Central Asian economies are booming thanks to Russia: Here’s why

Times are hard. War in Ukraine, climate change, the prolonged impact of COVID, plus a multitude of other local and international factors have battered economies around the world.

But not everywhere.

Those in Central Asia saw breakneck growth during the first half of 2023, according to the European Bank for Reconstruction and Development’s (EBRD) latest report. 

Tajikistan leads the pack with GDP growth of 7.5% expected this year, followed by Uzbekistan (6.5%), Kazakhstan (5%) and Kyrgyzstan (4.6%). 

Many elements are at play, including China’s reopening after the pandemic, yet Dr Anna Matveeva of King’s College’s Russia Insitute points to a “very obvious one”: Moscow’s invasion of Ukraine. 

This led “citizens of Russia, Belarus and Ukraine to relocated their money and businesses to Central Asia” in a bid to avoid Western sanctions, Matveeva tells Euronews, adding they have driven up “consumption” and “demand for sophisticated services”.

Russian companies have moved to Kazakhstan and Kyrgyzstan especially, with their geographic proximity and “cultural closeness” making the process much easier, she adds. 

She also points to the pair’s membership in the Eurasian Economic Union with Russia, Belarus and Armenia which facilitates economic integration, with common markets, harmonised regulation and free trade zones. 

“People’s preferred choice is, certainly, to go to Western Europe or the United States. But being in Central Asia has some advantages. One is people can come and go – they do not necessarily have to make a decision to emigrate permanently.” 

Precise figures are hard to come by, but hundreds of thousands of Russians are thought to have fled the country, particularly after the partial military mobilisation was announced in September. Many have since returned, unable to find work or secure residency status, however. 

Yet there are other parts to the story. 

The migration of workers from Central Asia to Russia has also boosted economic growth in these territories as they send money back to their countries of origin, according to the EBRD’s September report. 

It added this flow of money “notably compensates for the exodus of the working-age population” in the region, with millions of Central Asians tending to work in low-paid sectors of Russia’s economy, such as construction, farming and hospitality. 

Still, Central Asia’s lightening growth is not blemish-free. 

Accusations have grown among experts that the region is helping Russia dodge sanctions imposed by the West over its invasion of Ukraine.  

Speaking to Euronews in August, Tom Keatinge explained how sanctioned Western products and commodities were being imported into third countries, such as Kazakhstan and India, and then re-exported to Russia. 

“It doesn’t make a mockery of the sanctions, but it certainly makes it far more difficult to ensure the restrictions are being properly imposed,” he said. 

Data compiled by Euronews shows imports of sanctioned Western goods to Kazasktan increased massively after Russia’s February invasion. 

Between January and October 2022, Kazakh companies exported electronics and mobile phones to Russia for over €549 ml, 18 times more than that in the same period of 2021, as per data from the Central Asian Bureau for Analytical Reporting.

Such trade is far from new but can be traced back to routes that emerged during the Cold War era when Russia – then the USSR – was similarly embargoed. 

Plus Matveeva explains Moscow has “other ways of working around the sanctions”, with “many countries around the world involved, including those in Europe.”

“Sanctions are generally seen as quite ineffective and quite pointless [in Central Asia],” she says. “It doesn’t mean everybody likes what Russia is doing in Ukraine. But Western response is not seen as appropriate.”

While the economic impact of the fallout from the Ukraine war has been largely positive on the region, the academic points to “things central Asians are not quite happy with”. 

“Conscious of the big picture,” she notes sanctions have impacted Central Asia’s ability to export and transport goods, with most routes involving Russian territory. 

Kazakhstan in particular is worried about possible Ukrainian drone attacks on the Caspian Pipeline Consortium terminal on the Black Sea, which could potentially disrupt its oil exports.

“The West in its quest to hurt Russia needs to think what it means for others who do not really have that many other options. Western pressure does create an alienating effect and more anti-Western sentiment where there has been really none,” she concludes.