Central Asia recalibrates: Distancing from Russia amid shifting alliances

Two analyses of Russia's geopolitical situation have appeared in the Financial Observer. One points out that Russia and China, based on their mutual disdain for Western dominance, are striving to build an anti-Western coalition within the BRICS+ bloc. As the author notes, the member countries of this group have long sought to reduce their dependence on the US dollar. Still, it was only the sanctions imposed on Russia by the West after it invaded Ukraine that significantly accelerated this process.

The study emphasizes that the BRICS+ bloc, expanded in 2023 with new members, currently represents almost half of the world's population. Its share in global GDP measured by purchasing power parity exceeds that of the G7 group. This disparity is forecasted to deepen further due to robust economic growth in emerging markets.

Despite its significant demographic and economic potential, the BRICS+ bloc faces numerous challenges that impede practical cooperation. The study points out the profound internal diversity of the countries that form the grouping, including the size of populations and economies, development indicators, investments in human capital, and the degree of market integration.

As the author points out, these asymmetries lead to rarely convergent interests among the countries. Another complicating factor is China's clear economic dominance, which has led to trade relationships with Beijing at the center, negatively impacting the export position of the remaining members.

As research highlights, over the ten years of BRICS+ existence, no significant integration successes have been noted. Considering real values, one could even speak of economic disintegration within the bloc. The author notes that trade volumes between member states, excluding China, remain very low. Weak economic ties result from the low development level, poor production structure of the BRICS+ countries, and the lack of complementarity of their economies. The study indicates that the competitive economic structures have resulted in numerous conflicts and trade wars in which Russia plays a dominant role.

Although the BRICS+ countries share dissatisfaction with the US Federal Reserve's monetary policy and the desire to reform the global financial architecture dominated by the dollar, plans to create a common currency for the group remain merely declarative for now. As noted, negotiating a unified currency would be extremely difficult due to the asymmetry of economic power and the complex political dynamics within BRICS+.

The author emphasizes that none of the member countries has been willing to abandon their national currency. The primary efforts focus on creating an effective, integrated system of cross-border payments.

In this context, the study discusses the bilateral agreements between BRICS+ countries on settling trade and investment transactions in local currencies supported by central bank swap lines.

As pointed out, the Chinese yuan plays a key role here, enabled by the extensive network of swap agreements of the People's Bank of China. This allowed China to settle about half of its yuan cross-border trade and investment transactions. Russia, affected by Western sanctions, increasingly settles with China in yuan and rubles.

In conclusion, in short, BRICS+ countries will focus on promoting trade and investment settled in local currencies and diversifying their central banks' foreign exchange reserves. The project of a common currency remains a distant prospect.

The second research, in turn, analyzes the situation in Central Asia, a region traditionally perceived as a sphere of Russian influence. As the study points out, ever since Russia fell into conflict with most of the international community due to its invasion of Ukraine, its position in the region has rapidly eroded, and the number of its allies has dwindled sharply. With limited investment and technological capabilities, economically weak Russia has long ceased to be an attractive center of economic integration for post-Soviet states.

As an example of Russia's lack of a coherent and effective policy towards the region, the author notes the proliferation of various integration initiatives, which, beyond grand declarations, have not yielded tangible results. The reaserch delves into the case of the Eurasian Economic Union (EAUG), established in 2014 and modeled after the European Union - reads the analysis.

As pointed out, this project has become a fiasco after a decade of operation. Instead of the expected integration and intensification of trade, there is deepening disintegration and numerous trade barriers among members. The EAUG does not constitute a driving force for development or a bonding factor for the member countries, as indicated by low and declining internal trade volumes.

While China and Russia aim to reduce the influence of Western powers in the region, other EAUG members take more nuanced positions, maneuvering between the Sino-Russian bloc and the West to pursue particular interests. As the study notes, these countries seek, among other things, preferential terms for purchasing technology and military equipment or restructuring debt.

Russia's aggression against Ukraine made the countries of Central Asia aware of the real threat to their territorial integrity from Moscow's imperial ambitions. Cutting off Russia from international markets and the latest technologies as a result of sanctions has further deepened its image as a weakening and increasingly unattractive partner. Consequently, as the author notes, the countries in the region are distancing themselves from Moscow in various ways, shaping a more independent economic policy and diversifying their international contacts.

This tendency is reflected in the growing diplomatic activity of the Central Asian republics. Research points out that the region's leaders frequently visit the West, consulting with the US, the EU, and other countries on sanction compliance against Russia, economic matters, investments, and establishing transport routes bypassing Russian territory.

The weakening of Russia's position in Central Asia coincides with the increasing involvement of other global players. The region has become an intense rivalry between leading political and economic centers. China, in particular, has been very active, systematically displacing Russia from its position as the leading trade and investment partner of the region's countries for the past two decades. Beijing has strengthened its dominance, especially after the Belt and Road Initiative launch in 2013. According to data cited by the author, Sino-Central Asian trade volumes and investment value are multiple times higher than those in relations between Russia and the region.

Western players are also intensifying their involvement in the region. As the research notes, Central Asia has become a primary source of relocating European companies that have withdrawn from Russia. Western countries and corporations show particular interest in Central Asian raw materials, especially oil, natural gas, uranium, and rare earth metals. Advanced talks about creating alternative transport routes for raw materials from the region to global markets are ongoing.