The EU, the EEU, and the War in Ukraine: Political Risks and Management Options

Band 33 · März 2023 

Wirtschaft und Management 

Schriftenreihe zur wirtschaftswissenschaftlichen Forschung und Praxis 

The EU, the EEU, and the War in Ukraine: 

Political Risks and Management Options 

Hannes Meissner / Johannes Leitner 

From Conflict to War in Ukraine. 

The New Realities of Political Risk Management in the post-Soviet space 

Florence Ertel / Julian Plottka 

Internal and External Political Contestation in Kazakhstan 

Oxana Karnaukhova 

Central Asia between the European Union and Eurasian Economic Union: 

Sovereignty Underestimated 

David Morris 

The Huawei battleground: A critical case of political risk 

in the new global power contest 

Albert Hayrapetyan / Susanna Aghajanyan 

The impact of sanctions on Russia 

and the consequent Russian business relocation to Armenia 

ISSN 1812-9056 

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Wirtschaft und Management 

Schriftenreihe zur wirtschaftswissenschaftlichen 

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Editorial 

Dear Reader, 

This special issue entitled “The EU, the EEU, and the War in Ukraine: Political 

Risks and Management Options” is published within the framework of 

the Jean Monnet Network project “The EU and the EEU: Between Conflict 

and Competition, Convergence and Cooperation” (EUCON). The aim of this project co-funded by the 

Erasmus+ programme is to explore the complexity of relations between the European Union and the 

Eurasian Economic Union. 

Andreas Breinbauer 

Head of the Academic Council of 

the University of Applied Sciences 

BFI Vienna 

In the first contribution, Hannes Meissner and Johannes Leitner zero in on the dramatic geopolitical 

changes currently taking place against the backdrop of the Russian attack on Ukraine. They analyse 

the possible effects on enterprises and provide an outlook on new risk management strategies in light 

of Russia’s strong influence on post-Soviet countries. 

The second paper, by Florence Ertel and Julian Plottka, deals with the economic and political situation 

in Kazakhstan. The authors assess the political risks resulting from recent developments, evaluate 

the impact of the latter on traditional Kazakh “multi-vector foreign policy” and analyse the course of 

current Kazakh foreign and economic policies. 

The following contribution by Oxana Karnaukhova addresses the role of Central Asian countries within 

a changing geopolitical context, arguing that on emerging markets economic sovereignty is a key 

driver of regional development, a factor that must not be underestimated. 

The paper by David Morris focusses on new technologies as a key battleground for the power contest 

between the United States and China. Based on the Huawei business case, the author raises questions 

about identifying, assessing and managing cyber risks and points out the challenges these issues 

represent for the national security of a state. 

In the fifth paper, Albert Hayrapetyan and Susanna Aghajanyan provide an insightful analysis of the 

short- and long-term effects of Russia‘s invasion of Ukraine on Armenia‘s economy, highlighting also 

the impact of Armenia‘s policy of positioning itself as a tax haven for Russian companies. 

We hope you find this special issue an interesting read and look forward to receiving your feedback! 

Rector Prof. (FH) Dr. Andreas Breinbauer 

Head of the Academic Council of the University of Applied Sciences BFI Vienna

Table of Contents 

ArticlesPage 

From Conflict to War in Ukraine. The New Realities of Political Risk Management 

in the post-Soviet space7 


Internal and External Political Contestation in Kazakhstan19 


Central Asia between the European Union and Eurasian Economic Union: Sovereignty Underestimated37 


The Huawei battleground: 

A critical case of political risk in the new global power contest53 

David Morris 

The impact of sanctions on Russia and the consequent Russian business relocation to Armenia67 


List of AuthorsPage 

List of Authors79 

Working Papers and Studies of the University of Applied Sciences ViennaPage 

Working Papers and Studies of the University of Applied Sciences Vienna83

Impressum 

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Redaktion: 

Prof. (FH) Dr. Andreas Breinbauer 

Dr. Hannes Meissner 

Gabriele Bucher, MSc 

Martina Morawetz-Wiesinger 

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Project title: 

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Project number: 

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“The European Commission‘s support for the production of this publication does not constitute 

an endorsement of the contents, which reflect the views only of the authors, and the Commission 

cannot be held responsible for any use which may be made of the information contained therein.”


From Conflict to War in Ukraine. 

The New Realities of Political Risk 

Management in the post-Soviet space 

Abstract 

This chapter is dedicated to both the political risk constellation in Ukraine prior 

to February 24 th and to the political risk constellation since the Russian attack. 

In the former regard, it presents results from a field trip to Kiev in October 2021. 

In the latter regard, this chapter provides an outlook on the new political risk 

constellation and risk management strategies given Moscow’s tightening grip 

on post-Soviet countries. 

Hannes Meissner 

UAS BFI Vienna 

1 Introduction 

This chapter is an immediate witness of the dramatic geopolitical changes 

currently going on against the backdrop of the Russian attack on Ukraine. It is the 

result of a research project with the initial aim to analyse and evaluate chances 

and risks for enterprises with regard to Ukraine’s bridging function between the 

East (Russia and China) and the West (EU/wider Europe). In this context, the research project has 

been embedded into the Erasmus+/Jean Monnet Networks Project “EUCON”, dealing with EU 

and EEU/Russia relations that had until recently been characterised not only (although mainly) 

by conflict and competition, but also by cooperation and potential convergence. 

