This week, the media in Central Asia covered several diplomatic events, such as the Emirati Crown Prince’s visit to Kazakhstan and the EU Special Representative to Central Asia paying a visit to Tashkent. They also reported on multiple significant energy stories, such as Rosatom beginning to manufacture components for Uzbekistan’s first NPP, the U.S. Treasury lifting restrictions on the provision of oil-related services to the CPC and Tengiz oil field, Petronas, XRG, and Turkmenistan conclude production sharing deal for the Block 1 natural gas field in the Caspian Sea, and Uzbekistan and the World Bank signing a $150 deal to upgrade the country’s electricity grid. Several outlets noted that Kazakhstan and China agreed to construct a new $1.1 billion grain processing facility, and the EU and Ukraine sanctioned numerous Uzbekistani companies. Other sources reported that Kazakhstan recorded 6% GDP growth in the first four months of the year, while economic growth in Kyrgyzstan surged by 11.7%.

Investment:     

Kazakhstan and China plan to construct a new $1.1 billion grain processing plant (The Astana Times). The plant will process around 700000 tons of grain annually, producing starch and sugar. Kazakhstani Agriculture Minister Aidarbek Saparov and the Chairman of the Chinese company CITIC Construction, Yang Jianqiang, announced the project following their meeting. During their talks, they also explored the construction of livestock farms and other processing plants. Chairman Jianqiang met with Foreign Minister Muret Nurtleu to discuss his company’s potential involvement in reconstructing the Centre-West highway. The parties expect to sign a memorandum on the project when CITIC’s leadership visits Kazakhstan later in May. CITIC has previously participated in several significant agricultural, transport, and energy infrastructure projects in Kazakhstan.

On May 15, the World Bank approved a $100 million loan to Uzbekistan to upgrade the country’s electricity grid and enable it to integrate renewable electricity sources (Kun). Uzbekistan’s Regional Electric Power Networks (REPN) will contribute another $50 million. This project represents the first time Uzbekistan has used the World Bank’s “Program-for-Results” (PforR) financing instrument, which aims to support high-priority projects in client countries. Uzbekistan’s electricity grid remains highly inefficient, with network losses amounting to 13% in 2024. The country's electricity infrastructure is ageing, and with more than half of the network in operation for 30 years or more, many facilities are working beyond their operational lifespan. In a statement, the World Bank confirmed that if Uzbekistan were to meet its target of adding 25 GW of renewable electricity by 2030, it needed to modernize its electricity grid. The World Bank also emphasized that Uzbekistan must improve the financial viability of the network and reduce commercial losses and unpaid bills. Overall, the World Bank will invest $3 billion by 2030 to renovate the country’s electricity distribution infrastructure, according to the World Bank’s Central Asia Director, Tatiana Proskuryakova. Over the next five years, REPN will construct and modernize 6000 kilometers of low-voltage lines, replace and install 1,200 distribution transformers, install 150,000 smart meters, and install 4,000 concentrators to facilitate the digitalization of the network. The project will also improve financial planning, operational procedures, and corporate governance. By 2029, the project aims to reduce carbon dioxide emissions by 450000 tons, enable the network to integrate 50 MW of renewable energy from households and small enterprises and increase female representation in managerial roles to 14%.

Kazakhstani President Kassym-Jomart Tokayev met with the Chairman of Samruk Kazyna, Kazakhstan’s sovereign wealth fund, Nurlan Zhakupov (Kazinform). The Chairman reported that the fund’s profits surged by 39%, while its operating income rose by 9% in 2024. He also underlined the completion of several crucial investment projects. He outlined that the bitumen production expansion project will be approved in May, while seven other infrastructure projects will commence by the year’s end. He noted the sales of Qazaq Air and Tele2, which he hoped would increase market competitiveness while attracting foreign capital. He outlined that they completed 106 schools under the Comfortable School Project, with 102 more to be finished in 2025.

Water Management:

The Energy and Water Resources Ministers of Kazakhstan, Kyrgyzstan, and Uzbekistan recently met in Tashkent to agree on a water and energy management plan for the summer season (Daryo). They discussed balancing their interconnected grids and networks, reviewed several ongoing projects, such as the Kambar-Ata 2 HPP, and considered water levels in the Syr Darya basin. At the end of the meeting, the ministers signed a protocol outlining the functioning of their energy systems and water allocations for the summer season.

