Last week, the media in Central Asia reported on several critical trade and diplomatic events, such as the seventh Russia-Kyrgyzstan Trade Forum, the Eurasian Intergovernmental Council meeting, the U.S. Treasury sanctioning the Kyrgyzstani crypto company, Old Vector, the meeting of the Kazakhstan-Tajikistan Intergovernmental Commission, an Afghan trade delegation’s visit to Kyrgyzstan, and Uzbekistan and Jordan committing to draft a preferential trade agreement. They also covered Kazakhstan and Uzbekistan’s plans to tackle the shadow economy. In addition, several outlets noted Uzbekistan’s increased investment in water infrastructure and the ICWC meeting in Kazakhstan. Lastly, multiple sources reported the drop in Kazakhstani oil production last month.

Trade:

The Eurasian Development Bank (EDB) will provide a grant to Kyrgyz Temir Zholu, Kyrgyzstan’s national rail company, to conduct a feasibility study for the planned Balykchy to Cholpon-Ata railway (Akchabar). The $275000 grant will come from the EDB’s Technical Assistance Fund. The Director General of Kyrgyz Temir Zholu, Azamat Sakiiev, and the Deputy Chairman of the Board of the EDB, Yaroslav Mandron, signed the technical assistance agreement on the sidelines of the 7^th Kyrgyzstani-Russian Economic Forum. The project is estimated to cost $500 million. Once complete, it will boost tourism and economic growth, especially mineral extraction, in the region, connecting Issyk-Kul with the Kyrgyzstani and Uzbekistani rail networks. The new railway will also connect Tamchy airport. During the forum, Russia and Kyrgyzstan signed thirty deals worth $275 million (The Times of Central Asia). Overall, a thousand representatives from government, investment funds, and business attended the forum in Issyk-Kul. The deals include They include a $55 million contract for Russian aircraft, a $2.8 million memorandum for the purchase of an electric cruise ship, supply agreements for tractors, trucks, metals, and machinery, an contract to construct a milk processing plant, a financing agreement for Kyrgyzstani firms to issue securities in Russia, an investment agreement with the Eurasian Development Bank to support projects through the Russian-Kyrgyzstani Development Fund, and a deal with the Kyrgyzstani Green Energy Fund to buy electricity from Russia, and a memorandum between Roscosmos and the Kyrgyzstani Ministry of Digital Development regarding space exploration.

Uzbekistan’s Minister of Investment, Industry, and Trade, Laziz Kudratov, met the Jordanian Minister of Investment, Tariq Abu Ghazaleh, and Minister of Industry, Trade and Supply, Yarub Qudah. on August 11 (Kun). They discussed investment cooperation and increasing bilateral trade turnover. The two countries agreed to begin drafting a preferential trade agreement. During their visit, Uzbekistani officials also met with Jordan’s Minister of Digital Economy and Entrepreneurship, Sameer Smayrat, the Director General of the King Hussein Business Park, Ammar Izziddin, and the President of the Jordan Chamber of Industry, Fathi Jaghbir. Concluding their discussions, they held a roundtable with representatives of twenty companies, including the National Arab Mining Company, Arab Pesticides and Veterinary Drugs Manufacturing Company, Jordan Phosphate Mines Company, Classic Fashion Apparel Industry, and Grow Tech.

The Acting Afghan Minister of Industry and Commerce, Nooruddin Azizi, led a trade delegation to Kyrgyzstan on August 13 (The Times of Central Asia). Upon arrival, he met with the Kyrgyzstani Minister of Economy and Commerce, Bakyt Sydykov. After their talks, the two signed a roadmap for future collaboration and a memorandum of understanding on expanding trade and economic relations. Both countries also resolved to open trade houses in each other’s countries. Between March 2024 and March 2025, bilateral trade amounted to $66 million. Trade between the two countries has increased after Kyrgyzstan removed the Taliban from its list of proscribed organizations in September 2024.