Johannes Leitner 

L&M PRISK 

The Russian attack on Ukraine has far reaching effects on the world order. Many commentators 

from academia, media and the political sphere consider February 24th (2022) to be another 

turning point of global reach after November 9th (1989). However, while the latter date clearly 

marked the end of the bipolar world order of East-West confrontation, the final consequences 

of the current events are not fully clear yet. Moreover, the changes have been on the horizon for 

years. Ultimately, a new world order is currently beginning to emerge. The previous world order 

dominated by the west, based on norms and international law developed in the aftermath of the 

Second World War, is currently disintegrating into new blocks. The most likely future scenario 

is that the world will be divided by competition and conflict between the West and non-liberal 

authoritarian powers, such as Russia and China. However, in this context, China is more likely to 

become the dominant power, and not Russia. At the same time, regional powers such as India, 

Saudi Arabia, Indonesia (etc.) will wisely use their new opportunities, in most cases against the 

immediate interests of the West. 

Wirtschaft und Management · Band 33 · März 2023 

7


The miscalculation by many in the West that Russia would not start a war for economic rationality 

shows how dominant the neoliberal perspective that economic interests of countries and nonstate 

actors dominate the international arena has become. For this reason, national security 

interests and non-readiness for cooperation – as predicted by neorealism – have re-entered the 

academic debate about international politics. One thing is clear, though. The new global constellation 

will have far reaching consequences, not only for politicians, but also for enterprises. 

Consequently, both policymakers and managers must adapt to new realities. 

This chapter is dedicated to both the political risk constellation prior to February 24 th and to the 

political risk constellation since the Russian attack on Ukraine. In the former regard, it presents 

results from a field trip to Kiev in October 2021, dealing with the following questions: In what ways 

are companies confronted with political risks related to competition and conflict in the course of 

EU-EEU relations? How do they perceive the conflict in general? How do they manage the risks? 

Additionally, the chapter sheds light on the managers’ perceptions of the root causes of the 

conflict between Russia and the EU as well as their ideas on future cooperation and convergence 

between the EU and the EEU (prior to February 24 th ). In the latter regard, this chapter provides an 

outlook on the new political risk constellation and risk management strategies under the current 

conditions. 

The following section (section two) introduces the concept of political risk. In this context, it 

provides the analytical structure the empirical study (section four) draws on. Section three offers 

insights into the methodology applied to the research project. The empirical study (section four) 

provides answers to the questions introduced above. The field study to Kiev took place in October 

2021, four months prior to the Russian attack. Section five takes a final look at the new political 

risk constellation since February 24 th , focusing on war in Ukraine as well as Russia’s tightening 

grip on post-Soviet countries. 

2 The concept of Political Risk 

The internationalisation of a company is usually associated with an increased risk. The risks 

arise mainly from the fact that the company is entering a new market that may differ culturally, 

socially, economically, legally, politically-institutionally as well as structurally – i.e., in the 

constellation of the competition and local market preferences. Above all, the transformational 

eco nomies in the post-Soviet region incur a heightened risk portfolio (Hoskisson et al 2000; 

Meschi 2005; Alcantara/Mitsuhashi 2013). In addition to socio-economic and market risks, 

there are also specific political risk factors that have a significant influence on international 

business activities (Leitner/Meissner 2017). In this context, risk refers above all to the possible 

negative consequences for the company’s business activity and profitability in the respective 

foreign market due to unforeseen changes in the business environment (March/Shapira 1987; 

Al Khattab et al. 2007). The business environment refers to all variables that define the framework 

for entrepreneurial activity in a particular market, and includes both microeconomic and 

8 Wirtschaft und Management · Band 33 · März 2023

From Conflict to War in Ukraine. The New Realities of Political Risk Management in the post-Soviet space 

macroeconomic indicators, as well as those found in political and institutional environments 

(van Wyk 2010). 

From a business perspective, there are three areas relevant to identifying risk factors that can 

have a negative impact on business: these are firm-specific factors, the industry and, as a third 

area, the general environment of the company in the foreign market (Miller 1992, 1993; Werner 

et al. 1996). While the industry and firm-specific variables have been well studied, the general 

environment in particular often remains underexposed, even though it subsumes two key factors 

which can have a tremendous impact on the business, namely the political and institutional 

framework of a market (Lawton/Rajwani 2015; Grosse 2011). This non-market environment describes 

all those influencing variables not subsumed in an economic context, i.e., that do not follow 

market logic, but instead find themselves in a social and political context. To make this very 

broad field manageable for companies, this chapter refers to the literature on political risks, a 

strand in international business studies, dedicated specifically to the risk factors of the political 

environment (Sottilotta 2017). This environment includes factors such as bureaucratic quality, 

judicial independence and the rule of law, transparency in public tenders, or the importance and 

influence of informal networks, and geopolitical factors as well as diplomatic relations (etc.). 

