This week, the media in Central Asia reported on several critical energy and environmental stories, such as Tajikistan’s approval of a deal to provide electricity from the Rogun HPP to Uzbekistan, Kazakhstan beginning negotiations to renew its production-sharing agreements with crucial international energy investors, and the World Bank forecasting heat-related deaths to dramatically increase across the region. They also covered several important trade stories, such as China replacing Russia as Tajikistan’s largest trading partner and Uzbekistan, Afghanistan, and Pakistan agreeing to conduct a feasibility study for the future Trans-Afghan railway. Other sources reported on diplomatic events, such as the meeting of the SCO foreign ministers and the EU-Central Asia High-Level Dialogue.

Infrastructure:

Uzbekistan, Afghanistan, and Pakistan agreed to conduct a feasibility study for the proposed Trans-Afghan railway (bne IntelliNews). According to the latest plans, the railway will begin in Termez, on the Uzbekistani-Afghan border, before continuing onto Naibabad, Maidan Shar, Logar, and Kharlachi on the Afghan-Pakistani border. The feasibility study will involve route mapping, geological survey of the planned route, and economic and financial assessments. Once construction commences, the railway will take approximately five years to build. Given the mountainous terrain along the route, the project will require five tunnels and 312 bridges. The railway will have an initial capacity of three million tons annually, with plans to increase this to 15-20 million tons by 2035-2040. The project would significantly improve connectivity between Central and South Asia, providing Central Asian countries with direct access to ports on the Indian Ocean in India and Pakistan. It would also contribute to developing the North-South Corridor, which Central Asian States, Russia, and Iran have committed to establishing. Earlier this month, Russia became the first country to recognize Afghanistan’s Taliban government. Last week, we also reported that Kazakhstan had concluded a $500 million investment deal with Afghanistan to construct a 115-kilometre railway between Turgundi on the border with Turkmenistan and Herat. The new railway will connect to the line currently under construction between Khaf in Iran and Herat.

Diplomatic Events:

The Council of Foreign Ministers of the Shanghai Cooperation Organization (SCO) recently met on July 15 in Tianjin, China (The Astana Times). The foreign ministers discussed their multilateral cooperation through the SCO and preparations for the upcoming SCO summit in September. More specifically, the explored regional security, sustainable development, and institutional development. They also held a joint meeting with Chinese President Xi Jinping.

The 12^th meeting of the annual EU-Central Asia High-Level Political and Security Dialogue took place in Dushanbe, Tajikistan, on July 11 (Asia Plus). Their first Counterterrorism Dialogue also occurred on July 10. Officials explored numerous regional and international security issues, such as Russia’s invasion of Ukraine and developments in the Middle East and Afghanistan. The meeting follows increased engagement and cooperation between the EU and Central Asia in recent years. It builds on the 20th Ministerial meeting in March in Ashgabat and the first EU-Central Asia Summit held in April in Samarkand. They discussed the Joint Roadmap for Deepening Ties between the EU and Central Asia, concentrating on security challenges and cooperation. More specifically, they exchanged views on disinformation, cyber and hybrid threats, and articulated a need to boost collaboration in these areas. They also considered counterterrorism, extremism, border management, illicit drug trafficking, water management, and logistics infrastructure. The Deputy Secretary-General for Political Affairs at the European External Action Service, Olof Skoog, Kyrgyzstan’s Deputy Foreign Minister, Meder Abakirov, Tajikistan’s Deputy Foreign Minister, Ismatullo Nasredin, Uzbekistan’s Deputy Foreign Minister, Muzaffar Madrakhimov, Kazakhstan’s Ambassador-at-Large, Stanislav Vassilenko, and Turkmenistan’s Ambassador to Tajikistan, Aymyrat Gochmyradov, attended the dialogue.

Kyrgyzstan has officially ratified the trilateral border demarcation agreement concluded with Tajikistan and Uzbekistan (Daryo). The three countries signed the pact during a summit in Khujand, Tajikistan, on March 31. Kyrgyzstan’s parliament, the Jogorku Kenesh, approved the treaty on June 25. The treaty formally establishes the exact location of the confluence of their state borders, representing a significant step towards strengthening stability and cooperation in Central Asia.

