This week, the media across Central Asia reported on several critical diplomatic events, such as Kyrgyzstani President Sadyr Japarov’s visit to Tajikistan, and Uzbekistan and Kazakhstan officially becoming BRICS partner countries. They also covered Kazakhstan and Afghanistan finalizing an investment agreement regarding the Trans-Afghan railway and Tajikistan’s renewed interest in joining the China-Kyrgyzstan-Uzbekistan railway project. Several outlets noted that Condor Energies will construct Kazakhstan’s first LNG plant. Others analyzed the implications of the U.S. applying a 25% tariff on imports from Kazakhstan. Lastly, they reported on Tajikistan ordering all Afghan refugees to leave the country within 15 days.

Infrastructure:

Kazakhstan and Afghanistan have signed a memorandum of understanding (MoU) regarding the construction of the Trans-Afghan railway (Daryo). The project will significantly enhance connectivity between Central and South Asia. Kazakhstan’s Ministry of Transport and Afghanistan’s Ministry of Public Works concluded the MoU during Kazakhstani Deputy Prime Minister and Foreign Minister Murat Nurtleu’s visit to Kabul. Under the agreement, Kazakhstan committed to financing the construction of the Turgundi-Herat railway, a section of the Trans-Afghan railway. They discussed expanding transit through Turkmenistan through the Turgundi border crossing. Foreign Minister Nurtleu also confirmed Kazakhstan’s intention to increase bilateral trade to $3 billion annually and expand exports of agricultural products, fertilizers, fuel, and chemical products. On the other hand, Afghanistan aims to increase exports of food products, such as dried fruit and soft drinks, to Kazakhstan. This deal follows Russia’s recent recognition of the Taliban-led government in Afghanistan, and as regional countries consider normalizing relations.

Tajikistan has expressed an interest in joining the China-Kyrgyzstan-Uzbekistan railway project (Asia Plus). The announcement follows a meeting between Tajikistani Transport Minister Azim Ibrohim and his Chinese counterpart Liu Wei on the sidelines of the 12th SCO Transport Ministers’ Meeting in Tianjin, China. They discussed integrating Tajikistan into the project and growing the multimodal transport corridor connecting China, Tajikistan, Uzbekistan, Turkmenistan, Iran, Türkiye, and Europe. In 2014, several parties signed a deal to develop the China-Kyrgyzstan-Tajikistan-Afghanistan-Iran railway. Tajikistan’s Ministry of Transport also signed an agreement with Iran’s Metro Company. The Iranian side pledged $1 million to Tajikistan to conduct a feasibility study into the project. However, Iran subsequently halted funding. During the SCO Transport Ministers’ Meeting, representatives from China, Pakistan, Mongolia, Belarus, Kyrgyzstan and Tajikistan signed an MoU on constructing “Silk Road Stations,” which will provide facilities for international freight drivers. They also considered infrastructure gaps along the trade routes connecting their countries.

China and Uzbekistan have established UTK International Logistics to improve container transportation between their countries (Daryo). Representatives of Uzbekistan’s Uztemiryulkonteyner and China’s Xinjiang Union of Railway International Logistics signed an agreement establishing the new joint venture during a ceremony in Beijing on July 10. The new entity will focus on consolidating cargo operations, securing Chinese subsidies, and extending multimodal transport routes between China and Central Asia. They also finalised a deal with the Gansu International Logistics Group to commence rail container services along the China-Kyrgyzstan-Uzbekistan-Tajikistan/Turkmenistan route in the third quarter of 2025. Overall, Uzbekistan aims to increase the amount of cargo transiting through the country by 1.5 times by 2030.   

Migration:

Tajikistan has given Afghan refugees 15 days to leave the country (The Times of Central Asia). Afghanistan’s Khaama Press first reported the news, which the UN’s refugee agency, UNHCR, later confirmed. There have also been reports of increased detentions in recent days, specifically in the Vahdat Township and the Rudaki district near Dushanbe. The order will affect the thousands of refugees in the country, many of whom have valid residency permits and previously worked for the former Afghan government. As of late 2024, 9000 Afghans had officially registered in Tajikistan. Other countries in the region, such as Iran and Pakistan, have also begun deporting Afghan refugees in recent months. These developments coincide with the worsening humanitarian situation in Afghanistan (Daryo).

