Belgium (Brussels Morning newspaper) Both Russia and China are struggling with economic crises brought on by an ill-conceived war of aggression and by the glacial bursting of a bubble economy, respectively. The great beneficiaries are India and Central Asia which are booming.
According to the latest report of the EBRD (European Bank for Reconstruction and Development), dated September 2023, these economies are expected to grow by between 4.6% (Kyrgyzstan) to 7.5% (Tajikistan) this year.
China’s reopening after the pandemic is not the reason. Russia’s war in Ukraine is – as well as China’s meltdown. Capital flight from both these polities as well as smaller countries such as Belarus is fueling the economies of their immediate neighbors.
The idea is to avoid Western sanctions by relocating businesses into non-sanctioned but friendly territories. This stratagem is on its last legs, though: the Western coalition has begun to protest the subterfuge.
Central Asia has become a sanction-busting and dodging hub. Prohibited goods – including electric machinery, instruments, spare parts, and transport equipment – are imported into the likes of Kazakhstan and even India and re-exported to Russia at a hefty premium, according to data published by Bruegel, a venerable European think tank.
The Central Asian Bureau for Analytical Reporting released mind-boggling figures: between January and October 2022, Kazakh exports of electronic goods to Russia has skyrocketed by 1800% to 549 million euros.
Central Asia has always served as a backdoor to an ostracized Russia. Suitcase and shuttle trade as well as illegal re-exportation (smuggling, not to put too fine a point on it) have been a staple of these economies since the Russian Revolution.
Such illicit activities are aimed to offset the indirect damage inflicted by Western sanction on these landlocked polities whose only exit routes are via Russian territory.
One example: Ukraine’s attacks on Black Sea facilities can place in jeopardy Kazakhstan’s ability to export oil via the Caspian Pipeline Consortium Terminal.
Russians much prefer Russian clones Kazakhstan and Kyrgyzstan which are also members in the Eurasian Economic Union, a poor man’s wannabe BRICS. The other members are Armenia whose hostility to Russia is growing in the wake of the Nagorno-Karabakh debacle and Belarus, the hapless puppet state.
Still, the Union offers harmonized Customs and duties, free trade zones, common trade regulation, and access to a bigger market.
Ironically, the biggest beneficiaries of this tumult are Turkey and India, both far from being Russia’s pals. The peoples of Central Asia are, by and large, Turkic. As far as India goes, it offers time travel to a much earlier version of China, prior to its ascendance: an opportunity to participate in another Asian miracle, starting at the ground floor. It is also truly non-aligned with either West or East.
This year, India is expected to grow by 6.2%, according to the IMF (compared to China’s unrealistic IMF growth projection of 5.2%).
Still, this is all a one day miracle, the clear outcome of the conflict in Ukraine. Once it is over, one way or another, and once Russia’s civil war yields an uncontested new leader, these firms and their owners – around 500,000 strong – will revert to the motherland and its much larger and more sophisticated market.
In the meantime, emigrant workers from Central Asia keep propping families and economies back home with their remittances from Russia, says the EBRD. They work in construction, farming, hospitality and similar jobs which the indigenous Russians turn their noses up at.
The West cannot expect Central Asians to immolate themselves on the altar of the anti-Russia holy crusade. It should offer them access to its labor markets as well as alternatives pipelines and land routes to export oil and commodities. To shift their economically-driven allegiance from Russia would require treating them the way Ukraine is accommodated. Nothing less.
