At the Crossroads of Asia, Uzbekistan Reaches Out to the Gulf

For centuries, an invisible thread has connected what is now Uzbekistan and the GCC-member states: the famous Islamic scholar Imam Al-Bukhari (AD 810-870). Al-Bukhari belonged to the non-Arab inhabitants of Bukhara, which was one of the seven sacred cities of the Muslim world and a center of culture and science. After his childhood studies, Imam al-Bukhari made his way to Mecca. As his secretary Ibn Abu Hatam al-Varraq relates: “Al-Bukhari always said,: ‘When I reached sixteen, I had learned by heart the teachings of Ibn al-Mubarak and Vaki and then I began to study the works of the other contemporary followers of the Prophet (saas). After that, I went on pilgrimage to Mecca with my mother and brother Ahmad.’” Having lived in Mecca for two years, he made his way to Medina, then to Basra in Iraq, a leading center for studying the hadith.

Despite their limited interaction during the twentieth century due to geopolitical restrictions, a consistently growing mutual interest has sprouted between Uzbekistan and the Gulf. Today, their engagement has been further encouraged by the Gulf states’ insistence on diversifying their global relationships. Uzbekistan possesses a long and rich Islamic history, embodied in the figure of al-Bukhari, which the Uzbek government has leveraged to improve ties with states across the Muslim world, including the Gulf states. The country is home to several Islamic historical and religious sites and is a major center of Islamic learning and culture. It is an important destination for Islamic pilgrimage and tourism, and has been an influential force in the Muslim world for centuries. This role is not always easily visible—particularly in the West, where the central role of the Gulf states in Islamic culture and finance overshadow other Muslim regions—but there remain significant Uzbek contributions to Islam that are important to other Muslim societies, like those of the Gulf.

Naturally, foreign interest in Uzbekistan has as much to do with its strategic geographical position as its importance to Islam. Uzbekistan borders Afghanistan, Turkmenistan, Tajikistan, and Kyrgyzstan, and forms a vital part of the land route of China’s “Belt and Road Initiative.” Uzbekistan is also one of the world’s key cotton producers and boasts significant mineral, gas, and oil reserves. In addition to these resources, it exports a significant amount of natural gas. As a result, Uzbekistan shares a similar interest in economic diversification that drives much of the Gulf’s economic policies. Given the obvious potential for greater cooperation between Uzbekistan and the GCC states, it is important to evaluate the future of these relationships, as well as the extent to which shared Muslim identities and geopolitical transformations will shape their ongoing engagement.

Shared Muslim Identities

Islam has a long and complex history in Uzbekistan, having been present in Central Asia since the seventh century. The majority of Uzbeks follow the Hanafi school of Sunni Islam. Shared Muslim identities facilitate closer relationships across several sectors. Perhaps the most obvious, culture and tradition, are closely tied to religious identity.

However, shared Islamic values also enable economic collaboration via the development of Islamic banking and finance. These links have grown quickly under Uzbek President Shavkat Mirziyoyev’s leadership. In contrast to previous Uzbek leaders—notably longtime strongman leader Islam Karimov, who was deeply influenced by the Soviet Union’s policy of state atheism—President Mirziyoyev “views Islam as means of inspiration and liberalization of society.” The wealthy GCC states are ideal partners for Uzbekistan to expand its Islamic banking and finance sector. In 2021, Uzbekistan hosted the Islamic Development Bank’s annual summit. The bank, headquartered in Jeddah, Saudi Arabia, has invested approximately $2 billion in Uzbekistan. A new law planned for promulgation in late 2023 will attempt to enhance the efficiency of the Uzbek Islamic banking and investment sector, bringing Uzbekistan closer to its neighbors, Kazakhstan and Kyrgyzstan, whose Islamic finance infrastructure is significantly more developed.

One source, who requested to remain anonymous, remarked that cultural similarities, including the importance of tribes and clans in Central Asia, also contribute to close connections with the Gulf leadership. Personal relations between Gulf elites and Uzbek nationals are nurtured through culturally significant activities such as hunting and equestrian activities.