Trade:

China has become Tajikistan’s largest trading partner, outstripping Russia’s trade with the country for the first time, according to Tajikistan’s Statistics Agency (The Times of Central Asia). In the first five months of 2025, bilateral trade turnover between Tajikistan and China surged 30% to $934 million, compared to the same period in 2024. China accounted for 24.8% of Tajikistan’s trade between January and May. On the other hand, Tajikistan’s bilateral trade with Russia registered a slight increase of 9.3% to $900 million during the same period, accounting for 23.2% of the country’s foreign trade. An increase in Chinese exports to Tajikistan, which amounted to $787 million, largely drove the surge in trade with China. Tajikistani exports to China totaled $177 million. Meanwhile, Tajikistan imported $858 million from Russia while only exporting $42 million. However, China’s economic influence over Tajikistan reaches beyond trade. China is also the country’s largest investor. By the end of the second quarter of 2025, Chinese investment in the country stood at $5.1 billion while Russian investment amounted to roughly $2 billion. Additionally, China is Tajikistan’s most important creditor. Tajikistan’s debts to China account for a third of its external debt, or around $1 billion. Regionally, China has expanded its economic, trade, and investment footprint across Central Asia in recent years, now eclipsing Russia’s trade with all five countries in the region (The Caspian Post).

Energy:    

Tajikistan has approved a 20-year deal to supply electricity from the Rogun hydroelectric power plant (HPP) to Uzbekistan (Kun). According to the agreement, the Rogun HPP will provide electricity at 3.4 cents per kilowatt-hour. Uzenergosotish will coordinate the electricity supply with the plant operator, OJSC Rogun HPP, especially during peak demand in Uzbekistan. While the plant is under construction, it will only deliver power from April 1 to September 30 during the growing season. When construction work ceases, the plant will transition to year-round supply. Construction of the Rogun HPP began in the late Soviet period but was soon discontinued. However, work recommenced in 2016. When complete, it will have a capacity of 3600 MW, making it the largest HPP in Central Asia.

Last week, UzAtom signed a protocol on cooperation in nuclear power plant construction with the Hungarian Ministry of Foreign Affairs and Trade and MVM EGI (UZ Daily). The protocol includes plans to use passive dry cooling technology in Uzbekistan’s future NPPs, establish a joint venture to manufacture cooling systems, prepare technical and commercial proposals for the necessary equipment, and train the local workforce through educational programs and internships.

Last week, Kazakhstani Prime Minister Olzhas Bektenov promised that Kazakhstan would not pursue an uncompromising revision of its production-sharing agreements (PSAs) with foreign investors in its energy sector (Kursiv). Earlier, we covered President Tokayev’s instruction to accelerate negotiations over the renewal of PSAs with foreign energy investors. Nevertheless, he emphasized that the current PSAs have infringed on the national interest. He acknowledged that the tax burden on business is significant, with 70% of the country’s tax revenues, roughly $30 billion, coming from large corporations, including 12% from the energy sector. In May, several media outlets reported that the government was considering a new 1% tax on hydrocarbon production costs or investments to finance increased research, development, and exploration. However, this new payment will only raise a modest $30 million. The Energy Ministry expects the negotiations to last two to three years. Under the current arrangements, international investors finance the exploration and development of oil and gas fields, recouping the cost during the early stage of production before sharing profits with the government. Overall, a report by Energy Insights and Analytics estimated that Kazakhstan received $1.1 billion through these arrangements between 2016 and 2023. Recently, the Kazakhstani government filed a lawsuit alleging that embezzlement schemes involving the Kashagan and Karachaganak fields were used to bribe Kazakhstani officials and representatives of the Italian energy firm Eni between 2006 and 2011. While they adapted the PSA related to these fields in 2008, the changes only modestly increased the proportion of revenues obtained by the state by a percent. Kazakhstan is currently involved in several arbitration cases with the operators of the Kashagan and Karachaganak fields. Earlier, we reported that another international energy investor, Victoria Oil and Gas, filed a lawsuit against Kazakhstan over its loss of an exploration license at the Kemerkol oil field. We also noted the decrease in FDI in Kazakhstan, potentially indicating the adverse effect of these litigations on investor confidence.

Prime Minister Bektenov added that Kazakhstan would not withdraw from OPEC+ and was doing its best to meet its obligations, despite the country’s production frequently exceeding OPEC+ limits (Kazinform). In June, Kazakhstan’s crude oil exports amounted to 1.86 million barrels per day, compared to 1.78 million in May and 500000 barrels per day more than its OPEC+ quota for the month. In response, OPEC+ has announced production increases to penalize overproducing member states like Kazakhstan and Iraq.  

