Uzbekistan Leverages Regional Diplomacy as an Investment in its Future
Jun 23, 2021
On June 9, Tajikistan hosted the first annual Uzbek-Tajik Interregional Investment Forum, during which an estimated $1 billion of deals and investment contracts were signed. To cap off the flurry of economic and diplomatic activity, Uzbekistan President Shavkat Mirziyoyev, and Tajikistan President Emomali Rahmon agreed to create a joint stock company with the goal of constructing two hydroelectric power plants along the Zarafshan River in Tajikistan. The context surrounding the investment forum and presidential meeting is notable, since just weeks before Tajik and Kyrgyz forces fought along a disputed part of their border, and tensions remain. Uzbekistan played a role to mediate the conflict and has recently encouraged greater regional cohesion. This marks a drastic change in Uzbek foreign policy from President Mirziyoyev’s predecessor who shunned cooperation and failed to work with other Central Asian leaders.
Uzbekistan possesses the largest population in the region, the second-largest defense budget, and the second-largest economy. These statistics suggest that the Uzbekistan would naturally play a leading role in Central Asia, but until 2017 this was not necessarily true. Several potential explanations for Uzbekistan’s shift in international politics after Mirziyoyev became president would include stability, security, economics, and regional competition.
Uzbekistan would likely feel the cascading effects of any protracted Kyrgyzstan-Tajikistan conflict, since it would be a destination for refugees. After violence erupted in southern Kyrgyzstan in 2010, Uzbekistan took in between 45,000 and 100,000 refugees before closing its border, an act that earned Tashkent condemnation from the international community. With Uzbekistan just beginning to recover from the effects of the pandemic, it likely aims to prevent a scenario in which it would need to accommodate refugees. Instability brought about by a Kyrgyzstan-Tajikistan conflict might discourage foreign companies and investment from the region. Therefore, President Mirziyoyev’s recent visits and phone calls with Kyrgyzstan President Sadyr Japarov and President Rahmon could be an indication of Uzbekistan’s preventative diplomacy.
The withdrawal of international forces from Afghanistan also might explain Uzbekistan’s regional integration efforts. Prior to 2001, the Islamic Movement of Uzbekistan (IMU) posed a serious challenge to Uzbekistan, Kyrgyzstan, and Tajikistan, and disputes between the states hindered their ability to defeat the group. With the Taliban and its affiliates potentially playing a larger role in the region, Uzbekistan has worked diligently to resolve its own border disputes and include Afghanistan in projects like the newly created Central Asian Investment Fund. While the IMU has been on the decline, many in Central Asia remain concerned about the possibility of an extremist group exploiting existing vulnerabilities. Uzbekistan’s emphasis on cooperation looks like an attempt to prepare Central Asia for the post-American future in Afghanistan.
Diplomatic engagement can also bring about financial payoff, demonstrated by the recent Investment Forum. Uzbekistan has also sought entrance into international organizations like the Eurasian Economic Union (EAEU). While Uzbekistan only recently joined the EAEU as an observer state, President Mirziyoyev is using this platform to push for economic benefits from the organization. Uzbekistan has begun to recover from the effects of the pandemic, but the future remains uncertain. While remittances, a major sector of the Uzbek economy, are above pre-pandemic levels, the low vaccination rates in Central Asia and Russia – a major country of destination for Uzbek labor migrants – mean that a new surge in COVID cases could force another lockdown. By working to strengthen intraregional trade and production, Uzbekistan can diversify its own economy and potentially attract foreign investors to its emerging market. In the past several years, the country has worked to attract foreign investors, with substantial pay-off, and to diversify the destination of labor migrants. Domestic barriers to further economic reform remain, but Uzbekistan’s economy is changing, in no small part due to its new foreign policy.
Finally, through these recent actions, Uzbekistan is challenging Kazakhstan’s role as regional leader. During Uzbekistan’s absence from regional politics, Kazakhstan, frequently spearheaded joint Central Asian initiatives. While Kazakhstan is currently prioritizing trade routes connecting Asia and Europe and its hydrocarbons, Uzbekistan is building better local connectivity and trade. For some Central Asian migrant workers, Kazakhstan is their choice destination. While Uzbekistan has a long way to go before it becomes a labor destination country, by investing in its neighbors and the business environment of the region, it is investing in its own long-term prosperity. Either country’s success would profit the region. But after nearly a quarter century, Uzbekistan is ready to compete with Kazakhstan for regional leadership. This will be a boon to the region and certainly to Uzbekistan itself.
Photo Source: Tajik Presidential Administration