Energy:

Malaysia’s state energy company, Petronas, the Emirati company, XRG, Turkmenistan’s Hazarnebit, and Turkmennebit have signed a production sharing agreement concerning the development of the Block 1 gas and condensate fields in the Caspian Sea (Daryo). The parties also concluded a gas sales agreement with Turkmengas. Petronas, the field operator, will hold a 57% stake, XRG 38%, and the Turkmenistani state enterprise Hazarnebit 5%. The Block 1 field currently produces around 400 million cubic feet of gas daily, with 7 trillion cubic feet of reserves. Overall, the agreement aligns with Turkmenistan’s goal of boosting its energy supply and diversifying its export markets. Petronas has been responsible for developing the Block 1 fields since 1996 and operates the Gas Treatment Plant and Onshore Gas Terminal at Kiyanyl.

Rosatom has begun manufacturing components for the first unit of Uzbekistan’s planned small modular nuclear power plant, which is being built in the Jizzakh region (Kun). The company poured the first steel casting for the RITM-200N reactor unit at its factory in St. Petersburg. The RITM-200N reactor is a modified version of the RITM-200 reactor that powers Russia’s nuclear icebreakers. Overall, the NPP will consist of six small modular nuclear reactors, each with a capacity of 55 MW. The project will cost around $2 billion, with the first reactor expected to be commissioned in five years. In April, construction began on the project’s assembly base and support infrastructure.

The U.S. Treasury Department’s Office of Foreign Assets Control issued a license authorizing all transactions for oil field services related to the Caspian Pipeline Consortium (CPC) and Tengizchevroil (Kursiv). The previous license was due to expire at the end of June. In January, the U.S. banned all U.S. companies from providing oil-related services in Russia. The CPC pipeline connects the oil fields of Western Kazakhstan to the Russian port of Novorossiysk, transporting 80% of Kazakhstan’s oil exports. Nevertheless, in recent years, Kazakhstan has attempted to diversify its export routes. For instance, it has exported increasing volumes of oil along the Baku-Tbilisi-Ceyhan pipeline. This week, Kazakhstan announced it had transported three million tons of oil along the route since 2023 (Kazinform). In March 2024, Kazakhstan signed an agreement with Azerbaijan to increase the volume of oil transiting through its territory. In 2025, Kazakhstan aims to export 1.7 million tons of oil through the pipeline, with plans to expand this to 2.2 million tons in the future. This week, Kazakhstan’s Energy Ministry also confirmed that output at the country’s oil refineries surged to 6.092 million tons, a year-on-year increase of 10.8% (Kazinform).  

Diplomatic Events:

The Crown Prince of Abu Dhabi, Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, visited Kazakhstan from May 11-12 (The Astana Times). Upon his arrival, he held talks with Kazakhstani President Kassym-Jomart Tokayev, with the two leaders discussing economic, trade, investment, energy, logistical, digital, and political cooperation (Kazinform). President Tokayev noted that the UAE is one of the top five investors in Kazakhstan, with investments doubling last year to over $1 billion (Kazinform). In 2024, bilateral trade reached $277.4 million, with both countries aiming to increase this to $1 billion in the near future (The Astana Times).

During the visit, both countries concluded multiple cooperation and commercial agreements. After the leader’s deliberations, officials from the two countries signed several cooperation agreements and memoranda concerning transport and judicial cooperation, as well as the creation of a supercomputer cluster in Kazakhstan (Kazinform). Samruk Kazyna and Masdar concluded a deal for a 500 MW power plant and a 2000 MW energy storage system. In addition, Samruk Kazyna inked a strategic agreement with AIQ regarding digitalization in the oil and gas sector and a memorandum of understanding with Abu Dhabi Commercial Bank. QazaqGaz and AIQ also concluded a strategic cooperation agreement on digitalization in the oil and gas sector. Meanwhile, KazMunayGaz signed a protocol on cooperation with Abu Dhabi Ports Group to expand transport connections between both countries. Turkistan inked a memorandum of understanding with the Abu Dhabi Fund for Development to construct a new maternity hospital in the region. Kazakhstan also approved a $1.1 billion investment agreement with the UAE-owned Terminals Astana Airport Limited to expand Astana International Airport by constructing a second runway and a third terminal (Kursiv). Lastly, President Tokayev ratified an agreement with Masdar to build a 1 GW wind power plant in the Zhambyl region (Kazinform).

