Nasiba Ergashova’s article, prepared with the supervision by Dr. Ulugbek Ishankhodjaev, examines the growing importance of Central Asia in the global race for critical minerals and analyses how the C5+1 framework has become a key platform for U.S. engagement with the region. The article shows that minerals such as uranium, copper, lithium, tungsten, rare earth elements and antimony are no longer only economic resources, but strategic assets linked to clean energy, defence technologies, semiconductors and supply-chain security. The article highlights that since 2022, U.S. policy toward Central Asia has shifted from a primarily security-oriented agenda toward resource diplomacy and supply-chain diversification. The creation of the C5+1 Critical Minerals Dialogue, the involvement of Kazakhstan and Uzbekistan in the Minerals Security Partnership Forum, and recent investment frameworks demonstrate Washington’s growing interest in the region’s mineral potential. At the same time, the article stresses that U.S. engagement faces serious structural constraints. China already holds a dominant position in processing and refining critical minerals, while Central Asia’s geography, limited infrastructure, governance risks and investment barriers make large-scale Western involvement difficult. The author argues that diplomatic progress alone is not enough unless it is followed by financing, processing capacity, geological mapping, and stronger investment protection mechanisms. Overall, the article presents Central Asia as an increasingly important arena of geoeconomic competition between the United States and China. It concludes that if Washington wants to build a durable presence in the region’s minerals sector, it must move from dialogue to implementation, transforming C5+1 initiatives into concrete projects, long-term investments and reliable supply-chain partnerships. * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

Afghanistan occupies a dominant position in the water geography of South Asia. The glaciers and snowfields of the Hindu Kush feed river systems that flow eastward toward Pakistan, making Afghanistan a key actor in regional hydrology. Despite its economic vulnerability and international isolation, the Taliban government controls the headwaters of rivers that Pakistan cannot replace through alternative sources. Since coming to power, the Taliban government has increasingly viewed control over upstream rivers not only as a tool for the country's development, but as a political lever and a means of asserting sovereignty and exerting pressure on Pakistan in the absence of traditional diplomatic or economic instruments. Firstly, the situation is compounded by the fact that neither Afghanistan nor Pakistan has ratified the 1997 UN Convention on the Law of the Non-Navigational Uses of International Watercourses. The two countries have also never concluded a bilateral agreement on water resource allocation, which further weakens the institutional foundation for cooperation. The situation is further complicated by the fact that any formal water-sharing agreement would effectively amount to recognition of the Durand Line as a legitimate international border - a position that contradicts Afghanistan's longstanding policy, reinforced under the Taliban. Secondly, the Taliban's 2025 announcement of plans to construct a dam on the Kunar River - openly framed as a response to Pakistani pressure - signals that water has transformed from a latent irritant into an active element of bilateral confrontation. Although Pakistan is the downstream state on the Kabul River, it currently consumes the majority of usable water, largely due to Afghanistan's longstanding inability to develop upstream infrastructure. This balance is becoming increasingly fragile as Afghanistan advances the construction of 12 dams designed to generate 1,177 MW of electricity, which could reduce annual water inflows to Pakistan by nearly 3.7 billion cubic meters (16–17%), posing serious risks to water security, food security, and economic stability. Afghanistan uses the waters of the Kabul River primarily for direct drinking water supply to settlements along its banks. Pakistan directs these same waters toward large-scale strategic purposes: agricultural irrigation, hydroelectric power generation at facilities such as the Warsak and Mohmand dams, and drinking water provision for approximately 20 million people dependent on the Kabul River system. Taliban representatives explicitly articulated the strategic logic behind their actions, while some experts described water as “the only non-military weapon” available in response to Pakistani interference in Afghanistan’s internal affairs. Water infrastructure is thus no longer viewed solely as a means of achieving water independence, but also as an instrument of coercive diplomacy amid active bilateral confrontation. Nevertheless, an important limitation must be noted. Afghanistan's financial resources are constrained, its technical capacity has been weakened by decades of conflict, and few foreign contractors are willing to operate under Taliban oversight. The political signal of dam construction currently far outpaces actual engineering capacity on the ground. Thirdly, India's deepening involvement in Afghan hydropower has transformed a bilateral dispute into a triangular geopolitical confrontation. The Salma Dam - which irrigates tens of thousands of hectares and supplies water to the population of Herat Province - and the planned Shahtoot Dam on a tributary of the Kabul River will further strengthen India's infrastructural influence in Afghanistan's water sector. Beyond these projects, India has reportedly committed to investing approximately $1 billion in total, exerting a decisive influence on the direction and pace of dam construction given Kabul's limited finances. Pakistan, in turn, views