The more transparent and predictable the political and institutional environment, the better a 

company can adapt to general conditions and optimise processes to work as efficiently as possible. 

Against the backdrop of this, political risk refers to all factors related to the political environment 

in the country itself and beyond at the global/geopolitical level with a potential negative 

impact on enterprises. 

Political risks can be identified at three different levels of analysis: the geopolitical level, the 

macro level – whereby further differentiations can be made between internal and external factors 

– and the micro level. At the geopolitical level, factors such as global terror, geopolitical power 

strategies from different countries, or even global conflicts are examined more closely and their 

possible effects on the company examined. The micro level deals selectively with those market 

risk factors specifically relevant to a single company or project. The macro level, on the other 

hand, deals with the political risk factors that arise in a country due to domestic and foreign 

policy dynamics, but also due to specific regime typology (Robock 1971; Alon/Martin 1998; de 

la Torre/Neckar 1988). 

At the macro level, external political risks include factors such as regional or bilateral conflicts 

or the quality of diplomatic relations. Of equal importance may also be the basic ideology and 

agenda in comparison with international companies in a particular foreign market. The more 

hostile the political attitude towards international companies, the higher the political risk (Kobrin 

1979). The external factors refer to all those risk factors arising from the foreign policy dynamics 

of a country. 


9


Table 1: Different Levels of Analysis 

Level of Analysis 

. 

Geopolitical Risk Factors (MIGA 2015) 

Macropolitical Risk Factors 

(Robock , 1971; Alon & Martin, 1998) 

. 

Internal (de la Torre et al 1988) 

Political stability (Miller 1992) 

Systemic Corruption (Meissner 2017) 

. 

Systemic Favouritism (Meissner 2017) 

Institutional Ambiguity (Meissner 2017) 

External (de la Torre et al 1988) 

Regional, Bilateral 

Conflicts and Diplomatic 

Ties (Alon & Martin 1998) 

Host country‘s attitude 

towards international 

companies (Kobrin 1980) 

Micropolitical Risk Factors 

(Robock 1971, Alon & Martin 1998) 

. 

Source: Own illustration 

In contrast, the internal perspective focuses on those factors resulting from the domestic 

political constellation. This includes, for example, political stability, which comprises factors 

such as insurrections or strikes, but also to what extent a state can exercise its monopoly of 

power throughout the state territory, or how regulated regime change takes place in a state 

(Miller 1992). The question of the specific political risks of differently structured democracy 

constellations is also discussed in this area (Jensen 2008; Jensen et al. 2013). 

In fact, however, the different levels of analysis are ideal types. Rather, it is often difficult to draw 

a clear distinction. Geopolitical factors may provoke reactions by governments, which vice-versa 

influence the diplomatic arena. This shows that geopolitical factors are often intertwined with 

the macro level, especially in regard to the external dimension. Geopolitical factors might viceversa 

trigger civil unrest and political instability in a given country and thus influence the internal 

dimension at the macro level. And finally, some of these factors might have a strong impact 

on specific companies and projects, while other companies might not, or to a lesser degree be 

affected. In other words, the macro- and the micro-level are in turn interrelated again. Acknowledging 

theses interdependencies, the present chapter puts a major focus on geopolitical and 

external factors at the macro-level, while also considering political risk factors related to the 

internal dimension and/or the micro-level. 



3 Methodology 

The questions of the empirical study have already been presented in the introduction (section 

one). They all focus on perceptions, experiences and narratives of business managers and representatives 

of business associations operating in the field. More specifically, they deal with 

their perceptions of political risk, the conflict between the EEU/Russia and the EU in general, the 

conflict’s root causes, and political risk management strategies applied in this conflict constellation. 

Against the backdrop of this, the authors have applied a qualitative-interpretive research 

methodology (cf. Atteslander 2010; Diekman 2014). 

We developed the empirical study in three steps (see table two). Starting from a literature review 

and drawing on our experiences from previous field trips to Ukraine in 2013 and 2017, we drafted 

a partially structured interview guideline with questions structured along four thematic sections: 

firstly, the perception of political risks at the geopolitical and macro/external level, secondly, the 

perception of the conflict in general, thirdly, the management of political risks, and fourthly, the 

perception of the root causes of the conflict. All questions were formulated as precise, but also 

as open as possible, to motivate the interview partners to a free and yet targeted way of narration. 

Table 2: Research Process 

Preparation 

• Semistructured 

Interviews 

• Managers 

responsible for 

Ukraine 

Business 

• Diverse 

Industries 

Collection 

• Kiev, October 2021 

• Typing 

• English & German 

• 10 face2face 

Interviews 

Analysis and 

Interpretation 

• Interpretative 

Approach 

• Deductive 

Approach 

• Intersubjective 

Approach 

Source: Own Illustration 

In preparation of the field trip, we selected managers from as diverse a range of industry as 

possible to carry out 10 qualitative interviews in Kiev. All interviews were done anonymously in 

Kiev in October 2021. In the end, we carried out interviews with, (1) the manager of a consulting 

group, (2) the manager of an insurance company, (3) the country representative of an international 

business association, (4) the manager of a US multinational company, (5) the manager of 

an Austrian based industry company, (6) the manager of an Austrian agricultural company, (7) 

the manager of a technology company, (8) the manager of a high-tech company, (9) the executive 

of a consumer electronics company, and (10) the manager of a water-technology company. 

