Kazakh-Afghan Relations: The Competition for Trade and Connectivity in Central Asia

Eldaniz Gusseinov is a Non-Resident Research Fellow at the Haydar Aliyev Center for Eurasian Studies and a Columnist for Daryo

In recent years, the relationship between Kazakhstan and Afghanistan has been changing significantly, driven by stronger economic and diplomatic ties. A major turning point came in December 2023 when Kazakhstan decided to remove the Taliban from its list of banned organizations. This decision has opened up new opportunities for cooperation and positioned Kazakhstan as a key player in Central Asian diplomacy. In this article, we take a closer look at how Kazakhstan and Afghanistan are working together economically to build infrastructure, navigate regional changes, and how other major countries are influencing their partnership.

Economic and Diplomatic Cooperation

Kazakhstan has emerged as one of the key economic partners for Afghanistan, particularly in the agricultural sector. In 2023, bilateral trade between the two nations exceeded $600 million, with Kazakhstan exporting over $504.2 million worth of goods to Afghanistan. The primary exports include flour (58.3%), wheat (19.4%), flat rolled non-alloy steel (4.2%), and sunflower oil (3.4%). Conversely, Afghanistan’s exports to Kazakhstan are modest, amounting to approximately $17.9 million, mainly consisting of mineral water and grapes.

The removal of the Taliban from Kazakhstan’s banned list signifies a strategic move to enhance economic and humanitarian ties. Kazakhstan’s accreditation of a temporary envoy for Afghan affairs underscores its commitment to fostering deeper bilateral relationships. Despite facing challenges such as delays and quality issues in flour shipments, both countries are steadfast in their efforts to expand cooperation across various sectors, including agriculture, mining, transportation, and infrastructure.

Infrastructure Projects and Regional Integration

One of the cornerstone projects in Kazakh-Afghan cooperation is the construction of a logistics hub in Afghanistan’s Herat province. This initiative, undertaken jointly with Turkmenistan, aims to create a transportation nexus along the North-South corridor, enhancing cargo movement and hydrocarbon transportation. The Herat logistics hub is projected to handle up to one million tons of hydrocarbon traffic annually, facilitating the export of Russian oil to Pakistan and other South Asian markets.

Additionally, Kazakhstan is actively involved in developing multimodal transport corridors that connect Central Asia with South Asia. Plans to build a new railway linking Turkmenistan’s western border through Afghanistan to Pakistan and India exemplify Kazakhstan’s commitment to improving regional connectivity. These infrastructure projects are complemented by Kazakhstan’s interest in the TAPI gas pipeline, which seeks to transport gas from Turkmenistan through Afghanistan to Pakistan, leveraging existing Soviet-era infrastructure.

Trade Expansion and Economic Aspirations

Kazakhstan’s economic strategy towards Afghanistan is multifaceted, aiming to prevent a worsening humanitarian situation and expand its market presence. The target to increase bilateral trade volume to $3 billion reflects Kazakhstan’s ambition to solidify its role as a major supplier of agricultural products, particularly wheat and flour, to Afghanistan. In 2023, Kazakhstan’s exports to Afghanistan grew by 54.1% compared to 2019, with significant increases in milling products, cereals, iron and steel, and edible oils.

However, Kazakhstan faces shifting regional market dynamics, notably from Uzbekistan, which reported bilateral trade with Afghanistan amounting to $866.9 million in 2023, surpassing Kazakhstan’s $615 million. Kazakh and Uzbek proactive engagement with Afghanistan through joint transportation projects and export agreements may indicate evolving dynamics in Central Asian trade relations. While Kazakhstan is actively promoting transport corridors through the Western part of Afghanistan via Turkmenistan, Uzbekistan is actively promoting the Termez – Mazar-e-Sharif – Kabul – Peshawar railway through the Eastern part of the country. It is worth adding that Kazakhstan has shown interest in participating in the latter project as well. These market dynamics necessitate strategic adjustments from Kazakhstan, including diversifying its export routes and exploring new markets to mitigate risks associated with other economic players in the region.

Competition Between Kazakhstan and Russia in the Wheat Export Market

In recent years, global trade in agricultural products, particularly wheat, has become an area of fierce competition among major exporters. Kazakhstan and Russia, being among the leading producers and exporters of wheat, face a number of challenges and opportunities that define their positions in the international market.