Diplomatic Events:

On July 8, Kyrgyzstani President Sadyr Japarov arrived in Dushanbe, Tajikistan, for a state visit (Asia Plus). The visit represents a significant step forward in relations between the countries, following the resolution of their border dispute and Tajikistani President Emomali Rahmon’s visit to Kyrgyzstan earlier this year. After the signing of the State Border Treaty on March 13 and the gradual reopening of border crossings, trade between the two countries increased fifteen times to $6.35 million from almost nothing in the first five months of 2025 (Asia Plus). Previously, Kyrgyzstan unilaterally closed the border in 2021, terminating most trade between the countries. The Presidents discussed trade, economic, political, agricultural, energy, and transport cooperation. They also considered creating free economic zones and exploiting critical mineral deposits along their shared border (The Times of Central Asia). Following their deliberations, officials from the two countries signed various agreements concerning confidence-building measures, tourism, the establishment of an inter-governmental council and a business council, land surveying, standardization, product conformity assessment, and accreditation (Asia Plus). In addition, they also concluded numerous MoUs between Tajikistan’s Ministry of Health and Social Protection and Kyrgyzstan’s Ministry of Labor, Social Protection, and Migration concerning social protection, Tajikistan’s Public Service Agency and Kyrgyzstan’s State Agency for Public Service on civil service cooperation, Tajikistan’s Committee for Environmental Protection and Kyrgyzstan’s Ministry of Natural Resources, Ecology and Technical Supervision on environmental protection and sustainable development, Tajikistan’s Committee for TV and Radio-broadcasting and Kyrgyzstan’s National Broadcasting Corporation, Tajikistan’s Academy of Agricultural Sciences of Tajikistan and Kyrgyzstan’s Scientific and Research Institute of Crop Production. Lastly, they also finalized an action plan between the Tajikistani Ministry of Industry and New Technologies and the Kyrgyzstani Ministry of Economy and Trade for 2025-2026 and a cooperation program between their Ministries of Foreign Affairs for 2026-2027. The two heads of state also participated in the opening ceremony for the Tojvaron-Karamik border crossing between Tajikistan’s Lakhsh district and Kyrgyzstan’s Chon-Alai district (Asia Plus). The two Presidents also attended an exhibition of Kyrgyzstani and Tajikistani textile and industrial products, held in conjunction with the International Textile Forum in Dushanbe (AKIpress).

Kazakhstan and Uzbekistan officially received BRICS partner status at the recent BRICS summit in Brazil, alongside ten other countries (Gazeta.uz). The organization announced their accession in a joint declaration adopted during its 17th summit. Earlier, we reported they would gain partner status beginning on January 1, 2025. We also reported that Kazakhstan refused to join the organization as a full member at the previous summit in Kazan (Fergana News). Brazil, Russia, India, China, and South Africa founded BRICS in 2006, and the organization currently has ten members, including Egypt, Iran, the UAE, Indonesia, and Ethiopia (Gazeta.uz). In a statement, Uzbekistan’s Foreign Ministry emphasized that Uzbekistan has steadily developed relations and cooperation across trade, investment, transport, science, and innovation with other BRICS members and partners in recent years. In June, the board of governors of the BRICS New Development Bank approved the admission of the two countries to the bank, which aims to invest $5 billion in Uzbekistan to upgrade its irrigation infrastructure and develop its mining industry. On the other hand, U.S. President Donald Trump warned that countries supporting BRICS’ “anti-U.S.” policies would receive another 10% tariff.