The personal interviews were directly transcribed in Kiev with a laptop. The discussions lasted 

between 45 and 90 minutes and were conducted in either German or English. 

The material was finally evaluated in Vienna. The corresponding passages were coded in two 

evaluation rounds by two people with different disciplinary backgrounds, political science, and 


11


international business administration. By doing so, we tried to ensure an intersubjective relativisation 

in the interpretation, which contributed to a reliable result. In doing so, we used a deductive 

approach, in that we had previously defined literary categories, but also took up categories 

newly developed from the material (Mayring 2015). 

4 Political risk constellation prior to 24 February 2022 

We conducted the interviews only three months prior to the invasion of Russia in Ukraine. The 

atmosphere among the business elite was already tense, but still, none of our interview partners 

expected a full-scale war of the current dimension. The basic attitude was rather that “what 

must not happen, cannot happen and thus will not happen”. The business representatives we 

spoke to were aware that an open war between Russia and Ukraine would be the worst-case 

political risk constellation, since this would be a direct and immediate threat to all their business 

operations. As the country representative of an international business association emphasized, 

all enterprises active in Ukraine have taken the decision to enter the market, despite the conflict 

with Russia. As he further put it, the evaluation of the risk of further escalation to war is always 

based on individual perceptions. The ones not ready to bear this risk did not come to Ukraine, 

he emphasized. At the same time, the scenario of a war haunted the minds of some of our interview 

partners. For example, the country representative of an international business association 

concluded on his own that Russia would most likely not attack Ukraine from the East, what most 

people would expect, but rather from the North via Chernobyl, since this is only one hour drive 

from Kiev. Thus, Russian troops could be in Kiev in short time. If this scenario came true, businesses 

based in Ukraine would not have enough time to prepare. 

Against the backdrop of looming geopolitical risks of a war between Russia and Ukraine, interviewees 

with a closer personal attachment to the country focused on the positive developments 

and achievements of Ukraine. According to the representative of an international business association, 

in the last years, Ukraine has attracted increasing FDI and has also achieved significant 

progress in reducing corruption. This narrative had also been reiterated by the manager of a 

consulting group active in the entire region. Ukraine has improved a lot when it comes to corruption, 

the state bureaucracy works more efficiently, internal political risks are decreasing. As he 

further stated, the IT industry is booming, salaries are on the rise and international investments 

into the sector are growing significantly. A similar scenario was mentioned by the manager of 

an international insurance company who said that despite all political risks, their business in 

Ukraine develops very favourably. All three interview partners contrasted this positive picture of 

Ukraine with the developments in Russia. 

The extent to which this positive picture corresponded to reality was difficult to assess. It is worth 

mentioning that in terms of political risk country levels, the literature analysing Ukraine since the 

Maidan revolution, speaks rather a different language. In fact, there is a common understanding 

that initial hopes for far reaching structural reforms were all not met. None of the post-Maidan 



presidents and governments have shown willing and capable of breaking with the traditions of 

corruption and captured judiciary. The Bertelsmann Transformation 2022 Index reports, until 

recently, that “property rights are weakly protected due to deficiencies in the judicial system and 

extensive corruption. This situation is changing slowly due to ongoing reform efforts, including 

the creation of anti-corruption institutions, the ongoing judicial reform, multiple anti-raiding laws 

and laws strengthening intellectual property rights.” (BTI 2022: 25) 

However, it was not the aim of our research project to render an objective analysis on changes 

concerning political risks in Ukraine, but rather analyse and deconstruct managers’ perceptions 

and arguments. In this regard the major finding was that the positions they expressed were 

shaped by a strong polarisation in terms of the results of contradicting development paths of 

Ukraine and Russia. At the same time, our interview partners pointed to security risks for Ukraine 

resulting from this confrontation. The biggest threat for Ukraine, according to the manager of 

an international insurance company, is the rising aggression of Russia. Russia, he explained, is 

extremely afraid of Ukraine being successful, because it will lead Putin into the trap of having 

to explain why “people do live wealthier in democracies than under his rule”, so the source. The 

representative of an international business association confirmed this argument by stating that 

Putin needs to create an enemy in the West to save the country from breaking apart. Russia’s 

elite, according to him, is increasingly leaving the country and seeks a brighter future abroad. 

Putin’s daughters are the best and most striking example of this trend. This is why Putin has 

been creating the threat of NATO that wants to destroy Russia, he concluded. While our interview 

partner took this position for himself, he further highlighted that people in Ukraine, like in 

Germany (and Austria), do not all follow this line of argumentation. He remarked that the counterargument 

is rather that the West, in particular the USA and the NATO have openly and increasingly 

been violating Russian security interests, against initial promises not to enlarge the NATO 

by Eastern European Countries. In this regard, the West would have crossed a red line, when the 

NATO took into consideration a future NATO membership of Ukraine and started negotiations. 

