December 7, 2024
#Central Asia #EM Insight

Uzbekistan: A growing strategic partner for the European Union

In recent years, Uzbekistan has increasingly become a significant partner for the European Union (EU) through collaborative projects in socio-economic development, education, rule of law, border management, crime prevention, and environmental protection. These partnerships have accelerated trade, economic, and investment ties, positioning Uzbekistan as a crucial ally for the EU.

One of the cornerstones of this partnership is the Generalised Scheme of Preferences Plus (GSP+), which grants Uzbekistan preferential access to EU markets. This system has significantly boosted trade, with EU-Uzbekistan trade reaching $5.8 billion by the end of 2023, nearly a tenth of Uzbekistan’s total trade volume. This marks a substantial increase from $3.9 billion in 2020. Uzbekistan’s exports to the EU primarily consist of textiles, food products, and agricultural raw materials, while imports from the EU include machinery, equipment, vehicles, and chemicals.

Germany stands out as a key EU partner, with over 100 joint projects valued at more than $10 billion. German investments in Uzbekistan have increased elevenfold since 2017, and the number of enterprises with German capital has nearly tripled to 220 by April 2024. France also plays a significant role, ranking among the top ten countries in trade turnover with Uzbekistan. Italy and Hungary have further cemented their ties with Uzbekistan through strategic partnership declarations, highlighting the broadening scope of cooperation.

Central to this burgeoning relationship is Uzbekistan’s growing importance as a partner in Central Asia. In April 2023, Uzbekistan and the EU signed a memorandum of understanding to develop sustainable value chains for critical raw materials, such as copper, lithium, and titanium. These materials are vital for the EU’s economy, particularly in high-tech industries.

Interregional cooperation has also advanced, exemplified by the annual ministerial meetings under the Central Asia-European Union format. The upcoming Central Asia-European Union Summit, set to take place in Samarkand, underscores Uzbekistan’s pivotal role in the region. This summit, a landmark event, will focus on enhancing regional cooperation and could significantly impact the Trans-Caspian International Transport Route (TITR), also known as the “Middle Corridor.” The EU plans to invest approximately $10 billion in this initiative, which offers an alternative to the Northern Corridor and aims to restore and strengthen global logistics chains.

The “Middle Corridor” is gaining strategic importance due to geopolitical tensions that disrupt traditional trade routes. The World Bank notes that this corridor could diversify East-West routes, providing resilience against geopolitical shocks. The summit may also discuss the Enhanced Partnership and Cooperation Agreement (EPCA) with Uzbekistan, Kyrgyzstan, and Tajikistan. For Uzbekistan, this agreement, which has been initialled, promises to deepen economic ties, including in investment, trade, services, and intellectual property, aligning with World Trade Organisation standards.

Security concerns in Central Asia, particularly regarding Afghanistan, are also likely to feature prominently at the summit. Stability in this region is crucial for both Uzbekistan and the EU, offering opportunities to stabilize transport and logistics networks and access critical raw materials.

The evolving relationship between Uzbekistan and the EU is poised to open new avenues for both parties. For the EU, Uzbekistan and Central Asia offer alternatives for stabilizing supply chains and securing essential raw materials. For Uzbekistan, the EU partnership presents opportunities to access new markets, address environmental and security challenges, and diversify foreign policy engagements. This strategic alliance underscores the mutual benefits of deepened cooperation and shared development goals.

By Bunyod Tillakhujaev, Chief Specialist at the “Development Strategy Center” Uzbekistan

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