Taken as a unified economic entity, the European Union constitutes the main trading partner of the Central Asian states. In 2007, it accounted for close to 30 percent of the trade of Central Asia, or a total of US$30 billion, compared to US$21 billion with Russia and around US$18 billion with China during the same year. A breakdown of these figures by state reveals the predictable dominance of Italy and Germany—followed by France, Great Britain, and the Benelux countries—but also demonstrates the rapid rise of Central Europe. Former allies of the Eastern Bloc and now EU member states, the countries of Central Europe have unexpectedly offered opportunities for economic collaboration with Central Asian states, in particular with Kazakhstan.

BACKGROUND: Poland is one of Kazakhstan’s leading economic partners in Central Europe. The volume of trade between the two countries was US$ 884 million in 2007. Warsaw opened a chamber of commerce and industry in Kazakhstan and the Polish Diaspora in Kazakhstan appears active in the development of trade and small joint ventures. Polish investment in the economy of Kazakhstan increased by US$15 million in 2007. Regional cooperation agreements were signed between the region of Almaty and the Mazovia, one of the most dynamic areas of Poland, focusing especially on the construction sector, chemical industry, and agriculture in Kazakhstan.

While trade between Kazakhstan and Romania amounted to only US$103 million in 1999, it has increased significantly during this decade, due in large part to oil exports from Kazakhstan. In 2006, trade reached US$ 1.6 billion, but then fell by half to US$757 million in 2007. In 2008, total Romanian investment in the Kazakh economy stood at US$398 million, while Kazakh investment in the Romanian economy was just US$15 million. In 2006, discussions began on cooperation between the ports of Aktau and Constanta. In 2007, a Kazakh chamber of commerce and industry opened in Bucharest, primarily for cooperation in the energy, coal, and cars industries. Although in a more limited capacity, Hungary has also expressed interest in the Kazakh market. Trade between the two states increased by at least a factor of six between 2003 and 2007, reaching US$350 million in 2007. An intergovernmental commission has operated since 1995 and in Shymkent, a Hungarian trade representative opened in 2001. Thousands of Hungarians work on Caspian oil sites in Kazakhstan.

The Czech Republic is no exception. Again, trade sharply increased from US$173 million in 2004 to US$336 million in 2007. In 2008, both states agreed to create a joint chamber of commerce and industry. Prague also has a well-established presence in Uzbekistan, where 37 companies operate with Czech capital. In 2006 and 2007, Prague indicated its interest in the Uzbek gas, chemical, glass, textile, and water industries. The two countries have cooperated in the mechanical engineering sector, as some of the trolley buses and trams in Uzbekistan were manufactured in the Czech Republic. Like other countries of the former Eastern bloc, the Czech Republic purchases much of its cotton from Tashkent. In 2006, cotton fiber accounted for two-thirds of the Czech imports from Uzbekistan. However, this figure will likely decline as the Czech textile industry weakens and as Uzbekistan seeks to process its own cotton.

IMPLICATIONS: The commercial items traded are varied. Although Kazakhstan's main exports are petroleum derived, Central European chemical products like cleaners and mechanical equipment, especially that related to transport, also constitute a significant portion of trade. In this sector, links between former socialist countries draw out the compatibility of industries. Central Europe is active in the furniture industry, mostly wood, and the shoe industry. Here it offers better value compared to Western European brands, which are too expensive and seen as high-end luxury products, while Central European products are aimed at Central Asian middle class consumers. Finally, collaborations in pharmaceuticals and agribusiness also seem poised to grow. Again, the economies of Central Europe can play an intermediary role. The price of their products better reflects the standard of living of Central Asian populations, who consider the Central European products to be more reliable than those from Asia. Chinese goods in particular are perceived to be of poor quality.

All of the countries in Central Europe and the Balkans see Central Asia as a future source of energy imports that could reduce their often-total dependence on Russian supplies. Although small compared to Western giants, their national oil companies seek their respective places in the Kazakh market. At the forefront of Central European energy activism is the Romanian company Petrom, the main operator for oil extraction and the sale of petroleum products in the Romanian market. It hopes to establish a cycle of petroleum exploration, extraction, and processing in Kazakhstan and to promote the geographical situation of Romania as a crossroads of export routes. Petrom is currently working on six sites in the regions of Kzyl-Orda and Mangystau, which have reserves amounting to more than 16 million tons of oil and 7 bcm of natural gas. In August 2007, KazMunaiGas purchased for the sum of 2,7 billion dollars a 75 percent stake in Rompetrol, which seeks to spread throughout the Balkans. With this purchase, which the European Commission approved, Kazakhstan is taking its first investment steps into Europe. Rompetrol has nearly 700 service stations in seven European countries, but KazMunaiGas is primarily interested in Rompetrol’s Petromedia plant on the banks of the Black Sea. This site would allow KazMunaiGas to double its refining capacity. Astana's strategy is to gradually establish an economic justification for engagement with the West via the BTC, the Odessa-Brody and Constanza-Trieste pipelines.

Other Central European states have established themselves in this sector in Kazakhstan, although on a small scale. The Polish company PetroInvest purchased a 50 percent stake in Embaiuneft, in return for which Kazakhstan has received 40 percent of the PetroInvest parent company, effectively making this a joint venture between Kazakhstan and Poland. The Hungarian energy company MOL also wants to expand its cooperation with KazMunaiGas. It is already involved in extraction at the Fedorov site in western Kazakhstan, where it controls 27.5 percent of the shares. The Croatian petrochemical consortium Kemokomplex, once belonging to Enver Moralic but now owned by Germany, also seeks to take part in the development of the petrochemical industry in Kazakhstan. Its subsidiary Aray Petroleum participated in the 2005 Ministry of Energy and Mineral Resources of Kazakhstan tender for exploration and extraction in the eastern section of Akjar, in the Aktiubinsk region.

CONCLUSIONS: Although the figures for Central Europe-Central Asia trade are obviously modest compared to economic giants like Russia and China, or major European powers like Germany, it is apparent that a bilateral commercial niche is forming. Central European producers can meet the consumption needs of populations and industries in Central Asia. The increase in trade with middle and even small powers can also weaken traditional geopolitical pressures related to commerce. Central Europe-Central Asia economic relations are not subject to "Great Games" between powers. They also offer Central Asian states the long-awaited opportunity to diversify their partners and thus increase their autonomy.

AUTHOR’S BIO: Sébastien Peyrouse is a Senior Research Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center (Washington-Stockholm). He is the co-author of China as a Neighbor: Central Asian Perspectives and Strategies (Silk Road Monograph, April 2009) and the author, co-author or editor of seven books on Central Asia in French.  He is also an expert for the European Union-Central Asia Monitoring, launched by the Centre for European Policy Studies (CEPS, Brussels) and Fundación para las Relaciones Internacionales y el Diálogo Exterior (FRIDE, Madrid).