Commercial and Factors

In August 2022, the Saudi-Uzbek Business Council oversaw the signing of 13 agreements between Riyadh and Tashkent altogether worth $12 billion. The number of Saudi-owned enterprises in Uzbekistan has increased gradually over the past decade. At the same time, Saudi investments in Uzbekistan have skyrocketed; by 2021, Saudi Arabia’s annual stake in Uzbekistan reached $1.5 billion, up from only $88,000 four years earlier. Increasingly strong relationships have been formed, most notably in the energy infrastructure sector. According to the estimates of the Center for Economic Research and Reforms under the Administration of the President of the Republic of Uzbekistan (CERR), industrial expansion will drive economic integration with the GCC states. Areas where manufactured goods and commodities are in high demand are of particular interest to both Uzbekistan and its Gulf benefactors. One major and unsurprising example is the involvement of Saudi Aramco in the exploration, production, and processing of oil and gas in Uzbekistan. Joint projects with Saudi companies, including the Al-Habib Medical Group and ACWA Power, have been successfully implemented and continue to grow. With the assistance of Al-Habib, cutting-edge medical technology has been introduced into the healthcare management system of Uzbekistan.

Among the key fields for collaboration is the country’s drive toward renewable energy. ACWA Power recently signed an agreement with the Ministry of Energy for the establishment, operation, and maintenance of a series of wind-power plants with a capacity of 500-1000MW, altogether worth $550 million to $1.1 billion. ACWA Power’s other deals with Tashkent include a $1.2 billion scheme to develop a 1.5GW combined cycle gas turbine power plant, and a memorandum of understanding to set up a training center for Uzbek students and professionals. The application of the Kingdom’s experience in the transition to a low-carbon economy is certain to make a significant contribution to the development of environmentally friendly technologies, and will likely make it possible for Uzbekistan to produce 25% of electricity from renewable energy sources by 2030.

Local energy-economy experts suggest that this is a big step forward, but also point out some challenges involved in the implementation of such ambitious projects. Among these is the true efficiency of solar panels, which is very dependent on the topography and location of the country, the solar radiation available, the correct installation of panels, and maintenance costs. Because Uzbekistan sees 365 days of sun per year, solar technology has enormous potential to power Uzbekistan’s electricity grid. Nevertheless, uncertainties remain about the country’s ability to build and sustain a viable solar sector. The regulation of the solar sector also poses particular problems for the Uzbek government because the majority of solar power will likely be generated by private residences. The government has established a scheme to buy electricity from private producers, but the implementation of this plan will likely be difficult in reality.

While the Saudis are building a plant in Karakalpakstan, which serves the whole north-western part of Uzbekistan, the UAE is also building the Zarafshan wind farm in Navoiy, a city in southwest Uzbekistan. Zarafshan is the second of Masdar’s utility-scale projects in Uzbekistan, after the 100 MW Nur Navoi Solar Project. But the largest foreign investment in Uzbekistan is the Talimarjan Power project. This is run through the UAE’s Mubadala sovereign wealth fund, its main vehicle for foreign investments. So far, Mubadala has pumped money into a wide array of energy projects in the region. It has signed $10 billion worth of investment agreements in Uzbekistan, largely in power generation and distribution. Local experts have argued in interviews that both Saudi Arabia and the UAE remain keenly interested in developing Uzbekistan’s renewable energy sector. Other collaborations include the state-owned Abu Dhabi National Oil Company (Adnoc), which signed an agreement with an Uzbek company to provide strategic advice on upstream and downstream operations.

Increased investments and goodwill measures notwithstanding, there are several sticking points that may inhibit future ties between Uzbekistan and the GCC states. These can be addressed in various ways, such as improving the property rates, which is often crucial in attracting foreign investors, and improving institutional quality, the rule of law, and transparency. As these shifts and reforms progress, there are other directions in which collaborations can be expected. Uzbekistan’s rich agriculture sector is increasingly considering opportunities to export crops products to the Gulf, both for direct supply and for subsequent export.

