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Uzbekistan looks south for new trade routes

Uzbekistan looks south for new trade routes

Uzbekistan’s position in the middle of Central Asia is a source of strength but also vulnerability.

Uzbekistan has received its first transit shipment via Pakistan and Taliban-controlled Afghanistan. For Uzbekistan, this means prioritising a southern-looking policy, as it seeks to assert its own identity in the region and establish viable alternative trading partners. 

A private trader in India exported 140 tons of cargo, mostly Indian sugar, to Uzbekistan via Pakistan and Afghanistan, as VOA recently reported. The route involved sea and land freight transport with the cargo first arriving at the Karachi port in Pakistan from India. The cargo was then trucked across Pakistan and into Afghanistan, crossing the Torkham border and heading to Kabul. The trucks then traveled from Kabul to Mazar-i-Sharif and on to Termez in Uzbekistan.  

Modest though this cargo transit was, it could signal a major shift in trade routes for the landlocked Central Asian country, reducing its critical dependency on Iran and Russia for their trade routes, and enabling Uzbekistan to forge a more independent trade policy.

Russia has historically been a key trading partner and the primary route for Uzbek goods to reach global markets. Bilateral trade between the countries currently stands at $7.5 billion. Modern commercial ties developed in the 19th century when roads, railroads, and pipelines were constructed and solely directed northward toward the Russian heartland. In particular, Russian seaports are a major shipping route for gas and petroleum products and industrial metal.

Uzbekistan is double landlocked so has always remained on the periphery of major global markets. However, since Shavkat Mirzoyeyev came to power in 2016 Uzbekistan has been moving purposefully to address these issues and diversify its trade routes. In doing so, it has looked south and the route to Pakistan has been given the most attention.

The starting point for Uzbekistan’s strategy has been accessing Pakistani seaports. A Preferential Trade Agreement (PTA) was signed in March 2022 between Pakistan and Uzbekistan covering a total of 34 goods. The deal involves two key changes: in the first instance the PTA aims to lower duties on these products, which currently range from 20 per cent to 100 per cent, and second, non-tariff barriers are to be minimised by mutual recognition of standards and easing procedural requirements for goods covered under the PTA. 

This follows from the Pakistan-Uzbekistan Transit Trade Agreement (AUPTT) that the two countries signed in July 2021. Under the agreement, Uzbek trucks are allowed to carry goods via Afghanistan directly to Pakistani seaports at Karachi, Gwadar, and Bin Qasim rather than having to re-load them onto Pakistani trucks at the Afghanistan-Pakistan border and vice versa. The agreement also stipulated a relaxation of migration rules and mutual recognition of driving licenses.

Key to these agreements is Afghanistan since it is situated in between Uzbekistan and Pakistan. The three states have a history of cooperation on major infrastructural and trade projects. A famous example is the Mazar-i-Sharif-Kabul-Peshawar (Trans-Afghan) railway project, a trilateral project that aims to connect Uzbekistan with Pakistani seaports of Karachi, Bin Qasim, and Gwadar via Afghanistan. With these opportunities come security concerns. Serious practical challenges remain as rising internal discord between the various Taliban factions compounded with international isolation could make administering the Uzbekistan-Afghanistan-Pakistan route difficult.

Pakistani seaports also appear to be a preferred option to Iranian ones already in use. Uzbekistan is currently an active user of the Iranian seaport of Bandar Abbas, accessed through Turkmenistan, for example. But even though the port does have the necessary infrastructure, sanctions on Iran have significantly limited Uzbekistan’s potential to reach new markets via Iran. 

Implementing trade routes to Pakistani seaports hides Uzbekistan’s far greater concerns. The recent events in Kazakhstan and Ukraine have created a sense of unease. Moscow’s erratic international agenda has complicated Tashkent’s ability to maneuver among its many interlocutors. 

Recent events in Ukraine have especially catalysed Mirziyoyev’s southern policy. The sanctions on Russia have nearly paralysed its trade options and also severely impacted the Uzbek economy. The largest shipping consignment companies have suspended exports via the Black Sea to the Commonwealth of Independent States (CIS), which includes Russia and Uzbekistan.

Uzbekistan’s position in the middle of Central Asia is a source of strength but also vulnerability. For Uzbekistan, the best alternative to Russian trade routes is to the south. The reason is geographical. Uzbekistan occupies a central position in Central Asia. It has been the crossroads of all routes, both from North to South and from West to East, linking the Eurasian heartland’s core with the Indo-Pacific rimland. Yet the current Uzbek transport routes were built to serve the needs of the centralised Soviet state, which redirected trade flows north. Thus it has become a decades-long pursuit for Uzbekistan to overcome its geographical remoteness and transform the structures of its economy, which have become increasingly geared toward exporting commodities to its neighbors. A crucial part of this is identifying and expanding to non-traditional markets, and Pakistan and Afghanistan seem to be the keys to unlocking Uzbekistan’s aspirations in the region.

This article was first published in The Diplomat and can be found here

Published: 4th April 2022