In addition, Kazakhstan’s Energy Minister, Yerlan Akkenzhenov, revealed that Kazakhstan produced 49.9 million tons of oil in the first six months of 2025, compared to 44.7 million tons in the same period in 2024 (The Astana Times). Oil exports increased to 39.6 million tons, up from 35.4 million tons. Gas production reached 34.6 billion cubic metres in contrast to 33.7 billion cubic meters last year. Total electricity amounted to 62.2 billion kilowatt-hours, including 4.2 billion kilowatt-hours from renewable sources.  

Investment:

During a recent press conference, Kazakhstani Prime Minister, Olzhas Bektenov, confirmed that Kazakhstan aims to double its GDP to $450 billion by 2029 (Daryo). He noted that GDP reached $286 billion in 2024 and estimated that it would surpass $300 billion this year. He also highlighted several critical investment initiatives, such as Baiterek Holdings launching a program to attract $15 billion in new investment and the government’s plans to invest $2.8 billion across 190 industrial projects. He emphasized that the government is concentrating on developing oil refining, metallurgy, utilities, petrochemicals, automotive manufacturing, railway engineering, and agriculture to boost economic growth and diversify the economy. In addition, he touched on infrastructure development and the National Development Plan. Lastly, he underlined that funding for priority areas is rising, with 17 substantial industrial projects currently under construction expected to be operational by 2029. These include automotive factories, chemical plants for butadiene, ammonia, and urea, a metallurgical complex, a copper smelting plant, and the expansion of the Shymkent Oil Refinery. Additionally, the Kazakhstani government reported this week that food production in the country rose by 10% to $3.4 billion in the first half of 2025 due to government assistance in the form of VAT cuts, transportation subsidies, and preferential loans (Daryo).  

Kazakhstan and the Islamic Development Bank (IsDB) have signed a protocol of intent to finance key infrastructure projects across the country (Daryo). The Advisor to the Prime Minister of Kazakhstan, Nurlan Baibazarov, and the President of the IsDB, Muhammad Sulaiman Al-Jasser, signed the agreement following a meeting in Jeddah. The IsDB pledged $1.1 billion towards projects developing engineering and transport infrastructure in Kazakhstan’s special economic and industrial zones. Overall, the IsDB may invest upwards of 1.6 trillion tenge. In June 2024, the two parties signed a Framework Program Agreement on Strategic Cooperation to invest $8 billion in various projects. They have already pledged $1.15 billion towards improving the country’s water infrastructure by renovating 3600 kilometers of 115 irrigation canals and constructing eight new reservoirs. The two sides also considered the possibility of expanding Islamic finance in Kazakhstan.

Environment:

A recent report from the World Bank outlines how cities and populations in Central Asia are increasingly vulnerable to extreme heat (The Times of Central Asia). The study finds that the rising frequency of extreme heat threatens public health, economic productivity, and infrastructure. They estimate that heat-related deaths in the region’s cities could rise to between 10000 and 23000 by 2090. The rising temperatures will also affect the regional economy. In 2023, extreme heat precipitated the loss of 87000 jobs regionally. By 2050, economic losses could total 2% of GDP in particularly exposed cities, such as Ashgabat. Rising temperatures also damage infrastructure, with extreme heat causing the deterioration of 200 kilometers of road in Kyrgyzstan annually. Nevertheless, the report notes several adaptation measures, such as urban greening, retrofitting buildings with thermal insulation and more heat-tolerant materials, and establishing early warning systems and cooling centres.

Remittances:

According to Uzbekistan’s Central Bank, remittances surged by 27% to $8.2 billion in the first six months of 2025, compared to the same period in 2024 (Gazeta.uz). Remittances have also grown on a monthly basis, rising from $1.06 billion in January to $1.78 billion in June. The Central Bank attributed the increase to strong labor demand, wage growth, and the strengthening of local currencies in recipient countries. For instance, the Russian ruble rose 27.9% against the U.S. dollar. Almost 78% or $6.4 billion of all remittances came from Russia, compared to 77% last year. In comparison, 29.3% or $4.95 billion came from other countries, such as Türkiye, the U.K., the U.S., South Korea, Kazakhstan, and Lithuania. Remittances from the U.K. doubled to $89 million while inflows from EU countries surged by 41% to $251 million. Meanwhile, remittances from South Korea increased by 5.6% to $282 million, and those from the U.S. grew by 15% to $313 million, demonstrating the continued diversification of labor migration.

