Is the United States Out of Steppe? Addressing Central Asia’s Crossroads Moment
Author: Dr. Eric Rudenshiold
Nov 9, 2023
Central Asia is a rapidly changing region. What was unimaginable even a few years ago might already be happening in this evolving corner of the world. Central Asian leaders have learned that the old ways of doing business don't work as well anymore, that some traditional allies are not reliable, and that their former geographic isolation may become an asset for doing business. Now in its fourth decade of independence, the former-Soviet region comprised of Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan is eschewing ties with its colonial past and seeking to become a more connected player on the world stage. Central Asian countries are for the first time working together and breaking free from their former isolation to connect to a more global future, a process that has created significant new openings for the United States.
No greater symbol of this change can be seen than in this past year’s series of Central Asian high-level summits; of particular noteworthiness is the September 2023 meeting of the Presidents of the United States and the five Central Asian countries (the “C5”) on the margins of the United Nations General Assembly. Though the United States was one of the first countries to recognize each country’s independence in 1991, this first collective meeting at the executive level more than three decades later marks an important milestone in the region’s international recognition, demonstrating decades of engagement and relationship building.
“We’re building on years of close cooperation between Central Asia and the United States,” noted President Biden during the September Summit, “a cooperation that is grounded in our shared commitment to sovereignty, independence, territorial integrity. These principles matter more than ever, in my view. And today, we’re taking our cooperation to new heights.” Biden’s historic meeting was rapidly followed by an October development ministerial in the region hosted by U.S. Agency for International Development (USAID) Administrator Samantha Power, working to enhance the region’s trade and transit connectivity, as well as to address other bilateral needs. However, will the promise live up to the hype?
Source: USAID Central Asia Twitter
Open Door for the United States
The growing U.S. relationship with the region has generally focused on diplomatic engagements along with a steady stream of targeted assistance programs over the years versus splashy, high-budget infrastructure projects that China and Russia promise to the region (and often fail to deliver on). Nevertheless, the C5 countries are aggressively seeking foreign direct investment (FDI), with Uzbekistan alone attracting $10 billion in foreign investments in 2022. By comparison, apart from dedicated U.S. assistance funds numbering in the tens of millions of dollars annually implemented by the USAID, the State Department, and other federal departments and agencies, overall U.S. government investments in Central Asia have been modest to date and have often fallen short of the opportunity mark.
For example, the Trump Administration’s Development Finance Corporation (DFC) signed Memoranda of Understandings (MOUs) with Kazakhstan and Uzbekistan for $1 billion over a five-year period to support private-sector development and energy connectivity, in what was the largest U.S. government-led initiative in the region, following on the heels of adopting a seven-year, interagency strategy for Central Asian engagement. In particular, the chance to develop a new and expanded trans-Caspian energy corridor to Europe at the time was a novel opportunity that would have connected to the highly successful U.S. engagement that had earlier created the Baku-Tbilisi-Ceyhan pipeline. The United States was looking to create an energy conduit from Central Asia across the Caucasus to Turkey and Europe that would further reduce Europe’s dependence on Russian gas supplies. But though these funds were signed in an MOU at the end of the Trump Administration, they never materialized.
Under the Biden Administration, an Economic Resilience Initiative in Central Asia (ERICEN) was announced by Secretary Blinken in 2022 that ultimately provided $50 million to expand the region’s trade connectivity, diversify trade and energy, boost investment, and increase employment opportunities in Central Asia. Focusing on soft infrastructure needs, the ERICEN-funded programs address cross-border cooperation, e-payment systems, trans-Caspian infrastructure, private-sector cyber-security, English-language development, and other efforts intended to increase Central Asian competitiveness in global markets. Philosophically, the ERICEN funded programs were intended to help the Central Asians bridge westward, enabling the region to secure a measure of economic sovereignty by engaging with global markets on their own terms and not through middlemen Russia and China. However, breaking down trade barriers and establishing new modes of economic connectivity is a heavy lift for a relatively small investment.
Following the historic C5+1 Summit in September, USAID Administrator Samantha Power traveled to Uzbekistan in October to hold a Development Ministerial that again recognized the need for and focused on building the region’s connectivity, as well as fostering economic growth, energy development, and climate resilience. While MOUs were signed, Power was only able to muster an additional $14 million in assistance funds for programs aimed at key sectors in the region’s development, and $18 million extra bilateral funding for Uzbekistan to cover shortfalls in existing equities. Those assistance resources will be spread across a wide area of need and opportunity, leaving many needs and openings still unaddressed. All U.S. bilateral assistance accounts show steep declines for the C5 countries in fiscal year (FY) 2023 from FY 2022 figures, decreasing by 84% in Uzbekistan, 65% in Kazakhstan, 63% in Turkmenistan, 40% in Tajikistan, and 32% in the Kyrgyz Republic.
Policy Near Misses
While U.S. policymakers have continued to signal interest and engagement with Central Asia, funding for programming does not match and pales in comparison with other international players. Most recently, French President Macron went to Uzbekistan with a promise of a $1 billion strategic partnership, coming after China’s Xi’an Summit with the region that promised tens of billions in investments, as well as UAE and other Gulf countries investing billions as well into the region. This is not to say that the Biden Administration does not have the tools to do more.
