Central Asia: COVID-19 and the Decline of Oil Prices, a Storm in the Making?

Developing Just Leadership

Akhmet Makhmoudov

Ramadan 08, 1441 2020-05-01

News & Analysis

by Akhmet Makhmoudov (News & Analysis, Crescent International Vol. 49, No. 3, Ramadan, 1441)

With or without oil price decline and the coronavirus crisis, the geopolitical struggle is heating up in the former Soviet colonies in Central Asia. However, the COVID-19 crisis combined with significant decline in oil prices is a potential perfect storm in the making for the autocrats of Central Asia and the South Caucasus. The political systems of both regions are archaic with no productive economy except oil and gas.

The World Bank report titled Fighting Covid-19, painted a bleak future of the region by stating that “simulations suggest that the estimated impact under these baseline assumptions could reduce GDP growth in Europe and Central Asia by -5.4 percentage points in 2020… Unfortunately, many countries in Europe and Central Asia already have rising debt levels and are ill-prepared to address this crisis. Buffers will have to be used, and spending will need to be carefully reprioritized to the most urgent needs… in Azerbaijan if oil prices decline further and the COVID-19 situation persists, this could result in a more severe economic contraction in 2020 and a slower recovery could result.”

Energy Minister of Kazakhstan, Nurlan Nogayev told Reuters on March 7 that Kazakhstan is working on measures to cut costs with oil prices nearing $40 per barrel (Oil price has fallen below $30 in recent weeks), “We have budgeted oil price at $50-$55 (per barrel). If it falls to $40 and below, the government has a plan to optimize the costs and we are already working on it,” Nogayev said.

Despite being the most stable and prosperous autocratic system in Central Asia, Kazakhstan witnessed several political protests over the past three months. In February, there were unprecedent deadly clashes between ethnic Kazakhs and Dungans, soon after US Secretary of State Mike Pompeo departed after warning Kazakhstan that it should stay away from getting close to China.

Unable to build a decent health care system and accustomed to brutal police repression, no wonder Azerbaijan and Kazakhstan instituted draconian social control measures to prevent potential social unrest. As reported by Eurasianet, “Kazakhstan’s president has given the green light to an emergency military recruitment drive as the authorities resort to ever-broader measures to ensure order in the face of the unfolding coronavirus epidemic.” While the Kazakh regime justifies its measure in terms of COVID-19 crisis, the decree allows it to gain control over the country’s young population by suspending basic freedoms and turning them into soldiers forced to obey orders.

In Azerbaijan, the Aliyev regime was much more straightforward. Azerbaijanis need an electronic police permit to leave their homes. On March 19, Ilham Aliyev publicly declared that the political opposition needs to be crackdown upon in order to fight the pandemic.

Considering that Russia has suffered some significant economic blows from the decline in oil prices and will also be impacted by the COVID-19 global economic meltdown, Central Asia is going to feel the pain. In May 2019, the Central Bank of Russia identified Uzbekistan, Tajikistan and Kyrgyzstan as the largest recipients of remittances from Russia, which makes them especially vulnerable to a downturn in the Russian economy.

With these combined factors, post-Soviet countries are also facing a more determined Western desire to reduce Russian political influence in the region, an endeavor destined to become messy. In February 2020, the United States Strategy for Central Asia 2019-2025 document was published. It stated that “Central Asia is a geostrategic region important to United States national security interests, regardless of the level of United States involvement in Afghanistan.”

Writing for the Joint Transatlantic Research and Policy Center affiliated with the American Foreign Policy Council, Dr. Farkhod Tolipov, notes the following: “This is one of the most important messages, since it recognizes the value of the region consisting of five countries in its own right, and does not include Afghanistan as part of Central Asia as some scholars have recently been inclined to do… Notably, Russian and Chinese media and pundits did not leave the US top official’s visit and the subsequent announcement of the US Strategy without reactions. In particular, they noted that Pompeo’s Central Asian tour was preceded by a trip to Ukraine and Belarus, suggesting that the tour had a broader and more sophisticated agenda… Overall, the region is facing an ambiguous trend where great powers bring policies with competing geopolitical visions, while Central Asian states seek to escape geopolitical challenges.”

In February 2020 Crescent International noted that the Trans-Anatolian Natural Gas Pipeline (TANAP) that will bring natural gas from the Caspian Sea to Western Europe bypassing Russia, will revive geopolitical struggle in Central Asia. The latest global developments might serve as a significant catalyst in shaking up the status quo in the region. While NATO economies have also suffered significant negative impact due to decline in oil prices and COVID-19, Western policy makers are more likely to view the negative impact on Russia as a potential economic and political opening to make bold geopolitical moves to sideline Moscow in its sphere of influence. It would not be surprising if NATO regimes attempt to utilize Taliban’s imminent return to power in Afghanistan as a scapegoat to destabilize Russia’s southern borders.

If events in Central Asia take a dramatic turn, Russia’s overt interference in the region will increase and it will most likely outmaneuver NATO regimes due to its proximity and China’s negative attitude towards increased Western presence in Central Asia. Moscow knows well that local Central Asian despots who have not faced any significant popular unrest over the past two decades will not be able to deal with Ukraine-type Western interference in Central Asia.

Thus, a replay of Moscow’s determined actions in Ukraine are quite probable in Central Asia as well. Russia is open about the fact that it views countries of the former Soviet Union as its strategic and privileged sphere of influence. The former Russian president Dmitry Medvedev had proclaimed this position openly on August 31, 2008. Thus, Russia will not sit idle when the situation escalates in Central Asia.

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