Water Management:

The 90th meeting of the Interstate Commission for Water Coordination (ICWC) in Central Asia occurred in Borove, Kazakhstan, on August 14 (Daryo). Officials from Kazakhstan, Tajikistan, Uzbekistan, Turkmenistan, and Kyrgyzstan attended the meeting. Kazakhstani Deputy Prime Minister Kanat Bozumbayev urged regional countries to guarantee the fair distribution of water in light of growing climate challenges and declining water levels. The ICWC is Central Asia’s principal multilateral body for managing transboundary water resources. Noting the low water levels in the Shardara reservoir in the lower reaches of the Syr-Darya River, he called on his counterparts to uphold the ICWC’s decisions. The Deputy Prime Minister also held bilateral meetings with his Tajikistani and Uzbekistani counterparts to begin preparations for next year. The meeting concluded with the signing of a protocol. Last week, Uzbekistan and Kyrgyzstan agreed to supply an additional 600 million cubic meters of water to Kazakhstan to alleviate drought conditions (Daryo). Water levels in the Syr-Darya River basin are currently 30-40% below normal. Kazakhstani Prime Minister, Olzhas Bektenov, recently met with his Kyrgyzstani and Uzbekistani counterparts to discuss the matter. Water deliveries from Kyrgyzstan and Uzbekistan to Kazakhstan are approximately one billion cubic metres behind schedule. Energy and Water Ministers from the three countries previously met in May to coordinate summer water supplies. Central Asia continues to experience rising water shortages due to increasing temperatures and accelerated glacier melting.

On August 12, President Mirziyoyev approved the Program for the Development of the Irrigation Sector and Water Resource Management until 2028 (UZ Daily). The government spent 60 trillion Soums and attracted $622 million in foreign direct investment. In 2020, water-saving technologies were used on 4% of irrigated land. By 2025, the government aims to increase this to 50%. The program outlines the renovation of 2551 kilometers of irrigation canals and the replacement of obsolete pumping stations, reducing electricity consumption from 6.8 to 6.2 billion kilowatt-hours. They will also lower the amount of land with a limited water supply from 424000 to 276000 hectares and make a further 460000 hectares for agricultural use. In addition, they will improve land with high salinity and low groundwater levels, as soil conditions significantly affect water usage. They will introduce water-saving technologies across 1.4 million hectares and drip irrigation on 293000 hectares. Moreover, they will replace measurement and control equipment at twenty facilities. They will introduce a new digital monitoring system at 12,000 reclamation wells and 1,750 pumps and automate twelve hydraulic structures. Additionally, the share of concrete irrigation canals will rise from 39% to 47%, resulting in water savings of 10 billion cubic meters by 2025 and 14 billion cubic meters by 2028. They will also supply electricity to 5200 pumps and water meters, while large pumping stations will move to using renewable energy. They explored increasing private sector involvement, with 2612 facilities privatized so far, and the digitalization of water distribution points, noting the automation of 18,755 hydrological posts. In 2024, the government created 159 water delivery service institutions based on district irrigation departments. In the future, they will be permitted to manage their funds independently. Lastly, they plan to establish an IT and training center. Improving the efficiency of water usage remains a critical priority, especially in light of the severe drought conditions experienced throughout the region this summer.

Diplomatic Events:

The 9th meeting of the Kazakhstani-Tajikistani Intergovernmental Commission on Economic Cooperation took place in Astana on August 8 (Daryo). Kazakhstan’s First Deputy Prime Minister Roman Sklyar and Tajikistan’s First Deputy Prime Minister Hokim Kholikzoda co-chaired the meeting. The meeting considered the enactment of previous agreements, investment opportunities, and regional cooperation. They also outlined future trade, industrial, agricultural, and transport cooperation. In 2024, trade between the two countries rose 7.4% to $1.3 billion. They aim to increase this figure to $2 billion in the coming years. Meanwhile, cargo traffic increased 8% to 5.1 million tons last year. In the first six months of 2025, cargo traffic reached 2.1 million tons, a 12.1% increase compared to the same period in 2024. Road traffic in particular surged by 45% to 494000 tons. Kazakhstan is also one of the leading investors in Tajikistan, with total investments exceeding $146 million. Additionally, Kazakhstan’s Deputy Foreign Minister Alibek Kuantyrov announced that Kazakhstan will export a further 85 products worth $200 million to Tajikistan, following talks with the Chairman of Tajikistan’s State Committee on Investment and State-owned Property Management, Sultan Rahimzoda (Asia Plus). The Kazakhstani delegation invited Tajikistan to the Kazakhstan Global Investment Roundtable in October, while the Tajikistani representatives invited Kazakhstan to the investment forum in Dushanbe.