Trade:

U.S. President Donald Trump issued an executive order on July 7 placing a 25% tariff on Kazakhstani exports to the U.S. from August 1 (The Astana Times). This latest executive order lowers the 27% tariff on Kazakhstani goods proclaimed on April 2. The recent U.S. tariff measures aim to correct what the U.S. administration perceives as unfair international trade practices. In addition to Kazakhstan, President Trump announced a 25% tariff on South Korean, Japanese, Malaysian, and Tunisian goods. He also applied a 30% tariff on South Africa and Bosnia and Herzegovina, 32% on Indonesia, 35% on Serbia and Bangladesh, 36% on Cambodia and Thailand, and 40% on Laos and Myanmar. However, the Kazakhstani Ministry of Trade and Integration stated that 95% of Kazakhstani exports would be exempt from the new tariffs. The new measures exempt strategic goods, such as oil, uranium, silver, ferroalloys, and titanium. They also added that they have submitted numerous proposals to the U.S. side and expect negotiations to begin shortly. In 2024, trade turnover between the two countries stood at $4.2 billion, an increase of 4% on the previous year. In the first five months of 2025, bilateral trade reached $1.27 billion, with Kazakhstani exporting $418.2 million worth of goods and services. Crude oil represents 56.2% of Kazakhstani exports to the U.S., with other key exports, such as uranium, ferroalloys, silver, and tantalum products, accounting for most of the difference. Meanwhile, Kazakhstani President Kassym-Jomart Tokayev responded to President Trump in a letter outlining his readiness for a constructive dialogue on their countries’ trade relations (Reuters).

Inflation:  

According to Uzbekistan’s Central Bank, inflation expectations fell marginally in June (Daryo). Overall, their expectations regarding price increases for the next year fell from 13.7% in May to 13.2% in June. Nevertheless, they expressed disquiet about the trajectory of utility and energy prices. While 57% of those surveyed in May expected utility prices to rise, this figure fell to 50% in June. Moreover, 49% of respondents in May remained concerned about fuel and energy prices, while this indicator declined moderately to 45% in June. Meanwhile, those anticipating wages to grow over the next twelve months increased from 22% to 35%. High-income households also continued to perceive inflation to be higher than other socio-economic groups. In addition, manufacturing and transport workers and students had the highest inflation expectations. Entrepreneurs’ inflation expectations also fell from 12.9% to 11.8% during the month. Their expectations for utility price hikes fell from 54% to 47% and their expectations for energy inflation dropped from 48% to 43%. However, businesses in science and education expressed the most concern regarding future inflation. In an effort to reform their economies and attract investment, regional economies continue to struggle in balancing liberalization with controlling inflation.

Renewable Energy:

Uzbekistan’s renewable energy output so far in 2025 has exceeded the country’s total renewable production in 2024, hitting a new record high (Kun). In the first half of the year, renewable electricity, including hydropower, accounted for 20% of the country’s electricity supply. Uzbekistan’s solar and wind power plants generated five billion kilowatt-hours of electricity, outstripping their total output in 2024. Between June 10 and July 6 alone, they produced a billion kilowatt-hours. More specifically, the country’s eleven solar plants generated 3.125 billion kilowatt-hours, while its four wind farms generated 1.915 billion kilowatt-hours. This record renewable energy output saved 1.5 billion cubic meters of natural gas and reduced greenhouse gas emissions by 2.22 million tons.

Public Finances: Reserves, Reforms, and Debt

Uzbekistan’s Central Bank revealed that the total value of the country’s foreign currency and gold reserves decreased by $1.1 billion to $48.55 billion during June (Kun). This decrease was the first monthly decline in the country’s FX reserves since December 2024. In May, the Central Bank’s reserves surged to a record high of $49.66 billion. Nevertheless, the value of Uzbekistan’s gold holdings rose by $763 million to a new record high of $38.42 billion as the Central Bank added nine metric tons of gold to its holdings. Meanwhile, its foreign currency reserves plummeted $1.88 billion from $10.74 billion to $8.85 billion. It also purchased an additional $2.5 million worth of securities, bringing the total value of securities held to $708.8 million.