this not as neutral assistance but as India's strategy to create "hydraulic compression" from two sides, targeting the agricultural base of southern Punjab, Sindh, and Balochistan. The reason is that in May 2025, India suspended the Indus Waters Treaty, threatening the water security of eastern Pakistan, while India-backed dam construction in Afghanistan applies pressure from the west. Fourthly, the dynamics of the dispute reveal a fundamentally self-destructive character for Afghanistan. Despite rising tensions, Afghanistan remains structurally dependent on Pakistan for supplies of basic foodstuffs: nearly 80% of its key imports from Pakistan consist of wheat, flour, and rice. This interdependence creates a paradox: any attempt by Afghanistan to restrict water flows in order to weaken Pakistan's agricultural sector would likely produce immediate adverse consequences for its own economy. A decline in Pakistan's agricultural output would drive up food prices, directly affecting Afghan markets due to their dependence on imported staple goods. In this sense, both states are economic "hostages" of the same river system, and coercive strategies risk generating mutual vulnerability rather than unilateral advantage. Consequently, water cannot be effectively weaponized without significant self-destructive costs. Fifthly, the dispute is compounded by the growing impact of climate change, which is gradually reducing the total volume of available water resources. According to the United Nations Development Programme, in 2023 Afghanistan ranked sixth among countries most vulnerable to climate change, and fourth in overall disaster risk. These climatic changes are exacerbated by the accelerated melting of Hindu Kush glaciers, which are key sources of the Kabul River system. As a result, the total volume of available water is declining even as demand continues to grow due to population growth and agricultural needs. Consequently, even minor upstream interventions carry heightened political sensitivity, as they are increasingly perceived through the lens of scarcity and existential risk. Water relations between Afghanistan and Pakistan are increasingly shaped by structural imbalance, a weak legal framework, and growing geopolitical competition. What was once a technical matter has become a politically sensitive domain influenced by infrastructure, external involvement, and strategic paradigms. Despite rising tensions, economic interdependence and Afghanistan's domestic constraints inhibit sustained unilateral pressure. As a result, while water disputes will likely intensify political tensions and trigger episodic crises, they are unlikely to escalate into direct armed conflict. Rather, water serves as a catalyst that amplifies existing mistrust and regional rivalry, while mutual vulnerability raises the costs of escalation - encouraging both sides, at least in the long term, toward negotiated management rather than open confrontation. * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

Introduction The security cooperation between Russia and Taliban of Afghanistan is not just a mere embodiment of achieving common understanding with each other in security realm. Nevertheless, the true importance of this agreement could be interpreted through analysing the timing and the circumstances of this event for both Russia and Taliban government. Although Moscow is slowly developing multifaceted relationship with Taliban, the security cooperation could be elevated as an acme of this relationship, notwithstanding, Afghanistan is well capable of strengthening Russia’s endeavour to reach out to the South Asian energy hungry markets through offering routes via its territory.  For Afghanistan, however, the military technical cooperation appears to be the most crucial topic as far as the ever-growing Pakistani military threat is concerned. Moreover, Kabul’s Russia “gambit” seems to involve more than just a security agreement alone, as Russia itself and its Moscow friendly Central Asian Countries would support Afghanistan at a time when the country is under mounting pressure from both Pakistan and global community. The Content of the Agreement Recently, on the margins of Moscow Security Conference organised on May 27, 2025, Russia and Taliban signed an agreement on “military technical cooperation”. Although the details of the signed document were not disclosed, there were some speculations circling around on various platforms about the genuine nature of this agreement. For example, “Afghanistan International” reported that “the head of Russia’s trade centre in Afghanistan said companies from Tatarstan could repair and refurbish military equipment used by the Taliban”. The agreement covers wider range of cooperation in weapons, military technologies, licenses, and joint developments between Russia and the Taliban government. Discussions also included potential Taliban access to Russian military equipment and weapons systems. Beyond hardware, Moscow committed to expanding cooperation with the Taliban across security, political, economic, and cultural sectors following Russia’s formal recognition of the Taliban government in may 2025. Sergei Shoigu, Secretary of the Security Council of the Russian Federation, also used the forum to call on Western countries to unfreeze Afghan government assets held in foreign banks, portraying the Russia as a counterweight to Western policy on Afghanistan. Apparently, the current meeting has been built upon a prior groundwork that was laid out as early as May 14, 2026, during a regional security meeting in Kyrgyzstan. Mr. Shoigu, then, described the growing Russia-Taliban relationship as a “pragmatic dialogue” and a “full-fledged partnership”, stating shared security concerns. Taliban’s participation in the forum came at a particularly sensitive moment when the Pakistani strikes in early 2026 