The Eurasian Intergovernmental Council met in Cholpon-Ata, Kyrgyzstan, on August 14-15 (Kazinform). The EAEU heads of government explored several issues, such as the development of exchange trading on a common exchange market of goods, the report on competition in transborder markets, the formation of common oil, gas, pharmaceutical, and medical equipment markets, aligning qualification requirements, digitalizing transport corridors, and climate action. Following their discussion, they approved the program for the development of exchange trading on the common exchange market of goods, and an order concerning the report on competition in transborder markets, amendments to the roadmap on transport policy, a decision on distributing import customs duties between EAEU member states for 2024, and orders concerning the development of common medical equipment and pharmaceutical markets (24.kg). During his address to the Council, Kazakhstani PM, Olzhas Bektenov, accused other member states of erecting trade barriers (Kursiv). He emphasized that Kazakhstani companies continue to face double taxation and complete veterinary, sanitary and customs checks when selling goods to other EAEU member states. Concerning public procurement, he accused some members of ignoring the rules adopted in 2020 and preventing companies from other member states from participating.

The third round of consultations occurred between the foreign ministries of Kazakhstan and Serbia in Astana (Kazinform). The Deputy Foreign Minister of Kazakhstan, Arman Issetov, led the Kazakhstani delegation, while the State Secretary of the Serbian Ministry of Foreign Affairs, Damjan Jović, led the Serbian delegation. Both parties exchanged views on key international issues and the development of economic relations and considered preparations for the upcoming meetings of the Intergovernmental Commission and the Business Council. The head of the Serbian delegation also met with the Chairman of the Investment Committee of the Kazakhstani Ministry of Foreign Affairs, Gabidulla Ospankulov, and the Acting Chairman of the Board of Kazakh Invest, Aibol Argyngazynov (Kazinform). They discussed expanding trade and investment ties and agricultural, industrial, and transport projects. They focused on increasing Serbian companies' participation in Kazakhstan’s priority economic sectors and special economic zones, as well as Kazakhstani companies in the Serbian market.

Sanctions:

The U.S. Treasury sanctioned the Kyrgyzstani company, Old Vector, for aiding the Russian crypto exchange, Garantex, in facilitating illicit transactions and evading sanctions (Daryo). According to reports, the firm released a ruble-backed digital asset, the A7A5 token, which Garantex used to reclaim customer funds following the freezing of $26 million in cryptocurrencies by the U.S. Secret Service on March 6. The company subsequently transferred operations to Grinex. They intended for the A7A5 token to be used by Russian customers of the A7 Limited Liability Company, a cross-border financial settlement platform, linked to sanctioned Moldovan oligarch Ilan Shor and the Russian bank Promsvyazbank. They used the token to resume financial transactions, violating earlier sanctions. The new round of sanctions also targets A7’s subsidiaries A71 and A7 Agent, Garantex’s successor Grinex, three executives, and several other Russian companies. Garantex, established in Estonia in 2019, has facilitated $100 million in transactions for Russian ransomware groups, such as Conti, Black Basta, LockBit, NetWalker, and Phoenix Cryptolocker. It lost its Estonian license and was sanctioned by U.S. authorities in 2022. The U.K. also sanctioned the crypto token, which they said had been used to launder $9.3 billion in the past four months (Reuters).

Finance:

Commercial banks’ total capital in Uzbekistan grew to $9.9 billion in the first half of 2025, an increase of 20% compared to the same period in 2024 (Daryo). State banks accounted for 62% or $6.1 billion of all capital, while private banks accounted for 38% or $3.8 billion. Uzbek National Bank leads the way among state banks, holding $1.5 billion. Meanwhile, Ipoteka Bank held the largest amount in the private sector with $551.8 million. In addition, the banking sector’s overall assets stood at $67.8 billion, with state banks holding 65% or $44.2 billion and private banks holding $23.6 billion. Total loans reached $45.7 billion, with state banks accounting for 69% or $31.3 billion and private banks loaning $14.4 billion. The deposit gap shrank across the industry, with deposits amounting to $28.3 billion, including $14.6 billion in state banks and $13.7 billion in private banks. Overall, these figures speak to the gradual expansion of the country’s banking sector.  

President Mirziyoyev assessed efforts at combating the shadow economy at a government meeting on August 11 (Daryo). At the meeting, officials reported that the shadow economy had decreased from 45-50% of GDP to 35% by mid-2025. The meeting noted several successful measures to reduce the administrative burden on businesses and encourage the payment of taxes and adherence to regulations, including reducing the number of taxes from thirteen to nine and abolishing 100 licenses and permits. They also discussed various technological solutions to enhance transparency. They noted that fully automated payments on public transport had boosted passenger numbers in Tashkent by 30%. Similarly, digitalization of the agricultural and commodity markets increased revenue by two to threefold. President Mirziyoyev called for such measures to be extended to the construction, trade, and services industries. He added that the application process for licenses and permits should be digitized, and the use of electronic and cashless payments expanded.

