A world where economic interdependence is high, sanctions against Russia are likely to be more global destabilizing than policymakers think. In order to reduce collateral damage, the West must focus on Russia-dependent, vulnerable economies like Central Asia in order for it to be effective.
Landlocked Central Asia is flanked on all sides by countries sanctioned by the West—Afghanistan, Iran, Russia and, to a lesser extent, China. This region is now struggling to deal with Moscow’s new economic attack. Kazakhstan is an energy-rich country that exports more than half of its oil supply through Russian ports. The sanctions have left the region reeling and it has been burning vital reserves of currency to sustain its faltering currency, the tenge. This is a difficult time for Kazakhstan which is trying to restore investor confidence after the January 2022 violence that killed 225 people.
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Governments in South Asia, including the Republics of Tajikistan and Kyrgyzstan are facing high unemployment and budgetary problems. These countries are fortunate to have 7.8 million Russian workers last year. It reduces unemployment and eases strain on public services, while providing basic necessities for families.
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However, their short-term fix on migration has made them more vulnerable to external shocks. Remittances currently account for 30% of Tajikistan’s GDP, 28% of the Kyrgyz Republic’s, and some 12% of GDP for less exposed Uzbekistan, the most populous country in the region. These three countries will be facing the double pressures of a collapsed state and a shrinking household budget, leaving many people in food poverty as the ruble drops to 155 against the US dollar (a new record).
Granted, this is not the region’s first rodeo. Remittances to the region plummeted by 40% in 2014, following Russia’s annexation of Crimea and the sanctions it triggered. COVID-19 provided another example of the dangers associated with interdependence. Russian border closings resulted in 22% decrease in total remittances. Impoverished Tajikistan was hit particularly hard, with migrants sending just $1.7 billion back home—a $835 million decrease on the year prior. The current sanctions package, however, is something we’ve never seen before. Long-term effects will be enormous.
Russia’s crisis is China’s opportunity
Last August Central Asia struggled to deal with U.S. withdrawals from Afghanistan and the return to power of extremist Taliban movements. There was also a refugee crisis in Afghanistan (which could grow given that food insecurity has reached 95% of Afghan households). The Russian collapse could prove to be more dangerous, raising instability concerns in Xinjiang, a Chinese province which borders the region.
For China, Tajikistan’s vulnerable 1,357-kilometer border with Afghanistan has been a recurring source of concern. New York, 2019. Times leaked the “Xinjiang Papers,” revealing secret speeches made by President Xi Jinping during a 2014 visit to Xinjiang in the wake of a series of violent attacks across China. “After the United States pulls out of Afghanistan,” he warned, “terrorist organizations positioned on the frontiers of Afghanistan and Pakistan may quickly infiltrate into Central Asia.”
Tajikistan is a rare buffer that has prevented instability from Afghanistan spreading into Xinjiang. China detained an estimated 1.8million Turkic minorities as part of a campaign commonly referred to cultural genocide. The two countries conducted their first bilateral exercises in 2016, involving some 10,000 troops, and China has provided material support to the Central Asian country’s border defense. Notable is the fact that Beijing took over administration of several military bases located along the unstable Tajik-Afghan border.
The strategic role of Russia in this area should not be undervalued. In January this year, Kazakhstan’s President Kassym-Jomart Tokayev called on Russian forces, not Chinese, to help reestablish control in the wake of violent protests wracking his country. Moscow provided crucial support for the Tajik-Afghan forces at the Afghan border, in August 2021 after the U.S. withdrawal.
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However, the longer-term trend points towards Chinese hegemony. China is already leading the way in economics. Russia–Central Asia trade currently stands at around $18.6 billion, two thirds of China’s, and a far cry from the 1990s when it accounted for 80% of the region’s trade ($110 billion). China has been a growing strategic and arms partner to the region for some time, but it is far from surpassing Moscow.
These trends will be accelerated by rapid economic decline. While Russia’s economy suffers under the weight of sanctions, China’s trade with Central Asia has already bounced back to pre-pandemic levels, up nearly 18% in Kyrgyzstan from $6.37 billion in 2019 to $7.5 billion in 2021. It is the same outlook for the rest.
These gains are not enough to compensate Central Asia’s shock at Russia’s abrupt exit from the regional markets. The sudden change in its political and economic balance may lead to a stronger and more dominant China that takes advantage of growing power disparities between its neighbor and itself. Beijing already holds over 40% of Tajikistan and Kyrgyzstan’s national debts. In exchange for debt relief, China may make more security concessions.
The economic catastrophe of the Ukraine war will reverberate far beyond Russia’s borders for decades to come. While the sanctions may be a just response to Putin’s aggression in Europe, they are without precedent and could result in violent instability in neighboring countries. International community must work together to reduce collateral damage before it’s too late.