Geography and Geopolitics

The geographic importance of Uzbekistan also shapes the Gulf’s multisector policies. The proximity to Afghanistan makes both Saudi Arabia and the UAE concerned about the resurgence of Islamic extremist terror groups in Afghanistan and how this might spread into neighboring states. In that sense, political and military links with Uzbekistan may serve in combating extremism. At the same time, Afghanistan has been important for the GCC member-states’ spheres of influence: while Doha has hosted the Taliban’s representative office since 2013, and played an important role in the Afghan talks, the UAE has sought to take advantage of the country’s current situation as well. Despite some recent tensions, Uzbekistan has perhaps the best relations with the Taliban of local foreign powers. The Uzbekistan government has economic links to the new government, even offering up to 60% of its electricity to Afghanistan. In the north of Afghanistan, the majority of the population are ethnic Uzbeks, which further adds to opportunities and motivations for collaboration. For the Gulf states, Uzbekistan’s geography and politics may be helpful for maintaining a good regional balance, and forging links with the Taliban government as well, despite much criticism since its return following the US’ withdrawal.

Another factor in Uzbekistan’s development—and its importance to the Gulf—has been China, which has sought to expand westward through Uzbekistan with its Belt and Road Initiative. In the seventeenth century, Uzbekistan was a key trade center on the Silk Road. Today, Chinese investment represents one of the biggest opportunities for Uzbekistan to restore its geopolitical significance in this region. Under its current leadership, Uzbekistan is trying to retake its central position in the BRI project, which also offers huge economic opportunities with the Gulf states. For example, Uzbekistan, in addition to the Central region, could serve as the passageway for economic collaborations between China and the GCC states, and would see clear benefits from this arrangement.

Finally, there is a topical factor, namely the impact of the Ukraine war. For more than 20 years, Russia’s Lukoil and Gazprom energy giants have played the largest role among foreign companies in developing Uzbekistan’s oil and natural gas fields. Sanctions on Russia have affected the transfer of technology and equipment that Lukoil and Gazprom require for their projects and this will impact the two Russian companies’ projects in Uzbekistan. There have been long discussions in Uzbekistan about the desirability of being less dependent on Russia for energy, and the fear of losing economic energy sovereignty. Given the Western sanctions, direct Russian investments are hamstrung, but are likely to remain in place for some time. The existing schemes that give Russian companies a role in Uzbekistan’s energy sector offer opportunities for local firms to develop partnerships with Russian companies, which have real and established long-term value for Tashkent.

On another hand, it is a continuing challenge for Uzbekistan to maintain a balance between Russia and the West, which has become much more urgent for the country since Russia’s invasion of Ukraine. For example, the recent visit of U.S. Secretary of State Antony Blinken to Uzbekistan aimed to convince the Central Asia states—both Kazakhstan and Uzbekistan—not to help Russia to evade international sanctions. In the medium term, and depending on the outcomes of the Ukraine conflict, it may be that Russia permanently loses its role in Uzbekistan, creating openings for the Gulf states to invest and share their expertise. Much remains unpredictable. As one local expert commented, “I don’t think that Uzbekistan will be affected by this [the Ukraine crisis], especially when it comes to the Gulf nations, but Uzbekistan could see opportunities. If the demands for Russian goods and services decline, due to the sanctions, this is the market. Anyone can fill that gap, so why not Uzbekistan, too, in terms of exporting products?” The region will most acutely feel the impacts of the war in the mid- to long-run, likely both positive and negative. In other words, the geographic location and geopolitical dynamics are certainly important factors to consider for further considerations of Gulf-Uzbek relations.

To sum up, while the legacy of Imam Al-Bukhari is still remembered in the GCC states, and Uzbek Muslim identities play a crucial role in bridging between Uzbekistan and the GCC states, the energy rich Gulf states are growing their importance for Uzbekistan’s government, particularly through their investment activities. The geographic location of Uzbekistan at the crossroads of Asia makes it a vital place in times of geopolitical global changes and economic strategy. In addition, Uzbekistan’s neighbor, Afghanistan, has created complications that increase the value of Uzbekistan for the Gulf’s geopolitical ambitions.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.