Uzbekistan: Russia to write off debt, discuss free-trade zone

Yesterday, Russia wrote off almost $865 million worth of debt owed by Uzbekistan after President Vladimir Putin visited the country for bilateral talks with Islam Karimov. Uzbekistan’s new debt will be just $25 million, an odd move for a country strapped for revenues. Tashkent appears to be more amenable to considerations to create a free-trade zone between Uzbekistan and the EEU. Thus far, Uzbekistan has kept its distance from the EEU project, as commentators have dubbed it “Soviet Union lite,” and one of its purported goals is to reintegrate Central Asian economies under the Soviet borders. Additionally, as Russia banned the importation of food products from the West in retaliation for US sanctions, Uzbekistan’s vast agricultural sector will surely come into play to help alleviate some of the pressure created on average Russian consumers.

Additionally, Uzbekistan urged Russia to protect Central Asian countries against the threat of militant Islam as NATO withdraws from Afghanistan. Karimov had additionally met with Chinese officials to discuss counter terrorism training, where Karimov condemned the East Turkestan liberation movement by Uighur activists, as well as terrorist attacks like the one at a Kunming train station earlier this year. Karimov warned that “representatives from the Islamic State are slipping into Afghanistan,” and that preventive measures must be taken.

Russian-Uzbek relations have always been tense however, and the fact that Russia’s economy is faltering means that Uzbekistan will see a slowdown in demand for its own products as well.

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News Briefs:

  • Kazakhstan’s decisions to sell off its government debt in the form of bonds is now seen as a debacle, due the 40% plunge in oil prices, which comprise the country’s main export. The securities, originally set with a coupon of 3.875% and expiring in 2024, dropped almost 8%, sending yields to skyrocket and endangering it with a rating of “junk.” Kazakhstan’s main equity index lost 22 percent this quarter, making it one of the worst performers out of a group of 93 domestic markets tracked by Bloomberg.
  • Russia has transferred five new aircraft to its air base in Kant, Kyrgyzstan, just outside of Bishkek, according to a new report. Russia released a statement explaining the transfer and that the air base would see a more prominent role in Russian foreign policy as the Western military withdrawal from Afghanistan accelerates. Russia might be planning to turn the airbase into a joint one for the Collective Security Treaty Organization.
  • Turkmen authorities are apparently scrambling to discover diversification of their economy away from oil and gas, or at the very least, diversify away from only one or two customers. With the EU searching for new suppliers of gas after Russia, Turkmenistan and Azerbaijan appear to be in prime positions to obtain lucrative agreements from the EU for exportation. However, doing so requires the construction of a trans-Caspian pipeline, which in turn demands cooperation between Azerbaijan and Turkmenistan. More of this discussion was published by RFE/RL, and can be found here.
  • EU Energy Commissioner Maros Sefcovic said that a new high-level working group would be created to advance integration of southeastern gas markets and pipeline networks. Part of the group’s mandate will be to consider proposals to link Azerbaijan’s gas fields to European markets after Russia’s decision to abandon the South Stream pipeline project that had been agreed to. Any agreement will need to include Turkey as well.
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