A business forum also took place during the visit (Daryo). Speaking at the forum, President Tokayev noted that the UAE has investments worth $4.3 billion in Kazakhstan. He reaffirmed his country's commitment to expanding cooperation with the UAE across all sectors and announced they would sign twenty agreements worth $5 billion at the forum (The Astana Times). President Tokayev also emphasized that the UAE’s Vision 2031 aligns with Kazakhstan’s efforts to grow and diversify its economy (Daryo). He highlighted that Kazakhstan continues to reform its economy in line with OECD standards and noted the establishment of an Investment Board to support investors. Among the deals signed, Kazakhstan’s Ministry of Agriculture and QazaqArab Sugar confirmed they would launch a sugar production plant in Almaty. Kazakhstan’s Ministry of Digital Development, the Akimat of Astana, and Presight AI signed a memorandum to build a data processing center in Almaty. The Akimat of Astana and the Emirates Kazakhstan Education Investment Group agreed to build the SABIS International School Astana. The Astana International Financial Centre and Abu Dhabi Global Market will cooperate on personal data protection. KMG Engineering and AIQ also agreed to share technologies and expertise. The Khalifa Economic Zones Abu Dhabi concluded an agreement with Kazakhstan’s Chamber of International Commerce to promote investment, a heads of terms agreement with SEMURG Invest to establish a joint venture at the Kyryk Multipurpose Terminal, and a memorandum with Seaports Aktau. Alel Agro and Lulu Group International signed a memorandum of understanding on trade in the agri-food sector.

Uzbekistani Prime Minister Abdulla Aripov led a government delegation to Iran on May 11 (Daryo). The delegation met with Iran's First Vice President, Mohammad Reza Aref, and discussed expanding cooperation and increasing annual trade to $2 billion. Specifically, they focused on resolving several transport and logistical issues. After their talks, they signed a roadmap for cooperation for 2025-2027, an agreement on tourism and cultural cooperation, a protocol for approving goods included in the Preferential Trade Agreement, and an MoU on quarantine and food standards. Uzbekistan and Iran have substantially expanded relations in recent years. For instance, in October last year, they reached an agreement on preferential trade.

Last week, Uzbekistani Minister of Defense, Shukhrat Khalmukhamedov, visited Moscow for talks with his Russian counterpart, Andrey Belousov (Kun). Both ministers highlighted the success of past defense cooperation in strengthening bilateral relations. They signed a military cooperation plan for 2026 to 2030 after their meeting. Previously, they signed a military cooperation plan for 2025 and a strategic partnership program for 2026 to 2030 in January. The 2025 plan outlines 50 unspecified joint activities, while the strategic partnership document mentions broader strategic initiatives (The Moscow Times).

On May 12, Uzbekistani President Shavkat Mirziyoyev met with the EU’s Special Representative for Central Asia, Eduards Stiprais (The Times of Central Asia). They explored the outcomes of the recent Central Asia-EU summit and how to implement the agreements. More specifically, they concentrated on several investment projects valued at €12 billion. Economic relations have advanced substantially in recent years. Since 2020, trade between Uzbekistan and the EU has surged to €6.4 billion, with Uzbekistani exports quadrupling. European and Uzbekistani companies have launched over a thousand joint ventures, with European investments in the country reaching €30 billion.

Economic Forecasts and Statistics:

According to Uzbekistan’s Central Bank, inflation expectations for the next twelve months remain elevated at an annualized rate of 14.2% in April (UZ Daily). Most respondents to the Central Bank’s surveys indicated that they anticipate significant increases in fuel, transport, and utility prices. However, they do not expect a substantial rise in the value of foreign currencies. Nevertheless, surveyed entrepreneurs forecasted an annual inflation rate of 12.8%, down from 13% in March, but many remain concerned about utility and fuel prices. Meanwhile, the perceived inflation rate rose to 14.4%, reflecting the increased pressure of price rises on consumers.

According to Kazakhstan’s Ministry of the Economy, Kazakhstan’s GDP grew by 6% from January to April, compared to growth of 5.8% in the first three months of 2025 (Kursiv). Transport, trade, industry, and mining experienced the steepest growth. The transport sector reported an expansion in rail and pipeline shipments, while the construction sector experienced a seasonal spike in activity. Growth in the trade sector accelerated from 6.3% in the first quarter to 7% in April, while the industrial and mining sector grew by 6.4% and 7.1% respectively. Meanwhile, agriculture and telecommunications lagged behind at 3.9% and 2.6%. The World Bank predicts that Kazakhstan’s economy will grow by 4.7% in 2025 and 3.5% in 2026, compared to 4.8% in 2024. However, Kyrgyzstan witnessed GDP growth of 11.7% in the first four months of 2025 (24.kg). According to the country's National Statistics Committee, a significant expansion in the commodity and service sectors and taxation spurred GDP growth.