These perceptions relate to the question of the conflict’s root causes. In this respect, the picture 

we found was indeed mixed. While half of the interviewees shared the first position raised above, 

the other half took the opposite position. They were of the opinion that the NATO expansion 

into Russia’s Near Abroad is in fact responsible for the conflict between the EU and Russia. 

According to this view, the NATO is a legacy of the cold war. Instead of dissolving the organisation 

and establishing a new European security order including Russia, the organisation step by 

step expanded into the east, contrary to initial assurances towards Moscow. In the mindset of 

the Russian ruling elite, which has its roots vice versa in the former Soviet cold war order this is 

actually perceived as a threat. Here, Western politicians lack the basic understanding of “Russian 

mentality”. 

Although none of our interview partners expected a full-scale war with Russia, the conflict 

seemed to be much more present in people’s minds than in 2017. The failure to resolve the conflict 

and the growing war rhetoric made geopolitical risk factors more important in the perception 


13


than before. In contrast to prior research, we had conducted in Ukraine, they hardly constructed 

references to internal political risks, such as corruption, dis-favouritism, legal uncertainty and 

a low guarantee of property. During our field research in Kiev in 2017, only three years after the 

annexation of Crimea and inspite of the ongoing conflict in Eastern Ukraine, managers mostly 

mentioned the internal political risks as more important and to be a higher obstacle to business 

than external political risks, i.e., the conflict with Russia and the war in Eastern Ukraine. Concerning 

this, we now experienced an atmosphere of rising worry and nervosity in our discussions 

with the business managers, when talking about the fact that the conflict parties have proved 

unwilling to find an agreement within the Minsk format. In this regard, they feared that Russia 

might lose patience and apply a more radical strategy in future. 

There is another group of managers of international companies active in Ukraine, but also Russia, 

who highlight the increasing difficulties they face concerning their business operations. For 

example, the manager of an Austrian based industry company said that “despite the deteriorating 

diplomatic relations with Russia, we are doing very profitable business in Russia” and added that 

the biggest two risks would be sanctions and reputation risks. A similar argument was brought 

forward by a representative from another Austrian company in the agricultural industry. They 

had just recently closed a huge investment in Russia together with a US joint venture partner, 

therefore they were extremely exposed to sanctions risks. The manager of a technology company 

in Ukraine reported they were very nervous because of the increasing negative dynamic 

between Russia and Ukraine but also Europe/NATO/USA. However, they did not primarily refer 

to related security risks, but rather emphasized reputation and sanction risks they would face. In 

this regard, their main worries addressed their business operations with Russia, since their market 

presence plays by size a more important role than in the Ukraine. Another issue our interview 

partners referred to were supply chain risks that might emerge in case of further conflict escalation 

between Russia and Ukraine. Some producers in Ukraine need raw materials from Russia 

and without supplies from Russia, they would have to stop their operations in Ukraine. 

Given the rise of importance of geopolitical risks in the perceptions of our business partners, 

it was no surprise that their statements on the political risk management strategies they apply 

in Ukraine, first and foremost focused on the threat of further conflict escalation. For example, 

the manager of a US multinational company with factories in Western Ukraine stressed that 

Ukraine is a promising business hub with high potential, but that they are preparing themselves 

for scenarios which also involve a war between Russia and Ukraine. The highest priority in such a 

situation would be to protect their employees, but also to enable production as long as possible. 

Additionally, logistics would likely suffer. At the same time, it would be necessary to sustain the 

supply of raw materials and guarantee the transport of the final product out of Ukraine. Having 

in mind an escalation of the conflict with Russia, the same manager said that “the Ukrainian 

workforce is highly committed” to continue production under any circumstances. 

Despite the rather positive evaluation of business in Ukraine, and even though they did not r eally 

believe in a full-scale war with Russia, companies were preparing or had been preparing for more 



negative scenarios as well. While the manager of a high-tech company argued that they had been 

scaling down their business considerably since 2014 because of the increasingly un favourable 

conditions given geopolitical risks in the region, another manager argued that they had prepared 

a contingency plan. “If there was war in Ukraine, we would organize our business from Western 

Ukraine. If the whole country was conquered, we would manage our operations from Poland”. A 

consumer electronics company executive said they had adapted their organizational structures 

years ago by separating Russia from other markets in the region to be more independent from 

the developments in Russia. In a similar vein the manager of a water-technology company said 

they would put a stronger focus on Central Asia assuming there will not be any open conflict 

soon. 

5 Outlook: The Political Risk Constellation since 24 th February 

Reports from Kiev in the days before the Russian attack coincided with our experiences from 

October 2021. In the local population as well as among the business elite, not many really believed 

in a Russian full-scale attack. In the end, the war took many enterprises unprepared. Ultimately, 

they had to develop and implement acute emergency plans to safeguard staff and employees as 

well as the most important company resources, for example by hiring private security providers. 

Parallelly, they had to develop contingency plans to ensure company operations and safeguard 

control to the highest degree possible. However, companies are affected very differently by 

these political developments. For example, exporting companies have a different risk exposure 

than companies that have invested locally. 

