Does Central Asia have Southern options for transport and trade?

The Central Asian republics have long lacked reliable trade and transport routes to the South.

Unrest in Afghanistan since 1979 and the sanction-enforced isolation of Iran have caused the republics to rely on Soviet-era routes North to Russia, emerging links to the West that cross the Caspian Sea and the Caucasus, or to the East as part of China’s Belt and Road Initiative (BRI).

But recently the republics have seen a flurry of action that may give them redundant southern trade and transport routes.

In January, India’s president, Narendra Modi, hosted a virtual India-Central Asia summit with the presidents of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. The conference covered trade and connectivity issues, cultural exchanges, and security cooperation, among others, and followed the December 2021 signing of nine agreements in areas such as renewable energy, digital technologies, cyber security, and community development projects.

In an apparent conflict, in July 2021 Uzbekistan hosted a conference on connecting Central Asia and South Asia, and has prioritized transport through Pakistan to the ports of Gwadar and Karachi over routes through Iran to the port of Bandar Abbas. Later that month, Pakistan and Uzbekistan signed a transit trade agreement that “would give access of Pakistani seaports to Uzbekistan and offer access to all five Central Asian States for Pakistani exports.”

Securing a trade route to Central Asia has been a longtime goal of Pakistan, a matter that acquired urgency after the country’s cotton crop failed in 1994. Now that it is almost in hand, will Islamabad finally be successful?

Despite the recent public bonhomie between the leaders of Pakistan and Uzbekistan, Tashkent is likely aware of the potential for Islamabad to weaponize transport links from Central Asia against India to bolster its policy of “strategic depth” — which would surely disrupt the Indian-Uzbek bilateral investment treaty that was a topic at the January meeting. In fact, Pakistan removed may doubts when it blocked Indian food aid and medicine shipments to Afghanistan demanding that Pakistani trucks transfer the goods, later relenting to let Afghan trucks move the cargo. 

Uzbekistan is a member of the India-Uzbekistan-Iran-Afghanistan Quadrilateral Working Group on the joint use of Iran’s Chabahar port. In early 2021, India proposed that Chabahar Port be part of the International North-South Transport Corridor (INSTC), and invited Uzbekistan and Afghanistan to join the multi-lateral corridor project. The INSTC is a 7,200 km multi-modal project that links India, Iran, Afghanistan, Azerbaijan, Russia, Central Asia and Europe — and this option should be in the back of Pakistan’s mind at all times.

The Central Asian republics — which need new export routes and want to avoid Afghanistan — may find Iran’s Chabahar the best option for trade with India and its market of 1.4 billion people. Pakistan’s market is 212 million people, and a per capita GDP two-thirds that of India. Cooperation with India’s technology sector will be key to Tashkent’s goal of a 1.6-time increase in per capita GDP by 2026.

Normally isolated Turkmenistan sees Chabahar as a key part of a Eurasian transport route that would include its Caspian Sea port of Turkmenbashi. Iran and Turkmenistan recently discussed expanded trade relations, new arrangements in rail transit, energy, gas and electricity, and maritime transport — and are anxious to restore trade to pre-COVID levels.

Even more isolated Taliban-controlled Afghanistan also seeks an Iranian option — both for buying and selling and establishing peaceful links with Iran’s government, which will be more active in the regional economy once it has secured access to the $29 billion in overseas banks that has been blocked by sanctions. Afghanistan should try to reinvigorate trade with India, which was worth $1.5 billion annually before the Taliban takeover. One way to do that would be to abide by the 2021 India-Afghanistan Preferential Trade Agreement, though Kabul will be challenged by a lack of institutional depth to successfully execute the deal.

What should the U.S. do?

U.S. sanctions on Iran have acted as a tax on the region, so Iran’s reemergence as part of a new nuclear deal would encourage Central Asian governments and businessmen to buy and sell to Iran and use its transport links to India and the southern Persian Gulf.

Central Asia will soon be positioned to trade with both Pakistan and India without the worry that overland trade will rise and fall with relations between New Delhi and Islamabad. Increased trade will raise incomes and proof the republics against undue influence from China, via its BRI, and Russian actions in what Moscow sees as its “sphere of privileged interest.” Increased trade would also benefit Pakistan, which unfortunately has to contend with all the Chinese attention that comes with being the “largest single-country venue for BRI projects.”

The U.S. can help to improve the local economic picture. Pouring tens of billions into Afghanistan’s primitive economy contributed to the corruption that helped bring down the republic. Washington needs to say early and often that it supports increased regional trade; call off the sanctions dogs; retire the generals, ambassadors, and spooks in favor of economists and trade specialists; then use its votes at the development banks and international financial institutions to help create the organic economic growth that will truly empower and enrich the local citizens it always said it supported.

James Durso (@james_durso) is the Managing Director of Corsair LLC, a supply chain consultancy. He was a professional staff member at the 2005 Defense Base Closure and Realignment Commission and the Commission on Wartime Contracting in Iraq and Afghanistan. Mr. Durso served as a U.S. Navy officer for 20 years and specialized in logistics and security assistance. His overseas military postings were in Kuwait and Saudi Arabia, and he served in Iraq as a civilian transport advisor with the Coalition Provisional Authority.  He served afloat as Supply Officer of the submarine USS SKATE (SSN 578).