The country is still a dominant economic power but its authority is challenged by Western sanctions, the rating agency says. Russia’s economic pull in the Eurasian Economic Union (EEU) remains strong despite geopolitical tensions and Western sanctions, according to Moody’s. The rating agency, however, noted that growing uncertainty is undermining Moscow’s role as a major diplomatic player and economic hub.
According to the report, the conflict in Ukraine has led Central Asian countries to reassess their trade routes, export markets, and investment sources, as they seek to diversify. This could boost regional economic growth and transform labor markets, Moody’s wrote. The conflict has repercussions on the world stage, especially in the ex-Soviet Commonwealth of Independent States (CIS) nations, it added.
The report predicted that increased cooperation and infrastructure development between Central Asian countries will diminish Russia’s central role, as more diverse regional trade routes emerge as alternatives to the historical “hub and spoke” model that links Moscow to the former Soviet republics.
“We expect Russia’s diminishing power on the world stage to reshape geopolitical alliances in the CIS, particularly in Central Asia. China, the US, the EU, but also Türkiye and Iran, will play an increasingly prominent role,” Moody’s stated.
At the same time, trade between Russia and Central Asia has continued to rise, jumping by 28% in 2022 year-on-year, Moody’s said. The report indicated that economic cooperation has been growing within the Russia-led free trade zone.
Official statistics show that mutual trade between EEU member states has reached a record high of $83.3 billion so far this year.
The EEU, which is based on the Customs Union of Russia, Kazakhstan and Belarus, was established in 2015. It was later joined by Armenia and Kyrgyzstan. This year, Iran sealed a memorandum on free trade with the bloc. The union is designed to ensure the free movement of goods, services, capital, and workers between member nations.