Meanwhile, Kazakhstan’s shadow economy declined from 17.58% of GDP to 16.71% or $42 billion in 2024, a reduction of roughly one percent or $2 billion (Kursiv). The reporting of this new figure follows the Bureau of National Statistics’ upward revision of the 2023 figure. Nevertheless, the shadow economy continues to shrink by around a percent annually. For instance, the government highlighted declines in the unobserved share across a range of sectors, including in trade (from 3.54% to 2.97% of GDP), education (from 1.52% to 1.1%), and agriculture (from 1.89% to 1.74%). However, unobserved economic activity in real estate grew to 0.71% of GDP, household businesses stood at 0.21%, and construction’s share increased by 0.15% to 2.07% of GDP. While mining, energy, hospitality, and healthcare experienced declines, the financial and IT sectors witnessed increases. The share of illegal activity in the shadow economy rose from 1.12% to 1.18% due to increased illicit manufacturing and trade. Since 2019, the shadow economy has dropped by 12%, with trade, transport, construction, agriculture, and manufacturing recording declines. On the other hand, healthcare, household businesses, IT, and hospitality recorded an increase in the unobserved share. However, the Supreme Audit Chamber believes the methodology used to calculate the shadow economy is unsound and that government efforts to combat it are inadequate. For example, it excludes specific sectors, such as leisure and arts, as well as illegal activities like weapons and drug production. Furthermore, it emphasized that the switch from continuous to selective data collection for small businesses omitted significant amounts of data and criticized the use of indicative targets or figures that do not require action, which they claim contributed to the underestimation of planned results. It also noted that under the government’s 2021-2025 plans, only nine of seventeen industries have specific action plans, and one-third of the planned actions lacked concrete implementation steps.

Kazakhstan’s net international reserves, including foreign currencies and gold, rose in July, the first time in two months (Kursiv). According to the National Bank, reserves increased 1.45% to $50.3 billion. Overall, the country’s net international reserves have risen 15.54% since the start of 2025. Meanwhile, gross international reserves grew 1.22% on June’s figure to $52.4 billion. Foreign currency assets expanded 0.36% to $19.6 billion, while gold rose 1.75% to $32.8 billion. However, as we reported earlier, Central Asian countries are gradually divesting their international reserves of foreign currencies, especially those of developed countries, due to increasing global economic uncertainty. Indeed, Kazakhstan’s and Uzbekistan’s Central Banks were the largest global buyers of gold in June (Kursiv). Since the beginning of 2025, Kazakhstan’s foreign currency assets declined 10.7% or $1.7 billion, while gold reserves skyrocketed 37.66% or $7 billion. In addition, the National Fund’s foreign currency reserves increased 0.41% in July and 2.98% this year to $60.5 billion, the Fund’s highest level since November 2024, when its total assets were valued at $60.8 billion.

The Association of Financiers of Kazakhstan lowered their forecast for the dollar-tenge exchange rate for the next year (Kursiv). Their latest forecast downgraded the rate from 548.5 tenge to 573 tenge to the dollar in their latest forecast. They also decreased their monthly forecast from 523.4 to 541.7. For context, the average rate was 539.81 tenge per dollar on August 8. The tenge’s instability results from the volatility in the foreign currency and commodity markets, a decrease in Kazakhstan’s trade surplus, and high local demand for foreign currencies. The revised exchange rate forecast also coincides with elevated inflation expectations, which rose from 10.4% to 11.3% in August. Due to the weakened tenge, higher import costs and tax increases are responsible for the price increases. As a result, the anticipated base interest rate for the upcoming year was revised upwards from 14.75% to 15.25% and the real interest rate from 4.7% to 4.9%. Earlier this month, the National Bank reported the tenge lost 4% of its value against the dollar, trading at 540.72 tenge per dollar. Thus, the National Bank conducted $125.6 million worth of currency interventions after the rate exceeded 550 tenge to the dollar.   