Kazakhstani President Kassym-Jomart Tokayev has signed a decree establishing a new council to supervise the country’s national fund, which is financed by oil and gas revenues (Kursiv). President Tokayev will chair the council. The new decree annuls an earlier decree that appointed former President Nursultan Nazarbayev as chair. According to the decree, the Prime Minister, the Speakers of both chambers of parliament, the Head of the Presidential Administration, the Chairman of the National Bank, the First Deputy Prime Minister, the Chair of the Supreme Audit Chamber, and the Ministers of Finance and Economy will be members of the council. The council advises the President on the use of National Fund and pension assets, the allocation of targeted and guaranteed transfers from the fund, the investment of the fund’s holdings in financial instruments, and the financing of critical projects through the purchase of debt securities issued by Samruk-Kazyna, Kazakhstan’s National Welfare Fund. The government established the National Fund in 2000 to save a portion of the revenues generated by extracting the country’s natural resources and alleviate the effects of volatile commodity prices. The fund currently holds roughly $60 billion in assets. The government also uses guaranteed transfers to cover budget deficits and targeted transfers to finance crucial projects from the fund. It expects to use $3.9 billion in guaranteed transfers and $7.1 billion in targeted transfers to cover the budget deficit in 2025. The National Bank Chairman, Timur Suleimenov, has repeatedly criticized withdrawals from the fund, which will obstruct the fund from achieving its goal of expanding to $100 billion in assets by 2030. While the National Fund grew by 1% in June to $60.3 billion due to the increase in the market values of national companies such as KazMunayGas and Kazatomprom, Kazakhstan’s net national reserves dropped for the second month by $366 million or 0.73% to $49.8 billion (Kursiv). Its gross national reserves, which include freely convertible currencies and monetary gold, declined by $282 million or 0.54% to $52 billion. Foreign currencies plummeted $903 million or 4.37% to $19.7 billion, while its gold reserves added $622 million or 1.96% to reach $32.2 billion. In 2025, Kazakhstan’s foreign currency reserves have fallen 9.96% while monetary gold reserves have skyrocketed 35.29%. The growth in the country’s gold reserves, aided by new purchases and increased global prices, drove the 14.41% expansion of net international reserves since the beginning of the year.

Uzbekistan will discontinue heating and hot water subsidies by 2030 (UZ Daily). The Chairman of the Board of “Issiqlikta’minoti,” Ilkhom Turaev, announced the incremental phasing out of these subsidies at a recent press conference. Currently, residents pay heating tariffs below the market cost, with the government paying the difference. He explained that the subsidies must be ended to guarantee the future financial sustainability of the heating system. However, he continued that they would gradually phase out the subsidies to limit the impact on the population.

Debt levels have continued to increase across Central Asia (Kun). Most countries in the region, except Kazakhstan, have low credit ratings, compelling them to borrow at higher interest rates. Tajikistan is especially exposed. The country may struggle to make several Eurobond payments in 2027, meaning it may face an imminent debt crisis without debt relief or other aid.

Uzbekistan’s external debt rose by $4.3 billion to $68.4 billion in the first quarter of 2025 (Kun). The state’s external debt increased by $1.9 billion to $35.8 billion, while private corporate external debt grew by $2.4 billion to $32.6 billion. However, most credit rating agencies and the IMF believe Uzbekistan’s debt burden is moderate, as they concluded most of their loans under preferential terms. The country’s external debt rose by $10.8 billion in 2024, the highest annual increase since the Central Bank started publicly monitoring the data in 2013. The government has defended the country’s debt spending as necessary to further its economic and social development. The government’s current account deficit has fallen significantly from $2.1 billion in the first quarter of 2024 to $160 million. The trade balance deficit also shrank by 34% to $2.6 billion year-on-year, with exports rising by 22% to $8 billion, while imports over the same period amounted to $10.5 billion. Net foreign direct investment (FDI) of $752.3 million and net portfolio investment of $1.5 billion contributed to the current account deficit. Lastly, remittances and income from abroad added $148.9 million and $2.2 billion, respectively.