had destroyed substantial amount of the Taliban’s military infrastructure including the NATO-standard munitions inherited in 2021. As a result, the Taliban’s munitions inventory was largely depleted, and Kabul’s defence budget reportedly remained in a chronic deficit. The blistering question though, could be “Does Russia have a capacity for delivering what it promises on paper”? considering the Moscow’s quite rich history of being unable to keep up with its assurances. On one hand, the protracted Ukraine war bogged down Russia’s military industrial complex in the country’s western frontier and eventually debilitated its capability to manufacture enough defence hardware intended for the foreign markets. On the other hand, unprecedented quantity of combined western sanctions on Russian economy also enormously impacted on the country’s ability of delivering military tech on foreign markets not to mention the potential influence of the secondary sanction policy on those who dares to strengthen dependency on the hardware Russia could provide with. For Russia, the agreement could represent one of the most important pillars of Moscow’s broader vision for establishing multidimensional relationship with the Taliban government. Russia has long been enjoying relatively wormer political and diplomatic understanding as well as good economic relations with Kabul. Naturally, the security relationship with Taliban including military-technical cooperation is regarded as a crucial aspect of that comprehensive relationship architecture. Moreover, Afghanistan, with a strong desire for having a good relationship with Moscow, might also embody a crucial geographical space for extending Russia’s desire to reach out to the greater South Asia’s energy market through Afghanistan. Here, because of this, an obvious trade-off for Russia could emerge. And the Russians ought to strike balance between playing a principal role in turbocharging, at list on paper at present, the Taliban’s ability to thwart any foreign military aggression and expecting Pakistan to greenlight exporting the Russian energy to further South Asia through Pakistan’s territory. Accordingly, Islamabad might slow or even block Russia’s ambition to explore new energy market in South Asia. Pakistan – Afghanistan standoff a trigger for Afghan’s Northward Diplomacy Islamabad’s Afghanistan strategy composed of a blended diplomatic and political pressures appear to be fundamentally transforming in nature. Until recently, Pakistan has been favouring diplomacy for resolving some of the crucial issues regarding Afghanistan, even though those challenges were of a fundamental importance to Islamabad. These challenges would involve terrorism and extremism, separatism, border issues, refugees and several other areas such as trade and connectivity.  Starting from the October 2025 however, everything begun to change when Pakistan’s military started so called “Operation Khyber Storm” and heavily bombed the alleged terrorist strongholds in the bordering provinces of Afghanistan.  The extraordinary nature of that October assault against Afghanistan could be the Islamabad’s apparent disappointment with the effectiveness of the continued diplomacy mixed with several rounds of talks and negotiations with the Taliban authority for resolving range of issues, the most important one being to prevent the TTP from using Afghanistan’s soil as a safe heaven and stronghold to launch further attacks on Pakistan. As a result, the Pakistan’s military has taken all the matters at its own hand as the authority in Islamabad has seemed to be done with continuing “useless” talks with Taliban. Therefore, Pakistan currently appears to be strongly confident in the military solution being only way going forward. Short military clash between India and Pakistan in May 2025, has said to be dramatically emboldened Pakistan to occasionally apply the military means to solve the deepest security issues it has with its neighbours particularly, with Afghanistan. The air warfare experience with India could have set a strong precedent for Pakistan’s military for further using the strategy of applying maximum pressure on Taliban for achieving a substantial concession on such pressing issues as border disputes and TTP questions going forward. As a result, the evolution of events on this direction has seemed to further push the Taliban government to become even more active in diplomacy blended with a search for a burgeoning strategic alignment with an alternative security provider such as Moscow. The China – Russia quarrel The Russia-Taliban agreement cannot be read without meticulously scrutinizing the Chinese place in the equation. Ostensibly, for the last several decades, China – Pakistan relations have risen to the level of “all-weather strategic cooperative partnership” as both parties would call it. Presently, the security is at the heart of this cooperation since almost 80 percent of the Pakistani military acquisitions are sourced from China. When it comes to the China’s position on the Islamabad’s security related issues with its neighbours, China almost exclusively (both overtly and covertly) sides with Pakistan. Beijing openly backed Pakistan during the May 2025 India-Pakistan clash providing Islamabad with a strong diplomatic support coupled with a reported real-time intelligence. Although China appears to be quite explicit about recognising Islamabad’s deep-seated security and geopolitical interests in Afghanistan, Beijing is also extremely cautious about balancing its economic and security interests in Afghanistan. China and Pakistan’s “ironclad” relationship is leaving relatively few options for Kabul other than just opting in Moscow for creating a counterbalance against extremely aggressive Pakistan. The more Afghanistan and Pakistan relationships heat up and grow into kinetic conflict, the more