In the mid- and long-term, companies are to adapt their organisational structure and procedures 

to a continuous situation of uncertainty. Not only in Ukraine, but also in the other post- 

Soviet states political risks will rise. It currently becomes increasingly clear that Russian president 

Vladimir Putin’s imperialistic plans do not only refer to Ukraine. It rather seems that the 

attack on Ukraine is only the starting point of his plans to reorganise the post-Soviet region. 

Since the dissolution of the Soviet Union in 1991, Russia has always emphasized that post- 

Soviet countries still belong to Moscow’s sphere of influence. Right after the end of the Soviet 

Union, Moscow proclaimed that they belong to the so-called Near Abroad. Until recently, Russia’s 

strategy has been to trigger, escalate and freeze ethnical-regional conflicts in countries 

turning their back to Russia and willing to join the EU and/or the NATO. Moldova (Transnistria), 

Azerbaijan ( Nagorno-Karabakh), and Georgia (Abkhazia, South-Ossetia) were early examples in 

this context. The 2014/15 war in Eastern Ukraine initially followed the same scheme. However, 

with the 24 th of February full-scale attack on Ukraine, Russia is turning over a new leaf. While the 

final outcome of Putin’s project is still not apparent yet, enterprises have to prepare for different 

scenarios. In case of Ukraine, it remains to be seen to what extent the country will be able to 

resist the Russian attack. 


15


In regard to the post-Soviet region as a whole, political risks that have to be managed have 

reached a new dimension. However, some rules of the game are not entirely new. While Ukraine 

has become a battlefield of a proxy war of nutrition, indicators of this dramatic change have been 

observable long before February 24 th . The August war of 2008, when Russia openly intervened 

militarily at the side of South Ossetia and Abkhazia against Georgia, the annexation of Crimea 

and the war in Eastern Ukraine since 2014/15 have been major events affecting businesses in 

the region. The latter events resulted in EU sanctions on Russia and Russian countersanctions. 

In recent years, these geopolitical risks have added-up to a political risk constellation traditionally 

posing high risks to business operations of European enterprises. Political instability, clientelism, 

informal practises, legal uncertainty, a low guarantee of property rights, and unresolved 

territorial conflicts have been political risks characteristic of the region since the dissolution of 

the Soviet Union in 1991. 

The installation of Russia-friendly governments and local administrations in the conquered 

regions of Ukraine have far reaching effects on the local business constellation. The current experience 

of Western corporate partners in these local cases give a first foretaste of what may be 

to come elsewhere in Ukraine and the post-Soviet region. Russia is not only tightening its grip on 

Ukraine, but on other governments in the region as well. The idea of the expansion of the Union 

State between the Russian Federation and Belarus beyond the two countries, as recently put 

forward by Lukashenko, potential further (military) conflicts in pro-Western republics (Moldova, 

Georgia, Kyrgyzstan), breaking up inner-state conflicts (Uzbekistan, Kazakhstan), and responses 

by the West on the new Russian imperialism, will all have a significant impact on enterprises 

operating in the region. 

With Russia’s tightening grip, Western security and management patterns, as well as the leverage 

of Western embassies and trade commissions, will be pushed back in the individual countries. 

Political instability, corruption, deficiencies concerning the rule of law will most likely increase. 

Under the new rulers in the conquered regions of Ukraine, expropriation measures seem to be 

inevitable. Such measures can be directed at one’s own company and/or important business 

partners. At the same time, reform pressure by the EU will decrease and trade agreements 

with the West will become less important in countries under Russian control. In the Eastern 

Partnership region, this particularly concerns the Deep and Comprehensive Free Trade Agreements 

(DCFTA) with the EU. 

These developments need to be analysed, monitored, and managed. In any case, companies 

firstly have to identify specific risk factors affecting their company/their projects. They then 

must evaluate the possible effects and prioritise along the dimensions “probability and impact” 

before finally developing and implementing mitigation strategies for the respective risk constellation. 



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Interviews 

(1) the manager of a consulting group 

(2) the manager of an insurance company 

(3) the country representative of an international business association 

(4) the manager of a US multinational company 

(5) the manager of an Austrian based industry company 

(6) the manager of an Austrian agricultural company 

(7) the manager of a technology company 

(8) the manager of a high-tech company 

(9) the executive from a consumer electronics company 

(10) the manager of a water-technology company 



Internal and External Political 

Contestation in Kazakhstan 

Analysing Political Risks of the Kazakh President’s 

Foreign and Economic Policy Response to 

Demonstrators’ Demands 1 

Florence Ertel 

University of Passau 


On 1 January 2022, protests against the price increase of liquefied petroleum 

gas (LPG) started in the Western Kazakh city of Zhanaozen, where a large 

proportion of cars run on LPG. Within a few days, the protests spread across 

the country and led to violent riots, attracting a variety of actors with their own 

political agendas. By the time the protests ended in mid-January, 225 people had 

been killed, 4,300 injured (Tagesschau 2022) and more than 12,000 arrested (Zeit 

Online 2022). These figures are based on official data but have not been verified 

independently. Although there is a general tradition of protest in Kazakhstan, the 

outbreak of discontent with Kazakh leadership took many observers by surprise. 