Governance:

According to the World Bank’s latest Listening to the Kyrgyz Republic report, Kyrgyzstan is witnessing an extended period of economic growth and rising public trust in political and economic institutions (Daryo). The survey has been tracking public sentiment since 2021. Since then, the share of the population who believe the country is on the right track has increased from 70% to 90%. Moreover, 80% of households felt financially secure in June 2025, in contrast to only 33% in December 2021. In addition, 91% felt optimistic about the local economy compared to 71% in early 2022. Meanwhile, people’s life satisfaction rose from 54% to 80%. People also reported an improvement in terms of food security, while those borrowing to buy basic necessities also fell. Trust in social policies and government institutions increased, with those believing social supports to be adequate rising from 60% to 87%. People reported a substantial improvement in their economic status, with those considering themselves poor falling from 24% to 14%. According to an IMF report, Kyrgyzstan also experienced the highest per capita income growth in Central Asia during the same period (Daryo). The report outlines how per capita income in Kyrgyzstan rose by 85% to $2500 between 2022 and 2024. In comparison, Tajikistan witnessed growth of 49%, Uzbekistan 37%, and Kazakhstan 42%. Additionally, the Kyrgyzstani economy grew at an average annual rate of 9% during this time. Economic growth recently skyrocketed by 12.3% in the first five months of the year (AKIpress). The IMF forecasts growth of 6.8% this year (Daryo). Nevertheless, they anticipate growth slowing to 5.25% in the short term. Some economists believe that if this income growth persists, Kyrgyzstan will soon catch up with its neighbors as regards income per capita. While the Kyrgyzstani government has stepped up its reform efforts, economists have attributed much of the country’s recent economic expansion to its role in aiding Russian firms avoid Western sanctions. However, Kyrgyzstan has recently tightened controls on ruble transactions, potentially limiting this avenue of growth (The Moscow Times). There have also been reports that imports from the EU have declined (24.kg). Having said that, Kyrgyzstan continues to experience lower inflation than its neighbors, with prices growing by 4% in the first half of 2025 (AKIpress).

On July 18, President Tokayev approved a new tax code (Kursiv). The new tax code includes a 30% reduction in tax reporting volume, a 20% reduction in the number of taxes, and a new 16% value-added tax (VAT). Initially, the VAT rate on medical services will be 5%, which will rise to 10% in 2027. However, services covered by free-of-charge medical assistance, the Mandatory Social Health Insurance packages, and treatment for significant diseases and orphans will be exempt. Book publishing, periodicals, and archaeological excavations are also exempt. Meanwhile, they will reduce the VAT registration threshold to roughly $75000. Pension payments from the Unified Accumulative Pension Fund will not be subject to income tax, while the tax deduction for those with disabilities will increase to $36,893. The number of special tax regimes will decrease to three, with those for farmers, the self-employed, and companies entitled to simplified tax declarations remaining. The government has removed the land tax and lowered several other duties. They have also introduced a new 15% rate for individuals with an income over $62,718 and dividends over $1.7 million. They also applied a 10% excise tax on luxury goods, such as expensive cars, vessels, alcohol, and cigars. Property tax will increase for real estate valued over $844,453. Other amendments include regulations pertaining to the submission of asset and liability declarations. Overall, the changes involve the introduction of a slightly more progressive tax regime to boost government revenue, reduce the burden on low-income households, and maintain economic growth while curbing inflation. However, the increase in regressive VAT rates will add to the tax burden on low-income individuals.

Security:

Russian troops from the country’s 201^st military base in Tajikistan arrived in Termez, Uzbekistan, to participate in the Cooperation-2025 joint exercises with their Uzbekistani counterparts (Kun). The exercises occurred between July 15 and 21. They involved 400 special forces personnel, drones, electronic warfare equipment, and attack helicopters (Gazeta.uz). More specifically, they focused on combating small enemy formations while protecting the state border.

Agriculture:  

Between September 2024 and July 10, 2025, Kazakhstan exported 9.3 million tons of new harvest grain, an increase of 58.4% compared to the same period last year (Kazinform). Key destinations included Uzbekistan, which received 3.4 million tons, an increase of 32,8%, Tajikistan, which obtained 1.3 million tons, up 45,8%, Afghanistan, which imported 309,000 tons, a surge of 49,2%, Kyrgyzstan, which received 238,000 tons, skyrocketing 96%, Iran, which acquired 974,000 tons, a dramatic 17.5-fold increase), and Azerbaijan, which imported 713,000 tons, an even larger 118.8-fold increase. Kazakhstan also began shipping grain to Vietnam through China earlier this year, exporting 15000 tons by train in June.