Sanctions:

The EU has agreed to a 17^th package of sanctions against Russia (The Tashkent Times). According to Bloomberg, the sanctions will target Russia’s so-called shadow fleet, which it uses to export its energy resources (Bloomberg). The sanctions will also target companies in several countries, including Uzbekistan, which have reportedly helped Russia evade sanctions on its energy sector. According to the Financial Times, they will affect 149 ships and 60 companies (The Financial Times). Meanwhile, Ukrainian President Volodymyr Zelensky signed a decree instituting sanctions against 58 individuals and 74 companies in Russia, Belarus, Uzbekistan, China, and Iran (Gazeta.uz). The list includes three companies from Uzbekistan: Mercury Renaissance, Raw Materials Cellulose and Fargona Kimyo Zavodi (Fergana Chemical Plant). Rustam Muminov and Shakhriyor Tadjiev control 60% and 40% of Mercury Renaissance and its subsidiary Fargona Kimyo Zavodi, respectively. Larisa Utkina and Larisa Bykova control 76% and 24% of Raw Materials Cellulose. Rustam Muminov is also on the list of 58 sanctioned individuals. According to reporting by Important Stories, Vlast.kz, the OCCRP consortium (istories.media), and the BBC Russian service (BBC), Fergana Chemical Plant and Raw Materials Cellulose supply cotton cellulose to Russian gunpowder factories, with deliveries increasing significantly since 2022. Other previously sanctioned Uzbekistani entities include the electronics company Foton, its director, the cement company Akhangarancement, and its founder.

Economic Reforms:

According to Uzbekistan’s Agency for Strategic Reforms, the International Advisory Council proposed several fiscal policy recommendations during recent meetings with the Agency’s director and the Minister of Investments, Industry and Trade, Laziz Kudratov (Kun). With the Agency’s director, Bahodir Rakhmatov, they discussed five key priorities, such as broadening the tax base, improving the efficiency of the tax administration, and increasing transparency. They recommended amending how the government calculates excise duty on soft drinks, suggesting they tie it to the amount of sugar in the drink, not the drink's volume. They also explored reforming the pension system. They proposed creating private pension funds based on voluntary contributions, digitalizing pension services, and establishing a contributory period system through which officially employed people would make pension contributions.  However, Rakhmatov later denied that they would privatize the State Pension Fund after rumors began spreading online (Kun). Additionally, they offered to introduce Uzbekistani officials to regional development approaches in several other countries. The delegation from the IAC also met with the Minister of Investments, Industry and Trade, Laziz Kudratov, to discuss enhancing Uzbekistan’s investment potential (UZ Daily). In October 2024, the Uzbekistani Cabinet established a working group on pension reform led by the Minister of Economy and Finance Jamshid Kuchkarov and Bahodir Rakhmatov (Kun).

Mining:

The Kazakhstani Ministry of Industry and Construction announced the discovery of eleven rare earth mineral deposits at the Mining Congress Qazaqstan (Kursiv). The Ministry also revealed that the deposits contain seventeen rare earth metals, including lithium, lanthanides, tellurides, and neodymium. However, they have yet to confirm the value of the deposits. According to the Ministry’s geology committee, these metals are widely used in manufacturing batteries, turbines, and electric vehicles. Since 2018, Kazakhstan has granted 2,906 exploration licenses and 111 extraction licenses. The committee also disclosed that Kazakhstan possesses 100 deposits, producing 19 of 34 rare earth metals, such as beryllium, tantalum, niobium, and rhenium. Between 2019 and 2024, 38 deposits were discovered, containing 2.6 million tons of rare earth metals, 3.7 million tons of copper and nickel, 1.1 billion tons of brown coal, and 19 tons of gold. In addition, 266 million tons of hydrocarbons were located in the Aral sedimentary basin. The committee also issued 306 geological survey licenses, attracting $268 million in private investment. Earlier this year, Kazakhstan announced that EU, U.S., and Chinese companies could acquire exploration and extraction licenses.