For years, the resource-rich (most notably hydrocarbons and uranium) and in 

the region relatively “free” (Freedom House 2021) 2 country (second after Kyrgyzstan among the 

five Central Asian republics) was considered stable. Against this backdrop, the question arises if 

internal political contestation in Kazakhstan has changed this since early 2022. 

Julian Plottka 


While the goals of some protest groups will remain a subject of speculation, the majority of 

(peaceful) demonstrators were dissatisfied with their socio-economic situation. In general, 

Kazakhstan had a good record of increasing wealth per capita and decreasing poverty levels 

since independence in 1991, being the best performer in Central Asia (Braun/Plottka/ Smirnova 

2021: 9-10). However, due to the global financial crisis, the economic developments in Russia 

and the COVID-19 pandemic, income inequality had been on the rise in Kazakhstan since 2015 

(World Inequality Database 2021). 3 Therefore, protesters demanded reforms for a more equitable 

distribution of the country’s wealth. 

The demonstrators used the slogan “Old man out”, which was addressed to the former president 

and remaining power centre behind the scenes, Nursultan Nazarbayev. Their main issue was 

1 The article was written in August 2022. It, therefore, does not cover later events. 

2 Freedom House classifies all five Central Asian states as “not free”. However, measuring freedom rights, Turkmenistan 

(2/100), Tajikistan (8/100), and Uzbekistan (11/100) belong to the “worst of the worst” on the globe. Therefore, 

Kazakhstan – scoring 23 out of 100 possible points in the “Global Freedom Index” – appears to be relatively 

“free” compared to all her neighbours. 

3 Indicator: Income inequality, top 10% share; bottom 50% share. 


19


that only corrupt elites profit from the wealth of the country instead of giving all citizens their fair 

share. Especially the population in rural Kazakhstan does not benefit from the country’s wealth. 

To satisfy these demands and to secure stability in the country, President Kassym-Jomart 

Tokayev is facing a double challenge: on one hand, he has to implement socio-economic reforms 

to raise living standards in Kazakhstan. On the other hand, however, he has to challenge the 

influence of the established elite, which risks losing its wealth in economic reforms but remains 

influential and a potential threat to presidential power (Eastblog 2022). 4 

Prospects of addressing these demands and stabilising the situation in Kazakhstan are 

worsening due to the Russian war against Ukraine. As Kazakhstan is a member state of the Eurasian 

Economic Union (EEU), its economy is closely linked to that of Russia. Therefore, Western 

sanctions against Russia are impairing the Kazakh government’s chances to meet citizens’ 

socio-economic demands by boosting economic growth. Instead, the Russian war has become 

another crisis influencing the current trend of declining income equality. Even though commodity 

exports account for the bulk of Kazakhstan’s foreign trade, increased commodity prices will 

not compensate for the negative economic effects of the Russian recession on Kazakhstan. 

In addition to the economic fallout from the Russian war against Ukraine, in January 2022 

Kazakh President Tokayev added another political dimension further complicating his ability 

to fulfil Kazakhs’ demands when he described the protestors as terrorist gangs trained abroad. 

This reference to foreign influences allowed him to call for the temporary deployment of a 

peacekeeping force of the Collective Security Treaty Organisation (CSTO), a Russian-led international 

organisation of Eurasian countries. Until January 2022, earlier demands for military 

support by other member states were always ignored. However, the CSTO chairman, Armenian 

Prime Minister Nikol Pashinyan, immediately agreed to the deployment. Russian paratroopers 

arrived in Kazakhstan the very next day. The CSTO peacekeeping force also included soldiers 

from Armenia, Belarus and Tajikistan. 

Since then, Kazakhs have been debating whether the deployment of the CSTO troops has further 

increased their country’s dependence on Russia, whose influence is regarded very critically. 

Pursuing its traditional multi-vector foreign policy, which tries to balance the influence of 

foreign power in Kazakhstan, especially to avoid too much dependence on Russia, has become 

increasingly difficult for the Kazakh government. President Tokayev will now have to balance Russian 

expectations in foreign policy, the indirect consequences of Western sanctions against Russia 

and the expectations of his citizens. The first foreign policy decisions have been marked by 

restraint. In addition to citizens’ demand for socio-economic and political reform, Kazakhstan’s 

geo-political position between Russia and the European Union (EU) – as well as China – is adding 

another political risk potentially threatening stability in the Central Asian country. 

4 The power politics dimension will not be addressed in this article. 



In our article, we assess the changing situation and analyse the political risks resulting from 

recent developments in Kazakhstan. To this end, we present our methodology of political risk 

analysis in the following section. In the third section, we apply a macro-political analysis before 

addressing the course of Kazakh foreign policy since January 2022. In the final section, we 

employ a causal analysis approach to assess the political risks resulting from the course of the 

Kazakh president’s current foreign and economic policies. 

2 Methodology: Analysing Political Risks of the Kazakh President’s Foreign and Economic 

Policy Response to Demonstrators’ Demands 

Against the backdrop of the events of January 2022, we present a methodology to analyse the 

political risks emerging from the Kazakh president’s foreign and economic policy response to 

the demonstrators’ demands. In our approach, we follow Giersch (Giersch 2015) and focus our 

analysis on identifying possible future developments. 