Energy:

Kazakhstani oil output fell in July (The Astana Times). The country produced 1.827 million barrels of crude oil per day, a drop of 36000 from June. However, Kazakhstan’s OPEC+ quota for the month was 1.514 million barrels per day, meaning production exceeded the quota again. In May, output amounted to 1.781 million barrels per day. In April-June, production was 1.824 million barrels, in January-March, it was 1.758 million, and in October-December, it was 1.417 million. Meanwhile, annual output was 1.539 million barrels per day in 2024 and 1.603 million in 2023. Overall, OPEC+ countries extracted 27.543 million barrels per day in July, an increase of 263,000 barrels per day from June. In addition, global oil demand continues to surge. Demand for 2024 remains at 105.14 million barrels per day, up 1.29 million barrels per day compared to 2024. Moreover, OPEC+ estimates demand will reach 106.52 million barrels per day in 2026. The average Brent crude price fell from $69.80 in June to $69.55 per barrel in July. Nevertheless, Tengizchevroil, the operator of the Tengiz oil field, reported output of 19.46 million tons between January and June 2025, an increase of 35.1% compared to the 14.4 million tons produced in the same period in 2024 (Kursiv). This rise in output follows a significant expansion project at the field, with output expected to reach 40 million tons annually once the field is fully operational. It also produced 623,000 tons of liquefied petroleum gas, a decline from 669,000 tons in 2024, 1.2 million tons of Sulphur, down from 1.4 million tons in 2024, and more than 2.9 billion cubic meters of gas. Additionally, the operator paid $5 billion to the Kazakhstani government, a decrease compared to the $6.2 billion it paid during the same period in 2024. Earlier this year, KazMunayGaz revised its production target for the Tengiz field upwards from 34.8 million tons to 34.7 million tons. The Tengiz and Korolev fields are estimated to have 1.4 billion tons in recoverable oil reserves.

Kazakhstani Prime Minister Olzhas Bektenov recently held talks with the CEO of Rosatom, Alexei Likhachev (Kursiv). The meeting comes after construction work commenced on Kazakhstan’s first nuclear power plant (NPP) on August 8. They explored localizing nuclear fuel cycle processes, the use of local equipment, and the creation of an international consortium to oversee the project. They also considered funding for the project. In July, Samruk-Kazyna transferred its nuclear energy subsidiary, Kazakhstan Nuclear Power Plants, to the country’s Atomic Energy Agency. The NPP is expected to cost around $14 billion and become operational in 2035-2036. Last week, Kursiv also reported that the Rosatom Technical Academy will train 2000 specialists to operate the plant (Kursiv).

Investment:

The Chairman of the Investment Committee of the Kazakhstani Ministry of Foreign Affairs, Gabidulla Ospankulov, recently met with the Chairman of the Board of Dan Capital and Managing Director at the ValueLBH Fund, Shimon Ben Hamo, to consider several joint investment projects (Kazinform). Specifically, they explored upgrading logistics hubs, introducing new agricultural technologies, constructing renewable energy facilities, and developing oil refining capabilities. The fund confirmed that it was eager to invest around $1.5 billion in these initiatives. Both sides agreed to continue deliberations with the aim of signing a framework agreement in the near future.

Mining:

Kazzinc, Kazakhstan’s largest gold producer, lowered annual zinc production from its sources by 3% to 61,800 tons between January and June 2025 (Kursiv). The Swiss giant Glencore has a 70.2% stake in Kazzinc. However, zinc concentrate output soared 13% to 37,200 tons, copper declined 14% to 7,700 tons, gold fell 7% to 281,000 ounces, and silver surged 6% to 1.647 million ounces. Over the past year, copper production from its sources plummeted 26% to 343,900 tons, while cobalt soared 19% to 18,900 tons, zinc rose 12% to 465,200 tons, nickel dropped 17% to 36,600 tons, and gold decreased 18% to 301,000 ounces. As a result, Glencore’s gross revenue for the first six months of the year fell 14% to $5.43 billion. They attributed this fall to decreased coal prices, lower copper production, and worsening copper grades at its Maleevsky mine in Kazakhstan. In other news, the Kazakhstani government received $365 million in dividends from the mining giant Eurasian Resources Group (Kursiv). The dividends from earlier years had been previously frozen in Luxembourg. The government has a 40% stake in the company, while the heirs to the late Alexander Mashkevich and the Ibragimov family hold 20.7% each, and Patokh Chodiev holds 18.7%. In 2024, the company recorded a loss of $1.2 billion, a 27.3-fold increase on the $44 million loss it reported in 2023. The funds were previously frozen after a Luxembourg court ruled in favour of Anatolie and Gabriel Stati. They also froze funds from the National Fund and dividends from Samruk-Kazyna’s holdings in KMG Kashagan. The court lifted the restrictions in May.