China and Russia might have to unwillingly choose to compete in AFPAC region. Moreover, Moscow’s solidarity with Taliban and willingness to strengthen its security capacity might, over the long run, impact on its economic interests since Islamabad could practically shut down any use of its territory as a corridor for Russian energy towards South Asian market. At the same time, however, China ought to also be ready for absorbing some economic loss in Afghanistan due to its exclusive support for Pakistan. Considering, Beijing has already secured several mineral deals in Afghanistan involving lithium and copper deals. Conclusion Russia – Taliban security agreement appears to be timely important event for both parties. The Taliban government in Kabul seems to need Russia as much as the opposite being the case as Kabul is increasingly trying to seize the opportunity for slowly pivoting towards Russia and Russia friendly Central Asian Countries. In terms of Afghanistan’s expectations though, the critically needed security umbrella potentially provided by Russia is seemingly very important, bearing in mind that Kabul’s increasing hostility against Pakistan might produce a threat to the very existence of the Taliban government in Afghanistan. This fundamental adjustment looks to be necessitated by relatively loathing relationship between Afghanistan and Pakistan. However, Russia’s manoeuvre might yield certain unintended consequences for Moscow as Islamabad could slow Russia’s ambition to export energy to further South Asia through Afghanistan and Pakistan.  At this critical juncture, both Russia and Afghanistan look to walk a tightrope because each of them has something to lose out of these incipient alignments. Unintended China – Russia rivalry unfolds itself against a larger backdrop where Afghanistan is simultaneously becoming a strategic location for every major powers. Russia sees Afghanistan territory as an energy corridor while China values it for the untapped resources of rare earth minerals. Afghanistan, long treated as a problem to be managed, is quietly becoming a focal point for every major power’s ambitions. * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

Co-author: Oygul Yuldasheva   Over the past decade, green industrialization has emerged as one of the defining economic trends of our time. The concept refers to the process by which countries restructure their industries (steel production, fertilizer manufacturing, cement production, and energy generation) to significantly reduce carbon dioxide (CO₂) emissions, while continuing to grow their economies. In practical terms, this means replacing coal- and gas-powered factories with facilities that run on renewable energy sources such as solar and wind, improving energy efficiency, and adopting production technologies that release far less carbon into the atmosphere. The underlying goal is straightforward: to ensure that economic development no longer comes at the expense of the climate. This global shift has taken on a new urgency since 1 January 2026, when the European Union fully activated the Carbon Border Adjustment Mechanism (CBAM) – a landmark trade policy instrument that directly links environmental standards to market access. Under CBAM, any company wishing to export certain carbon-intensive goods into the EU must now purchase certificates corresponding to the amount of CO₂ embedded in the production of those goods. The covered products include steel, aluminum, cement, fertilizers, hydrogen, and electricity – sectors that together account for a significant share (individually, iron and steel production contributes 7–9% of global GHG emissions, cement approximately 8%, aluminum around 2–3%, fertilizer manufacturing 2–3%, and hydrogen production close to 2-2.5%, while the power sector represents roughly 25% of global CO₂ emissions) of global industrial emissions. The rationale is to ensure that foreign producers face the same carbon cost as EU manufacturers, who are already subject to the EU’s own internal carbon pricing system. The EU presents CBAM as a measure to prevent carbon leakage – the risk that production simply moves to countries with weaker environmental rules. Many developing economies, however, view it very differently. From their perspective, CBAM functions as a form of “carbon protectionism”: a trade barrier that uses environmental criteria to disadvantage exporters from countries that have not yet completed their own green transition. Countries that rely on fossil fuels, often due to limited financial and technological resources find their goods subject to additional costs at the EU border. This raises a legitimate concern: that CBAM may inadvertently penalize poorer nations for the same industrialization path that wealthier nations themselves followed for over a century, while simultaneously benefiting European producers who are shielded from lower-cost foreign competition. For Uzbekistan, a fast-growing economy that exports steel, aluminum, fertilizers, and gas-related products to European markets, CBAM presents both a serious challenge and a strategic opening. On the one hand, Uzbekistan’s industrial sector remains heavily dependent on carbon-intensive energy sources, meaning its exports face higher CBAM costs and reduced competitiveness in Europe. On the other hand, Uzbekistan possesses exceptional solar and wind resources and has already launched one of the most ambitious renewable energy programs in Central Asia – a foundation that, if extended to its industrial base, could reduce CBAM exposure, attract international investment, and open doors to premium low-carbon export markets. I. The risks of CBAM for Uzbekistan’s exports to the EU market The EU’s CBAM applies to six product categories: cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. These are precisely the sectors in which Uzbekistan has developed export capacity and in which the country’s production remains heavily reliant on fossil fuels and aging industrial infrastructure. According to Uzbekistan’s 2024 foreign trade data, substantial volumes of exports to EU member states comprise fertilisers, ferrous metals, and aluminium, with the principal destination markets being Latvia, Lithuania, Romania, and Germany.   