The model of the GCC is also interesting because, on the one hand, it does not limit each country’s sovereignty, which is a concern for many countries,” said Kushkumbayev. “On the other hand, they are flexible, as the council enables [members] to institutionalise, decide, and set long-term strategic goals within the institution.”  

As other countries increasingly engage with Central Asia as a bloc, it could benefit from formalising a council similar to the GCC. “Central Asia has a consultative format, it is already more than five years old. But now we should think about moving from a consultative format to a council,” said Kushkumbayev.

Increasing Gulf partnerships 

Although trade volume between Central Asia and the Gulf is minimal, the Gulf states have played a more significant role promoting Islamic institutions and investing in trade infrastructure in Central Asia. As Islam resurged in Central Asia after decades of Soviet state-atheism, the Gulf states have promoted the development of actively Islamic national identities in the region through donating hundreds of thousands of Qurans in local languages, facilitating Hajj pilgrimages to Mecca, and financing mosques.  

The Gulf has also invested in Central Asia’s trade and energy potential. Dubai Ports World owns large stakes in two special economic zones in Kazakhstan: a 51 per cent stake in the Khorgos dry port on the Chinese border and a 49 per cent stake in Aktau. The Saudi Fund for Development provided 40 million US dollars to Turkmenistan for the construction of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipelines. Oman’s state oil company owns 20 per cent of Kazakhstan’s Zhemchuzhina and Dunga oil fields. 

In the joint statement from the GCC + C5 summit, it was announced that Saudi Arabia will hold an investment forum for the summit’s countries in the last quarter of this year while Kyrgyzstan and Turkmenistan will host an investment forum in 2024. 

While both regions have long derived their global importance from their vast mineral and fossil fuel reserves, food and water security have become increasingly important—especially because GCC countries import between 70 and 90 per cent of their food. Dependence on imported grain is even higher; Saudi Arabia imports 88 per cent of its grain and Bahrain and Qatar import 100 per cent. 

Last year, Kazakhstan’s president Kassym-Jomart Tokayev visited Saudi Arabia and secured agreements for multimillion-dollar investments and increased collaboration between the two countries’ sovereign wealth funds on projects in exchange for the promise of long-term supplies of wheat, flour and oilseeds from Kazakhstan.  

Until recently, Gulf countries sourced much of their grain from Ukraine, but with the termination of the Black Sea Grain Initiative, there is renewed pressure to diversify their food supply chains. The summit’s joint statement repeatedly mentioned cooperation on food security. 

However, besides the investment forums and explicit support for Saudi Arabia’s candidacy to host Expo 2030 in Riyadh, the joint statement did not announce specific, named joint initiatives. The statement did, however, outline major areas where both blocs hope to begin or deepen cooperation. For an inaugural summit, that is an important start.

Source : Emerging