Mutual Bans and Trade Tensions

In April 2023, Kazakhstan imposed a ban on the import of grain, initially applying to wheat imports by road and later extending it to all modes of transport until the end of 2024. The primary reason was to protect its agricultural producers from “gray imports,” which pressured domestic wheat prices. This move aimed to prevent the re-export of Russian grain through Kazakhstan and support local farmers amid expectations of a record grain harvest. By September 2023, Kazakhstan had threshed over 20 million tonnes of grain, anticipating a harvest exceeding 25 million tonnes.

In retaliation, Russia, one of the world’s largest wheat exporters, responded by increasing its grain exports to Kazakhstan’s traditional markets in Central Asia and Afghanistan. In 2024, Russian grain exports surged by 16% to 40.2 million tonnes, with Afghanistan becoming the largest market for Russian flour, receiving 270,000 tonnes – five times more than the same period in 2023. This escalation marks a significant intensification of trade competition between the two nations.

Impact on Bilateral Trade and Regional Markets

Kazakhstan’s ban significantly impacted its wheat exports to Afghanistan, dropping from 2.246 million tonnes to 0.178 million tonnes – a 75.5% decrease. Concurrently, Russia’s flour exports to Afghanistan rose sharply, positioning Russia as a dominant supplier in the Afghan market. This shift not only affects bilateral trade volumes but also alters the competitive dynamics within Central Asian agricultural markets.

The mutual bans and ensuing trade tensions have led to significant logistical challenges. Kazakhstan has struggled to increase wheat supplies to Afghanistan, prompting a deal with Russia. However, sanctions on Russia have created new opportunities for Kazakhstan to expand its grain exports to the European market. The European Union’s imposition of a €95 per tonne duty on Russian grain has allowed Kazakhstan to position itself as an alternative supplier, despite risks related to the verification of grain origins.

Potential Resolutions and Future Outlook

Both countries recognize the need for compromise to mitigate the adverse effects of their trade disputes. Kazakhstan’s Grain Union has proposed negotiating an earlier lift of the wheat import ban. This initiative is driven by Kazakhstan’s ambition to secure new export markets, including China, which plans to increase grain imports to 2 million tonnes in 2024. Additionally, Chinese investments in Kazakhstan’s agro-industrial sector, such as CITIC Construction’s $1.07 billion wheat processing plant, underscore the potential for diversified trade relations.

To navigate this trade war, Kazakhstan must enhance its logistical infrastructure and diversify export routes, including the development of the Trans-Caspian Corridor. Meanwhile, ensuring strict adherence to EU standards will be crucial for penetrating European markets and avoiding further trade complications. Collaborative efforts to standardise grain quality and improve trade transparency can also help build trust and stabilise bilateral economic relations.

Strategic Adjustments and Market Diversification

In response to regional competition and geopolitical shifts, Kazakhstan has sought to diversify its export markets beyond Central Asia. The European Union’s imposition of a €95 per tonne duty on Russian grain presents an opportunity for Kazakhstan to expand its grain exports to Europe. Kazakh exporters are exploring the use of Baltic Sea ports to increase grain shipments to EU countries, aiming to capitalise on the void left by sanctioned Russian exports. However, this strategy is not without risks, as the EU plans to conduct genetic studies to verify the origin of grains, potentially complicating Kazakhstan’s efforts to penetrate the European market.

Simultaneously, Kazakhstan is enhancing its logistical capabilities to support increased exports. The development of new railways and the modernization of transport infrastructure are critical to sustaining growth in grain and flour exports. Companies like Kentau Transformer Plant, Kaspy Group, ERG Exploration, and Kazakhmys Barlau are actively participating in joint ventures and infrastructure projects, leveraging their expertise to bolster Kazakhstan’s economic footprint in Afghanistan.

Influence of Foreign Players

Kazakhstan’s approach to Afghanistan is significantly influenced by major foreign players, each shaping the bilateral relationship through their respective geopolitical and economic agendas.

• Russia: Russia plays a crucial role in Kazakhstan’s economic projects with Afghanistan, particularly in flour exports and infrastructure development. The collaboration on the Herat logistics hub and increased Russian flour exports underscore Russia’s influence in shaping regional trade dynamics.
• China: While China’s direct influence on Kazakhstan’s policies towards Afghanistan is less pronounced, its investments in regional transit and transportation projects indirectly support Kazakhstan’s strategic objectives. The collaboration among Kazakhstan, Afghanistan, and Turkmenistan to develop transit infrastructure enhances trade routes that benefit both Kazakhstan’s and China’s expanding trade networks.
• United States: The United States maintains a complex relationship with Kazakhstan, characterized by Kazakhstan’s independent policy prioritizing regional stability and economic cooperation. Despite the Taliban’s interest in partnering with Kazakhstan in the mining sector, Kazakhstan remains cautious, balancing its economic ambitions with security concerns.
• Turkey: Turkey’s influence is evident in sectors like the sunflower oil market, although its direct impact on Kazakhstan’s Afghanistan policy is limited. Turkey’s consultations within the Organization of Turkic States and its exploration of joint projects with Azerbaijan in Afghanistan indicate a nuanced presence in the region.