Product EU Importing Countries, Value (USD thousand) Fertilisers Latvia – 46,224 │ Romania – 22,778 │ Lithuania – 16,960 Iron and Steel Latvia – 4,713 │ Lithuania – 2,794 │ Germany – 523 Aluminium Lithuania – 10,672 │ Latvia – 968 │ Bulgaria – 115   According to the International Monetary Fund the total annual CBAM cost for the entire Middle East and Central Asia region will reach $1.7 billion per year – equivalent to a 14% surcharge, a kind of extra customs duty, on all goods from the region that fall under CBAM rules. Within that regional total, Uzbekistan and Kazakhstan dominate: some 90% of regional emissions covered by CBAM originate in these countries, primarily from iron and steel, aluminum, and fertilizer production. This concentration reflects the fact that both economies export large volumes of these high‑emission products, placing them squarely in CBAM’s crosshairs. The United Nations Economic Commission for Europe (UNECE) report, provides the most specific projections for Uzbekistan. It finds that EU carbon prices are projected to rise sharply, reaching approximately $200 per ton of CO₂ by 2030 and around $350 by 2050. At those levels, the cost of Uzbek steel exported to Europe could rise by as much as 14%, fundamentally altering its price competitiveness. The World Bank’s CBAM Exposure Index offers a nuanced picture. While Uzbek aluminum actually shows lower emission intensity than the average EU producer, potentially giving it a slight competitive advantage in that sub-sector, other key exports, particularly steel and fertilizers, face significant exposure owing to Uzbekistan’s dependence on carbon-intensive energy and dated production technologies. A structural vulnerability compounds these direct cost pressures: Uzbekistan has not yet established a domestic carbon pricing mechanism. Under CBAM rules, exporters may deduct carbon prices already paid in their home country from their EU obligations. Without such a mechanism, Uzbek exporters cannot claim this deduction, meaning they bear the full CBAM cost – while competitors in countries with domestic carbon pricing systems may pay substantially less. Compounding this is the verification burden. From 2026, emission reports can no longer be self-certified; they must be verified by accredited independent experts. Where data is missing or unreliable, the EU applies conservative default values that are deliberately penalizing and may overstate actual emissions. Uzbek exporters who lack robust monitoring, reporting, and verification (MRV) systems could therefore face higher effective CBAM costs than their actual emission intensity would warrant. II. The Opportunities: Solar Energy, Modernization, and Green Certificates The same CBAM pressure that creates risks also creates incentives and Uzbekistan has already begun to respond. The country possesses structural advantages that, if leveraged strategically, could transform CBAM from a threat into a gateway to premium green markets. Uzbekistan’s geographic endowment is exceptional: the country enjoys among the highest levels of solar irradiation in Eurasia, with a total solar energy technical potential estimated at 177 Mtoe – nearly fourtimes the country’s entire primary energy consumption. This potential is already being activated at scale. By the end of 2025, Uzbekistan had commissioned 15 solar and 5 wind power plants with a combined capacity of 5,582 MW. Renewable assets generated 10.5 bln kWh of electricity in 2025 alone, saving 2.8bln cubic metres of natural gas and preventing 4.2 mln tonnes of harmful emissions. The government’s 2030 target is ambitious: 54% of national electricity generation from renewables, reaching 21 GW in combined solar and wind capacity, which would save 18 bln cubic metres of natural gas annually. 2025 year was declared as the “Year of Environmental Protection and Green Economy,”and Uzbekistan has attracted approximately $35 bln in green energy investment from international partners including Saudi Arabia’s ACWA Power, France’s Voltalia and the Asian Development Bank. The UNECE report notes that aligning power generation, hydrogen production, and industrial processes with EU-comparable carbon prices could simultaneously reduce CBAM-related costs while advancing national climate goals. The report identifies substantial opportunities for fuel switching away from coal – up to more than 600 PJ (around 167 TWh) by 2050 – alongside increased electrification, improved energy efficiency, and greater integration of renewable sources. Already, several domestic industrial companies in Uzbekistan have adopted international green-energy certification. This certification pathway is critical: verified low-emission production provides the data foundation for calculating actual – rather than penalizing default – CBAM charges. Firms that can document clean production processes will face materially lower CBAM obligations and gain a competitive edge over less-documented rivals. Uzbekistan has also pioneered green hydrogen production. The first industrial-scale green hydrogen facility in Central Asia commenced operations in Chirchik, powered by solar and wind energy through a public-private partnership with ACWA Power. Since hydrogen is a covered sector under CBAM, green hydrogen production positions Uzbekistan to export a commodity that, when verified as produced with renewable energy, would carry negligible embedded emissions and therefore incur minimal CBAM charges at the EU border. Moreover, Uzbekistan, Kazakhstan, and