Development banks are vying for influence in Central Asia

Central Asia has become a new arena for geopolitical competition—this time in the realm of development finance. While the G7 nations are seeking to expand their economic presence through international institutions, China is strengthening its influence with its own financial instruments and infrastructure projects.

At the center of this competition are two development banks: the Western-dominated Asian Development Bank (ADB), headquartered in Manila, and the China-led Asian Infrastructure Investment Bank (AIIB).

Infrastructure as a Geopolitical Tool

The Asian Development Bank recently announced extensive investments to expand infrastructure and trade links in Central Asia. A key focus is on promoting the so-called “Middle Corridor,” a trade route between Europe and Asia that bypasses Russia and is increasingly supported by the U.S.

The upcoming ADB annual meeting is also symbolic of this growing attention: it will take place in early May in Samarkand, Uzbekistan—a clear signal of the region’s strategic importance.

China responded promptly. The new AIIB President, Zou Jiayi, visited several Central Asian countries and met with top politicians in Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan.

Although no concrete agreements were signed during the trip, Zou emphasized that the discussions had provided important insights for future investments. “If we listen today, we can invest better tomorrow,” she explained.

The talks focused on topics such as renewable energy, climate protection, water resources, digitalization, and the expansion of regional transportation networks.

According to its own figures, the AIIB has invested around eight billion dollars in Central Asia to date—about 11 percent of its total loan portfolio.

New Trade Routes in the Shadow of Geopolitical Crises

Parallel to this competition for development financing, the region’s trade routes are also shifting. In light of the instability in the Persian Gulf, Chinese logistics companies are increasingly promoting land transport between China and Europe via Central Asia and Russia.

These routes are currently considered less vulnerable to maritime bottlenecks than the traditional sea routes via the Suez Canal and the Red Sea.

Politically, too, the region is coming more into focus. The China-dominated Shanghai Cooperation Organization (SCO), to which four of the five Central Asian states belong, recently condemned the use of military force in the Middle East and emphasized the importance of Iran’s territorial integrity.

The governments of Central Asia themselves reacted to the crisis with much greater caution and avoided taking a clear stance.

Kazakhstan focuses on water and legal cooperation

At the same time, Kazakhstan is seeking to expand its international networks. The country is intensifying training programs in the field of so-called water diplomacy—an issue that is becoming increasingly politically sensitive in light of growing water scarcity in the region.

In addition, President Kassym-Jomart Tokayev signed an agreement with Hong Kong on legal cooperation, which provides for mutual legal assistance in investigations and criminal proceedings.

Kyrgyzstan Seeks Investors from China

Meanwhile, Kyrgyzstan is stepping up its efforts to attract Chinese investment. Deputy Prime Minister Edil Baisalov traveled to the Chinese province of Shandong to attract investors for new industrial projects.

At the same time, the modernization of the country’s largest oil refinery, Zhongda, is underway at a cost of more than $190 million. Once the work is complete, the facility is expected to produce fuels that meet modern environmental standards.

Other projects with Chinese participation range from the construction of water treatment plants to the establishment of a new stone crushing plant near the capital, Bishkek.

China is gaining importance as a trading partner for Uzbekistan

Beijing’s economic influence is also growing in Uzbekistan. At the start of the year, China accounted for more than a quarter of the country’s total foreign trade—significantly more than a year earlier.

However, a highly anticipated Sino-Uzbek economic forum in Tashkent fell short of expectations: no major investment agreements were announced.

Meanwhile, the Uzbek anti-corruption agency is investigating alleged irregularities involving official delegation trips to China.

Turkmenistan Opens Border to Refugees

Turkmenistan has also recently come into the spotlight of regional developments. The country opened its border to foreign nationals fleeing the fighting in Iran.

According to Chinese media reports, several Chinese citizens are among those who have entered Turkmenistan since the end of February.