ASTANA – As risks around key maritime chokepoints such as the Strait of Hormuz intensify, Central Asia is increasingly being repositioned from a transit option into what Jihad Azour, director of the International Monetary Fund (IMF)’s Middle East and Central Asia Department, described in an interview with The Astana Times as a “transit hedge,” offering alternative routes for trade and energy flows amid rising geopolitical uncertainty.
Jihad Azour, Director of the Middle East and Central Asia Department at the International Monetary Fund. Photo credit: IMF Photo/ Joshua Roberts On how this situation could affect the attractiveness of overland corridors through Central Asia, especially as maritime routes come under pressure and shipping and insurance costs rise, Azour said their importance will clearly increase.
“When key chokepoints like the Strait of Hormuz become riskier and more expensive, trade and energy flows are reassessed not only in terms of cost, but also availability and geopolitical exposure. In this context, Kazakhstan and Central Asia have moved from being a transit option to becoming a transit hedge,” he said.
“The Middle Corridor across the Caspian Sea is no longer just an alternative on paper. It is a real opportunity to create resilience and allow firms and governments to plan accordingly,” he added. However, he cautioned that while this is an opportunity, the capacity of overland routes remains limited.
Infrastructure constraints and the level of coordination required between countries make these routes more complex than maritime shipping. Addressing this requires three things. “One is to scale up infrastructure by improving quality and investing in more modern systems.
Another is to strengthen coordination between institutions across countries, including harmonizing customs rules. And third is to allow the private sector to use different logistics facilities to ensure more seamless integration of value chains,” Azour said. The same geopolitical tensions reshaping trade routes are also reverberating through energy markets.
Hormuz risk: a double-edged sword for oil exporters like Kazakhstan With the war in the Middle East sending economic shockwaves through Central Asia, exposing the region’s vulnerability to global disruptions even as oil exporters like Kazakhstan see short-term gains, Azour said this situation presents both an opportunity and a risk.
Ongoing disruption in oil markets could provide upside for Kazakhstan but also pose risks, depending on the shock’s duration and policy responses. According to him, higher oil prices can deliver a short-term boost to the economy and strengthen fiscal and external balances.
Yet, they also create pressure on the global economy due to inflation risks. “Therefore, volatility in oil prices and the risk of inflation transmission are the two main risks for Kazakhstan at this stage,” he said.