Azerbaijan are advancing a Green Corridor initiative – a regional framework for exporting “green” electricity to Europe via undersea and overland transmission routes. The Green Corridor Alliance was formally established in Baku in July 2025, with Italy’s CESIengaged to prepare a feasibility study expected by early 2027. If realized, this corridor would allow Uzbekistan to export verified clean electricity – a CBAM-compliant, premium product – directly to European markets. III. Recommendations for Uzbekistan's Policy-Makers and Industrial Sector Establish a domestic carbon pricing instrument Uzbekistan should develop and implement a domestic carbon pricing mechanism – whether an emissions trading system or a carbon tax – as a matter of priority. Under CBAM rules, verified carbon costs paid domestically can be deducted from EU obligations. This single reform could significantly reduce the financial exposure of Uzbek exporters. Regional neighbor Kazakhstan have already established such systems, though at prices below EU levels. Uzbekistan could learn from these models while calibrating pricing to its economic conditions. Build robust MRV systems for industry From 2026, the EU applies penalizing default emission values where verified data is unavailable. Uzbekistan must urgently build monitoring, reporting, and verification (MRV) capacity across its export-oriented industries. Technical assistance from the UNECE, World Bank, and Asian Development Bank (ADB) is available for this purpose. Factories with verified low-emission profiles not only reduce their CBAM liability but can use that data to market premium, “green”-certified products to European buyers who increasingly demand documented sustainability credentials. Accelerate industrial decarbonization in Steel and Fertilizers The sectors most exposed to CBAM – iron and steel, aluminum, fertilizers – must be prioritized for energy efficiency investment and fuel switching. The UNECE report identifies fuel switching away from coal as the single highest-impact intervention, with potential savings. Public-private partnerships and concessional finance from international the EU Emissions Trading System institutions should be channeled specifically into these sectors. Pursue Green Certification and EU market positioning Uzbekistan should explore the EU Emissions Trading System (EU-ETS) linkage or mutual recognition arrangements that would allow its domestic carbon pricing to be recognized for CBAM deduction purposes – a path pursued by Switzerland and Norway. Develop Green Hydrogen as a Strategic Export Uzbekistan’s pioneering green hydrogen facility in Chirchik should be scaled and replicated. The EU’s growing appetite for imported green hydrogen – driven by its REPowerEU strategy – represents a substantial long-term market opportunity for Uzbekistan, provided production is verified and transmission infrastructure is developed. The Green Corridor project, with its 2027 feasibility timeline, should be fast-tracked. The European Union offers a range of technical assistance instruments – including short-term expert missions through TAIEX, long‑term institution‑building via the EU4Environment program, specialized training through the MED‑GEM Network, and direct engagement through the EU Delegation in Tashkent – that can be accessed to strengthen domestic monitoring, reporting, and verification systems, train operators and verifiers, and lower the compliance burden on Uzbek exporters. If Uzbekistan consistently implements targeted and well-calibrated measures – such as introducing a national carbon pricing instrument, developing a robust MRV (Monitoring, Reporting, and Verification) infrastructure, decarbonizing energy-intensive industries, and achieving full harmonization with EU environmental standards – it will be able to transform the Carbon Border Adjustment Mechanism (CBAM) from an external risk into a strategic catalyst. Such a proactive transition would not only preserve the competitiveness of Uzbek exports in European markets but also position the country as a credible and verifiable supplier of low-carbon steel, clean electricity, and green hydrogen. * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

Nargiza Umarova’s article examines how Uzbekistan continues to advance the Kabul Corridor despite rising tensions between Afghanistan and Pakistan. The piece highlights that the Termez–Naibabad–Maidanshahr–Logar–Kharlachi railway remains a strategic infrastructure priority for Tashkent, Kabul, and Islamabad, as it could create the shortest overland connection between Central Asia and South Asia. The article underlines that recent upgrades to the Hairatan–Mazar-i-Sharif railway and the expansion of facilities at Naibabad station demonstrate Uzbekistan’s practical commitment to improving cross-border logistics with Afghanistan. These steps are not isolated technical measures, but part of a broader effort to strengthen Afghanistan’s role as a transit link and reduce the region’s dependence on longer maritime routes. Umarova also notes that repeated disruptions at Afghanistan–Pakistan border crossings have increased the importance of northern transit routes through Central Asia. In response, Uzbekistan is seeking to ease pressure on existing railway hubs and border stations, including by proposing the redirection of some freight traffic from the congested Saryagash–Keles crossing to the Oasis crossing point in Karakalpakstan. Overall, the article shows that the Afghan–Pakistani conflict has complicated, but not halted, the development of the Kabul Corridor. For Uzbekistan, the project remains a key element of its wider strategy to expand regional connectivity, diversify trade routes, and position Central Asia as a bridge between Europe, Eurasia, Afghanistan, and South Asia. Read on Jamestown * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.

