Unearthing potential on the Silk Road – What Central Asia's critical minerals advantage means for investors 

Central Asia¹ may become a future global supplier of critical minerals and hub for renewable energy. The region's strategic location, mineral wealth and meteorological profile coupled with ongoing strategic economic reforms make it a potential hotspot for international investment. However, investors are advised to adopt appropriate safeguards to successfully navigate Central Asia's legal landscape. In this article, we highlight opportunities presented by the region and provide guidance for managing identified risks.  

Many critical minerals are essential to an array of green energy technologies, such as electric vehicles, wind turbines and solar panels. Illustrating this, the International Energy Agency (IEA) estimated that reaching the 2^oC target set by the Paris Agreement will require "a quadrupling of mineral requirements for clean energy technologies by 2040".² 

Despite its outstanding wealth of resources, Central Asia is often omitted from analyses of critical mineral supply chains – for example, only Kazakhstan's resources got a cursory mention in the IEA's Global Critical Minerals Outlook 2024.³ This may be due to historically strict non-tariff trade barriers⁴ and an unfamiliar legislative environment which may have deterred foreign investors in the past. 

Yet some of the Central Asian states sit among the world's top 20 producers for critical minerals which are most essential to the development of green technology. For example, Kazakhstan has the world's largest reserves of chromium – a key material for wind turbines, and is tied with Turkey as the second largest producer in the world.⁵ It ranks among the top ten countries globally for its substantial zinc reserves.⁶ Similarly, Uzbekistan is among the world's top ten producers of uranium, rhenium and tellurium.⁷ It is also in the top 15 countries for copper reserves and among the top twenty for molybdenum and cadmium reserves.⁸ In addition, the Central Asia region holds significant reserves of manganese, lead, zinc and titanium.⁹ 

Unearthing Central Asia's hidden (green) power 

Green energy technologies, which depend on critical minerals, have become a major driver of demand for these resources. This is relevant in Central Asia: in addition to geological suitability for critical mineral extraction, its meteorological profile makes it a promising location for renewable energy generation. In future, it may therefore be possible to source key critical minerals and generate green energy from the same region. For example, there is excellent solar and wind power generation potential in Kazakhstan. Uzbekistan similarly possesses significant hydro and wind potential. Tajikistan and Kyrgyzstan are particularly well-suited to hydropower, whilst Turkmenistan has strong prospects for solar power generation.¹⁰

The investment opportunity  

Central Asian states have expressed willingness to work with investors to exploit their mineral reserves and generate renewable energy. For example: Kazakh President Tokayev firmly "support(s)… the construction of power plants using renewable energy sources".¹⁷ This finds steadfast support in the "Kazakhstan-2050 Strategy" (2012), the Concept on Transition towards Green Economy until 2050 (2013), and the 100 Concrete Steps programme (2015).¹⁸ This legislation facilitates development through structural reform and by supporting green energy developments. Uzbekistan's President Mirziyoyev has shared this sentiment and intends to more than triple the country's renewable energy production in the next ten years¹⁹, having recently implemented related investment reforms.²⁰ Indeed, Uzbekistan is seeking foreign investment of $70 billion in 2022-2026, including in the energy sector.²¹ In the same vein, in June 2024 Kyrgyzstan lifted a ban on uranium extraction to boost economic growth.²² 

Foreign investors therefore have an opportunity to facilitate regional ambitions to decarbonise and develop. However, they must proceed with caution and mitigate investment risks. 

Bridging differences through arbitration 

Engaging with an unfamiliar judicial system can be challenging, particularly when it could impact the enforcement of contractual safeguards. However, alternatives to domestic litigation exist, including international arbitration. This may be facilitated by regional arbitral institutions, such as the International Arbitration Centre (IAC) at the Astana International Financial Centre in Kazakhstan and the Tashkent International Arbitration Centre.²³  

Advantages of international arbitration include certainty, with arbitral awards being final and binding, while being subject to limited grounds for annulment. Further, parties can determine the specifics of the arbitral process. They may appoint subject matter experts to adjudicate their disputes, while proceedings are private and usually confidential. International arbitration also benefits from an international framework for recognition and enforcement under the New York Convention 1958²⁴ which has 172 signatories, including the Central Asian states.²⁵

Decoding state defences

Extractive and infrastructure projects often involve contracting with the state or state-affiliated entities. These entities will often benefit from state immunity, which provides protection against being sued, and from the enforcement of judgments and awards. It is therefore important to include a waiver of state immunity in an agreement with the state or its affiliates to ensure the ability to claim under the agreement and enforce it against the state's assets. 

The changing legislative landscape

Stability is key to critical minerals and green energy projects, particularly considering their extended duration. Investors should consider how legislation might change over the lifetime of an investment. However, it may be possible to preserve the economics of an investment through careful drafting.
 

Investment treaty protections 

Investment treaties seek to promote and protect private investments made by nationals of relevant states in each other's territories. They may be bilateral (between two states, a BIT), or multilateral (between a number of states, an MIT). These treaties are usually agreed to provide confidence to foreign investors associated with a particular state (the home state) that investments will not be negatively affected by certain irregular actions by the state hosting the investment (the host state).

The Central Asian states are party to an array of BITs and MITs, such as the Energy Charter Treaty (ECT), many of which provide standard protections, such as guarantees of fair and equitable treatment, full protection and security, protection from unlawful expropriation, national treatment and most favoured nation treatment. For example, Kazakhstan and Uzbekistan are party to more than forty BITs, whereas Tajikistan, Turkmenistan and Kyrgyzstan are each party to more than twenty BITs.²⁶ However, specific treaty wording (and other factors) will determine whether or not an investor may bring proceedings against the host state. 
 

An epicentre of the energy transition?

Central Asia presents fascinating investment prospects. Its reserves of critical minerals and potential for renewable energy generation could enhance its appeal in the future.  However, investors should embrace responsible due diligence, meticulous contractual drafting and prudent investment structuring to mitigate inherent investment risks.