Our Insights

Central Asia and the Gulf: From Mutual Courtesy to Major Investments

The relations between the Central Asian states and the Gulf countries could have always been characterized as cordial, with shared religious, cultural, and historical ties binding the nations and their leadership. However, the economic relations lacked momentum and joint projects mostly happened in cultural and social spheres. Everything changed in the 2020s when the Gulf nations, seeking to diversify their economies and trade, joined the ranks of the most prominent investors in Central Asia.

The most notable area of the Gulf investments in Central Asia is the massive expansion of energy production and renewable energy in particular. In 2023 the Saudi energy giant Acwa Power announced plans to launch Uzbekistan’s first green hydrogen plant and the company’s second utility-scale green hydrogen project after the landmark NEOM facility back home in Saudi Arabia. This project comes on top of 12 other energy projects Acwa Power already has in Uzbekistan which has become the company's second-largest market in terms of investments.

The scale of investment is staggering - by mid-last year Acwa Power’s Uzbekistan investments portfolio accounted for 7.5 billion USD, making Saudi Arabia, which once had bilateral trade with Uzbekistan running in mere millions, the third largest foreign investor in the country in H1 2023 with 8.5% of total FDIs, overtaking Turkey, South Korea, and the EU.

Acwa Power also expands its footprint in Kazakhstan. In November 2023 the company inked the deal with Sovereign Wealth Fund Samruk Kazyna to construct a one-gigawatt wind farm and energy storage for 1.5 billion USD - the largest Saudi investment in Kazakhstan's energy sector to date. Another new one-gigawatt project in the country will be constructed by UAE’s clean energy champion Masdar - the company’s inaugural project in the country.

Masdar, in turn, is currently present in all five Central Asian countries, running wind farms in Uzbekistan, and exploring photovoltaic generation in Turkmenistan, hydropower plants in Kyrgyzstan, and floating solar panels in Tajikistan. In addition, Masdar is expanding in the South Caucasus, especially in Azerbaijan where it runs Garadagh Solar Park, the largest operational solar power plant in the region. In November 2023 Masdar also signed a joint MoU with Acwa Power and Azerbaijan state oil company SOCAR for 500MW clean energy generation in Nakhichevan.

The UAE in general has had the largest economic footprint in the region, with massive investments into oil & gas, petrochemicals, and transportation flowing to Kazakhstan and Turkmenistan in particular through Mubadala Investment Company. In recent years, the UAE expanded trade and investments in energy, agriculture, tourism, and logistics with the other three Central Asian countries, with the investment projects in Uzbekistan alone reaching over 10 billion USD.

The warm relations of Central Asian nations with another Gulf monarchy - Qatar - acquired an additional economic boost following the series of high-level visits in recent months. In an ambitious attempt to overhaul economic relations and trade in Uzbekistan Qatar signed several agreements amounting to 12 billion across several sectors, such as banking, energy, logistics, and transportation, including the launch of a 1600 MW thermal power plant by the Qatari Nebras Power in cooperation with French and Japanese partners. In addition, Uzbekistan invited Qatar to partner on the ambitious Trans-Afghan Railway linking Uzbekistan, Afghanistan, and Pakistan.

In February 2024 Kazakh president visited Qatar, calling for intensified Qatar-Kazakh cooperation with potential investment opportunities ranging from LNG and petrochemicals to agriculture, mining, and tourism. Again, the energy came first with Qatari Nebras Power and Pearl Overseas agreeing to build two power plants in the country. This was followed by an agreement to sell the government-owned telecom operator to the Qatari Power International Holding, allowing the company to make inroads into the country’s tech sector, and Qatari Lesha Bank entering negotiations with Baiterek National Managing Holding on purchasing its share in a Kazakh bank.

Beyond energy and transportation, two dominant destinations for Arab investments, Central Asia offers Gulf states and financial institutions an untapped potential for Shariah-compliant Islamic banking, as well as tourism, and agriculture. In turn, Kazakh and Uzbek state-funded IT Hubs are seeking to establish a presence and attract venture investments in Saudi Arabia and UAE which are becoming the global hotspots of digital innovation and venture capital exploring cutting-edge technologies such as AI.

With the inaugural Gulf Cooperation Council and Central Asia Summit in 2023 indicating shared cultural affinity and understanding of today’s geopolitical challenges, the Central Asian nation's economic opportunities and investment attraction policies remain the key factor driving increased engagement with the Arab world. Notably, many such projects also attract Chinese Belt and Road Initiative (BRI) investments, mutually reinforcing trade, connectivity, and economic growth. Today this is a truly win-win partnership with Central Asia getting much-needed investments and infrastructure and the Gulf States finding new export markets and securing a foothold in the strategic region.