Following the Taliban movement’s rise to power in August 2021, a significant part of the international community expected a rapid economic collapse of Afghanistan. The grounds for such forecasts seemed obvious: the freezing of foreign exchange reserves, the cessation of Western financial assistance, sanctions, de facto disconnection from the global banking system, and the lack of international recognition of the new regime. However, these assessments were only partially justified. Despite a severe crisis, the regime managed to maintain the controllability of the state apparatus, centralized control over financial flows, and the basic stability of the economy. Currently, the key interest lies not in Afghanistan’s development potential, but in the regime’s capacity to adapt to conditions of international isolation. De facto, the Taliban is constructing a model of a “survival economy,” based not on modernization and investment growth, but on a combination of administrative control, shadow financial mechanisms, regional trade, and indirect external support through humanitarian channels. The foundation of the regime’s financial sustainability comprises: 1. Customs Revenues. After 2021, the Taliban focused particular attention on controlling trade crossings with Pakistan, Iran, and the Central Asian states. Under conditions of an extremely weak production base, it is precisely imports, transit, and border duties that provide the bulk of budget revenues. According to data from the World Bank and a number of international monitoring structures, as early as the first two years after coming to power, customs and tax revenues began to recover faster than expected: in 2023–2024, the regime's monthly domestic revenues in certain periods exceeded 15–20 billion afghanis (approximately $200–250 million), with a significant part of these funds derived precisely from customs duties. International experts note that the new Administration managed to centralize the duty collection system and significantly reduce the level of grassroots corruption compared to the previous Government. If previously a significant part of revenues dissolved into regional client networks and corrupt schemes, now financial flows are concentrated to a much greater extent under the control of the movement’s central leadership. Of particularly important significance are the Torkham, Chaman, and Spin Boldak border crossings on the Pakistani direction, and trade routes through Iran and Central Asia, through which the main volume of imports of fuel, food, and consumer goods passes. As a result, the economy of the regime acquires the character of a “border rent model,” under which the state exists predominantly through the control of trade corridors and import flows, rather than the development of domestic production. It is precisely this system that provides the Taliban movement with relatively stable revenues under conditions of international isolation. 2. Mineral Extraction An additional factor became the activation of mining of mineral resources, viewed as one of the few potential sources of long-term foreign exchange earnings. According to estimates by the US Geological Survey, the total value of Afghanistan's mineral resources could reach $1–3 trillion. This refers to large reserves of copper, iron ore, lithium, cobalt, gold, and rare earth metals. Of particular significance are the Aynak copper deposit and the Hajigak iron ore basin. After returning to power, the Taliban significantly increased coal exports to Pakistan: in 2022–2023, the volume of deliveries reached 3–4 million tons annually, and the regime's revenues were estimated in hundreds of millions of dollars. In parallel, cooperation with Chinese companies intensified. In 2023, the Xinjiang Central Asia Petroleum and Gas Co of China signed an agreement on the development of oil fields in the Amu Darya basin with anticipated investments of up to $540 million during the first three years. However, the Afghan Ministry of Mines and Petroleum nullified this 25-year contract in mid-2025 because a joint ministerial committee determined that the Chinese firm had repeatedly breached its contractual obligations and failed to meet its specified investment deadlines.According to data from the Afghan Ministry of Mines and Petroleum, revenues from oil extraction on the Amu Darya alone exceeded $130 million in 2025. Nevertheless, the resource sector still faces systemic constraints - a lack of infrastructure, technologies, international financing, and recognized security guarantees. Therefore, mineral extraction for now remains rather a strategic reserve of the regime and an instrument of negotiations with external partners, primarily China, than a full-fledged foundation for economic growth. At the same time, expectations of large-scale economic involvement by China have not yet materialized. Beijing demonstrates cautious pragmatism, avoiding major investments under conditions of instability. China is interested primarily in preventing terrorist threats near the borders of the Xinjiang Uygur Autonomous Region (XUAR) and in maintaining access to Afghanistan's potential resources, but is not ready to assume the role of the primary sponsor of the Afghan economy. 