The Development Finance Corporation has both the funds and the mandate to engage in Central Asia and the ability to target needed infrastructure. As well, the Partnership for Global Infrastructure and Investment (PGI) is the U.S. President’s flagship G7+ initiative for the advancement of strategic infrastructure and investment in low- and middle-income countries. Through PGI, the U.S. government and G7 partners are mobilizing $600 billion over the next five years in global infrastructure investments. PGI’s goal of strengthening and diversifying supply chains and advancing shared national security interests is tailor-made for Central Asia. While U.S. private-sector investments total over $31 billion across the region, major infrastructure initiatives require major U.S. governmental support and appear to be missing in action.
For example, creating a major lift for Caucasus economies and alternatives to Russia as an energy supplier, the Baku-Tbilisi-Ceyhan (BTC) pipeline that connects Caucasus oil to European ports was inaugurated in 2005 only through dedicated U.S. diplomacy and the efforts of the U.S. and Japan Exim Banks, EBRD, and through other loans. Likewise, the European Investment Bank, EBRD, and other international financial institutions created the Southern Gas Corridor in 2008, bringing Caucasus gas to European markets. Both projects have been highly successful and profitable undertakings, raising the question of why haven’t U.S. initiatives helped further connect Central Asian energy exports across the Caspian, particularly as Europe needs long-term gas supplies and is working to wean itself off Russian energy sources.
Absent increases in traditional assistance funds, Washington has its hands tied, just at the time when Central Asia is breaking free from Russia’s stranglehold on the region’s economies. Kazakhstan’s President Tokayev has sought to bypass Russia as a conduit for Kazakhstani goods headed to Western markets, particularly through the development of the Middle Corridor that transits from China, across Kazakhstan and the Caspian Sea to the Caucasus and Europe. Likewise, President Mirziyoyev of Uzbekistan is pushing for the Middle Corridor, as well as southern trade routes that access both South Asian markets and the sea lanes. And Turkmenistan is also beginning to signal that the time is right for a trans-Caspian gas pipeline which would facilitate energy connectivity from Central Asia to the Caucasus and Europe.
The way forward
All five Central Asian leaders have committed to enhancing the region’s trade connectivity to the broader world and to enhance Central Asian export competitiveness. With international investors beginning to beat a path to Central Asia’s door, bringing billions of dollars in long-term engagement, Washington is missing a critical window of opportunity to assist the region in evolving and continuing its sporadic trajectory toward Western markets and trade systems. U.S. diplomats and development experts are sending the right messages to Central Asian capitals, but they don’t have sufficient resources to follow up. U.S. technical assistance programs are a key lever of change that could further fill soft infrastructure gaps in Central Asia to enhance disparate needs, such as economic digitalization, crop and water management, and critical legal climate changes. Such improvements would help the region develop self-sustaining, resilient, and independent economies.
Many factors contribute to driving the regional transformation and influence White House and other U.S. policy thinking: four of the region’s five Presidents changed in the last several years, are younger, and are no longer Soviet holdovers. Half of the region’s burgeoning population was born after the Soviet break-up, with a different and more sophisticated understanding of the world than that of their parents and grandparents. This new generation needs jobs that old industries can’t produce; Uzbekistan alone has 700,000 citizens turning 18 every year. Wary of their large neighbors and international sanctions, Central Asian leaders are looking for alternatives to trade with and through Russia and are cautious of China debt. Common security concerns still exist in the region that Central Asian capitals need partnerships to address. These are all sweet spots for deeper U.S. engagement.
Perhaps the greatest challenge for U.S. policymakers is not convincing the Central Asians of their interest and goodwill, but convincing the U.S. Congress that the region is worth investing in. U.S. foreign assistance budgets are never popular with voters and the current Congress seems unlikely to pass anything other than a continuing budget resolution, making it difficult for appropriators to carve out new assistance funding priorities. Also, some on Capitol Hill still persist in seeing Central Asia through outdated prescription lenses, seemingly as vassals of Russia and China, with punishingly decreased assistance budgets. Clinging to outdated policies like the Jackson-Vanik amendment, which was implemented in 1975 to eliminate barriers to the emigration of Soviet Jewry and deny permanent normal trading relations with the United States, Congress still holds some Central Asian countries to such obsolete standards, although Russia and some other post-Soviet republics have long been granted permanent normal trade relations. A fresh and clear-eyed view of Central Asia is badly needed in Congress, recognizing a geostrategic region undergoing significant realignment and change. Enhancing access to Central Asian energy, food, and strategic mineral exports can make vital contributions to the global economy and help elevate and bolster regional unity.
A new Congressional policy towards Central Asia that matches the foreign policies of the Trump and Biden Administrations and recognizes a critical region in the throes of breaking from its past, and securing greater autonomy from its powerful neighbors, is long overdue. Modest assistance funds go a long way in Central Asia. And, while the United States will never supplant neighbors Russia and China as economic partners, Washington’s assistance can help enable Central Asian capitals to do business on their own terms, not those dictated by Moscow and Beijing. U.S. goals and objectives of supporting the independence of Central Asian countries dovetail with U.S. concerns in the Caucasus and Ukraine. More assistance programs to address Central Asia’s democracy, governance, and economic needs can help develop regional economic sovereignty and resilience, which in turn further opportunities for deeper trade and development relations with the United States. Marshaling DFC and PGI resources to address infrastructure connectivity westward would bring tectonic connectivity to the region. Smart and targeted investments to match historic advances in U.S. relations with Central Asia need to happen soon, before others step in to fill the void. Following up President Biden’s historic C5+1 Summit, the United States needs more than empty words and pockets.