Humanitarian Initiatives and Sustainable Development

Beyond economic and infrastructural collaborations, Kazakhstan is committed to humanitarian initiatives aimed at supporting Afghanistan’s socio-economic recovery. The proposal to establish a United Nations Regional Centre for Sustainable Development Goals (SDGs) in Almaty reflects Kazakhstan’s leadership in addressing regional challenges such as climate change, gender inequality, and economic development. This initiative, supported by the United Nations Development Programme (UNDP) and the European Union, seeks to foster regional cooperation and align efforts with the global 2030 Agenda for Sustainable Development.

Kazakhstan’s humanitarian aid to Afghanistan, including 1,600 tonnes in assistance to Herat province following severe earthquakes, underscores its dedication to alleviating Afghanistan’s humanitarian crises. The focus on sustainable development and regional integration through initiatives like the SDG centre highlights Kazakhstan’s holistic approach to fostering long-term stability and prosperity in Afghanistan and Central Asia.

Challenges and Future Prospects

Despite the positive trajectory, Kazakh-Afghan relations face several challenges that could impede progress. The lack of a direct border between Kazakhstan and Afghanistan necessitates reliance on neighbouring countries like Turkmenistan and Uzbekistan for trade and infrastructure projects, complicating coordination and strategic alignment. Additionally, regional competition and geopolitical tensions require Kazakhstan to navigate a complex landscape of alliances.

Moreover, Kazakhstan’s cautious approach to direct engagement with Afghanistan is influenced by security concerns and the presence of international terrorist organizations in Afghanistan. The absence of substantial Kazakh investments in Afghanistan’s economy further highlights the cautionary nature of this bilateral relationship. To overcome these hurdles, Kazakhstan must engage in proactive diplomacy, seek common ground with Central Asian neighbours, and enhance cooperation through multilateral platforms such as the Shanghai Cooperation Organization (SCO) and regional business forums.

Looking Ahead: Key Developments

Several key developments are anticipated to shape the future of Kazakh-Afghan relations:

1. Implementation of Major Infrastructure Projects: The completion of railways, gas pipelines, and logistics hubs will be pivotal in enhancing regional connectivity and facilitating trade expansion.
2. Increase in Trade Volumes: Efforts to surpass the $3 billion target in bilateral trade will require sustained economic policies, improved logistical infrastructure, and strategic market diversification.
3. New Agreements and Partnerships: The signing of new economic agreements across various sectors will bolster cooperation and open new avenues for investment and trade.
4. Cooperation on Multimodal Transport Corridors: Developing routes like the “Belarus–Russia–Kazakhstan–Uzbekistan–Afghanistan–Pakistan” corridor will enhance transit capabilities and support regional integration.
5. International Conferences and Forums: Hosting events focused on fostering cooperation and addressing emerging issues will strengthen diplomatic ties and facilitate knowledge exchange.
6. Establishment of Joint Working Groups and Technical Committees: Collaborative efforts on specific projects and initiatives will ensure coordinated implementation and effective problem-solving.

Kazakh-Afghan relations are at a pivotal juncture, characterised by robust economic partnerships, strategic infrastructure projects, and active diplomatic engagement. Kazakhstan’s role as a middle power in Central Asia, combined with its strategic initiatives to enhance regional connectivity and economic integration, positions it as one of the key players in Afghanistan’s socio-economic recovery and regional stability. However, navigating the complexities of regional competition, geopolitical influences, and infrastructure challenges requires sustained diplomatic efforts and strategic foresight.

As Kazakhstan continues to promote economic growth and sustainable development in Afghanistan, its ability to balance regional interests, leverage foreign partnerships, and address humanitarian needs will be crucial in shaping a stable and prosperous Central Asian landscape. The future of Kazakh-Afghan relations hinges on collaborative efforts, proactive diplomacy, and a shared vision for regional integration and development.

The opinions expressed are those of the contributor, not of the RSAA.