Meanwhile, Kazakhstan’s external debt increased by $5.7 billion to $170.5 billion in the first quarter due to $3.4 billion in balance of payments operations and $2.3 billion in currency, valuation and other adjustments (Kursiv). Private sector debt surged by $5.6 billion to $138.2 billion, while government debt fell by $400 million to $14.8 billion. Additionally, banks’ and state-owned enterprises’ obligations rose by $600 million to $17.5 billion. The country’s principal creditors include the Netherlands, Russia, the U.K., the U.S., France, China, and Bermuda, with a substantial part of the debt comprising inter-company loans. Most of the debt, roughly $115 billion, is in U.S. dollars, while only $11.3 billion is denominated in tenge. Loans from foreign entities represent 71.9% of all external debt. The various extractive industries have received $78 billion, with the oil and gas sectors alone obtaining $74 billion. The manufacturing sector secured $14 billion in external finances, while the insurance and financial services industries have debts of $23.7 billion. The defense and vehicle repair industries also have substantial debts of $12.5 billion and $11.8 billion, respectively.

Security:  

Last week, Kazakhstan and Azerbaijan conducted joint military exercises involving unmanned aerial vehicles (UAVs) in Azerbaijan (Kazinform). The Tarlan-25 exercise took place from July 8-10 and forms part of the 2025 cooperation plan finalized by the countries’ defence ministries in September 2024. This program and exercise will facilitate the exchange of operational experience and substantially strengthen military cooperation between the two nations. In June, Azerbaijan’s Ministry of Defense revealed that five countries, including Kazakhstan, Uzbekistan, Pakistan, and Türkiye, will participate in the Eternal Brotherhood-IV military exercises in Azerbaijan in September (The Times of Central Asia).

Oil and Gas:

KazMunayGaz disclosed that the Dunga oil field in the Mangystau region produced 340000 tons of crude oil in the first half of 2025 (Kursiv). The field extracted 630000 tons in 2024, with production set to rise to 649300 tons in 2025. Estimates indicate that the field holds 106 million tons of oil and over 6 billion cubic meters of gas. KazMunayGaz have a 60% stake in the field after buying out French giant TotalEnergies in 2023. Additionally, Oman Oil Company Limited and PTTEP Corporation each hold a 20% stake. KazMunayGaz currently enjoys preferential rights regarding the exploration and operation of oil and gas fields in Kazakhstan. However, Kazakhstan’s Agency for the Protection and Development of Competition has proposed axing these rights.   

On July 5, OPEC+ member states recently met to assess global market conditions and assign production volumes (Reuters). They agreed to further increase production by 548000 barrels per day in August as prices spiked owing to the ongoing conflict in the Middle East. Previously, they agreed to increase production by 411000 barrels per day in May, June, and July. While OPEC+, which produced around half of the world’s oil, has been cutting production since 2022, earlier this year, it began expanding production to punish the group’s overproducers and regain market share as the U.S. started expanding production. The increase came amid mounting frustration with Kazakhstan and Iraq, who continued to increase production and exceed their quotas, angering other member states that implemented the previous cuts. Last month, Kazakhstan’s daily oil production rose 7.5% to 1.8 million barrels per day, equaling the record high achieved in March (Reuters). Nevertheless, this level of production exceeded the country’s quota for the month of 1.5 million barrels per day. This increase was primarily due to the growth in production at the Tengiz oil field from 813000 to 953000 barrels per day, following the completion of Chevron’s $48 billion expansion project at the field. Overall, Reuters estimates that Kazakhstan’s oil production has risen 13% in the first six months of 2025 to 1.79 million barrels per day, despite the country repeatedly affirming its commitment to OPEC+’s production cuts, including at this most recent meeting.

The Canadian energy company, Condor Energies, will construct Central Asia’s first methanol and liquefied natural gas plant (Kursiv). This announcement comes after a meeting between the Governor of the Mangystau region, Nurdaulet Kilybay, and the managing director of Condor Energies and CEO of Qazaq LNG, Norman Storm. They will construct the LNG plant in Kuryk and expect to commission it in 2027. It will have a capacity of 145000 tons per year. By 2027, they will also construct a methanol plant with a capacity of 100000 annually. In March of this year, the company also received a license to exploit the Kolkuduk field in Kazakhstan.