3. The Shadow Economy In parallel, the expansion of the shadow economy continues, which historically has been a crucial part of the Afghan economic system. International sanctions have only reinforced the significance of informal financial mechanisms, primarily the “hawala” system, which provides cross-border settlements outside traditional banking infrastructure. Through such networks pass trade operations, diaspora remittances, import financing, and a significant part of domestic monetary circulation. It is fundamentally important that the Taliban does not attempt to liquidate the shadow sector. On the contrary, the regime integrates it into its own governance system, utilizing the licensing of intermediaries, control of transport routes, and taxation of informal trade. As a result, the shadow economy becomes not a sign of state weakness, but one of the key mechanisms of its functioning. 4. The Narcotics Economy The narcotics economy deserves separate attention. Despite a more than 90% reduction in the production of opiates in Afghanistan following the 2022 ban, this does not indicate the complete disappearance of narcotics production. Firstly, significant volumes of opiates were accumulated in advance. Secondly, the supply deficit caused a sharp rise in prices, which partially compensated for the decline in production volumes. Thirdly, the production of synthetic drugs, primarily methamphetamine, is intensifying. International structures record a steady growth in seizures of Afghan methamphetamine in the Middle East, South Asia, and East Africa. Production is based on the ephedra plant, which is widespread in the central and western regions of the country. As a result, Afghanistan is gradually turning not only into a hub for opiate trafficking, but also into one of the new nodes for the production of synthetic drugs with higher profit margins and less dependence on the agricultural cycle. At this stage, there are no sufficient grounds to assert that the narcotics trade is the main centralized source of revenue for the regime. However, it continues to play an important role in financing regional elites, armed networks, and the shadow economy. A paradoxical but critically important factor in the stability of the regime remains international humanitarian aid, despite the absence of official recognition of the Taliban. International organizations continue to finance food programs, infrastructure projects, healthcare, and humanitarian operations. According to UN data, after 2021, Afghanistan received several billion dollars of external humanitarian support annually. In 2022 alone, the volume of international assistance exceeded $3 billion, and in 2023–2024, despite a gradual reduction in funding, the country remained one of the largest recipients of humanitarian aid in the world. Humanitarian programs in one form or another cover more than half of the country's population, while about 23 million Afghans continue to need permanent external support. Formally, these funds are directed to the population; however, factually they simultaneously support domestic demand, employment, currency circulation, and the functioning of basic social services, indirectly stabilizing the regime itself as well. Under conditions of a ruined economy, the humanitarian sector has turned into one of the largest sources of monetary circulation inside the country. Through the programs of the UN and international NGOs, food supplies, the payment of salaries to medical personnel, water supply facilities, and primary infrastructure are financed. De facto, a situation is emerging in which the international community, striving to prevent a humanitarian catastrophe and mass migration, simultaneously contributes to preserving the economic sustainability of the Taliban rule. At the same time, the regime itself consistently strengthens control over the distribution of aid, personnel appointments, and the logistics of humanitarian operations, seeking to use the international presence as an instrument of administrative influence and an additional source of internal legitimacy. Thus, the main vulnerability of the regime lies in the absence of long-term sources of modernization. Without international recognition, full access to the global financial system, large-scale investments, and institutional development, Afghanistan is unlikely to be able to transition from a “survival economy” to a model of sustainable growth. Ultimately, the economic sustainability of the Taliban movement’s regime is explained not by governance efficiency in the classical understanding, but by the ability to adapt the state to conditions of prolonged isolation. Afghanistan is gradually turning into an example of “low-cost authoritarian survival,” where a combination of customs rent, the shadow economy, humanitarian support, and regional informal ties allows the preservation of controllability even without international recognition. * The Institute for Advanced International Studies (IAIS) does not take institutional positions on any issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of the IAIS.