In general, risk-based analyses seek to make statements about the probability of how certain 

unfavourable scenarios are likely to occur, what negative impact these scenarios may have if 

they occur, and what might go wrong (Giersch 2015: 6). More precisely, risk analyses are done 

to isolate from the multitude of risks those which ought to be taken so seriously that they 

should be prevented entirely, or whose probability of occurrence or potential damage should 

at least be reduced (Haimes 2009; Renn 2008; Giersch 2015: 2-14). To identify relevant political 

risk scenarios, we focus on two methods suggested by Giersch, combining a macro-political 

approach with a causality analysis (Giersch 2015: 8). 

For the macro-political analysis, we look at the political, social and economic environment 

of Kazakhstan. To carry out a risk assessment according to this method, indicators must be 

selected to measure economic, political and social development. In addition to the current risk 

assessment, the political risks of individual countries can thus also be compared, or a specific 

country can be viewed over time (Giersch 2015: 8). Therefore, we analyse the recent socio-economic 

development, the economic forecasts, and the Kazakh government’s policy response to 

citizens’ economic demands as well as Kazakhstan’s traditional multi-vector foreign policy. This 

is indispensable, especially with regard to its particular geopolitical situation, as the multi-vector 

foreign policy affects its foreign trade policy, e.g. the export of oil and gas. 

With the causal analysis of political risks in general, we show the causes and forms of public 

discontent. According to Giersch (Giersch 2015: 8), the reasons for discontent can be of religious 

or ethnic origin or may arise from social grievances or even corruption by a country’s political 

elites. Discontent, in turn, can manifest itself in individual protests or regular demonstrations 

and even violent riots. In addition, the government’s reaction and its handling of the situation are 

also important, i.e. which measures it takes and whether these can also affect foreign companies. 

These factors influence the political stability of a country. Ultimately, causal risk analysis 


21


seeks to determine the extent to which regime change is possible through the coincidence of 

various factors (Giersch 2015: 10). In our analysis, we will identify the most important issues 

arising from the macro-analysis and draw conclusions for risk assessment in Kazakhstan. 

3 Macro-political Analysis: Prospects of the Proposed Economic Crisis Management 

Despite the uncertainty regarding the objectives of some of the groups engaging in the events 

of the Kazakh “Bloody January” of 2022, the majority of demonstrators expressed their dissatisfaction 

with socio-economic development in Kazakhstan and the unequal distribution of 

the country’s wealth, mainly generated by exporting hydrocarbons and other raw materials. 

The liberalisation of trading LPG on 1 January 2022, resulting in a steep price rise, was the 

initial trigger for the protests in Western Kazakhstan, where most cars run on LPG. In an early 

response, the government accused petrol station owners of profiting from price speculation and 

ordered a cap on the LPG price. Neither the price cap nor a later price reduction below the level 

of 2021 helped to calm down the protests. This shows that the demonstrators demanded more 

than a mere reduction of the price level for LPG. 

In his ex-post assessment of the events in January, the Kazakh president upheld his narrative 

that the protests were hijacked by foreign agents and terrorists. However, he also acknowledged 

that many demonstrators were peaceful and expressed legitimate demands. These demands 

included the fight against corruption, an investigation into the treatment of protesters during the 

“Bloody January” as well as political and socio-economic reform. Tokayev took the inauguration 

of the new cabinet on 11 January 2022 5 as a first opportunity to outline how the new government 

would respond to these demands: in his speech, he announced steps to ease anger over 

rampant economic inequality, a five-year freeze on salaries for top officials and the elimination 

of corrupt systems widely believed to benefit the country’s oligarchs. In a TV interview in 

mid-February 2022, he renewed his commitment to socio-economic reform. During a “Foreign 

Investor Council’s Meeting” on 22 February 2022, he declared that “the principal idea behind economic 

reforms is not abstract figures of GDP growth and place in global rankings but increase 

of income and living standards” (President of the Republic of Kazakhstan 2022a) of the Kazakh 

people. At least until Russia started its war against Ukraine, Tokayev was willing to put economic 

and social reform high on the country’s political agenda. 

To assess whether citizens’ discontent with the socioeconomic course of Kazakhstan is a potential 

source of further unrest and therefore a political risk, we first put the citizens’ demands in a 

long-term perspective on Kazakh economic development. Over the past twenty years, the upper 

middle-income country’s success in poverty reduction has been considerable. While 62 percent 

of the population lived on less than USD 5.50 per day in 2001, this number was down to just five 

percent in 2018 (The World Bank 2022a). For the same period, Kazakhstan has had an overall 

5 Tokayev forced the previous government, which had been appointed under the rule of the former president, to step 

down. 



positive trend in increasingly equal distribution of income (Braun/Plottka/Smirnova 2021: 10). 

Furthermore, unemployment is not a major concern in Kazakhstan, as it faces shortage of labour 

and has become a destination for migrant workers from other Central Asian countries as Russia 

has less demand for foreign workers and tightened immigration regulations (Braun/ Plottka/ 

Smirnova 2021: 7). In terms of increasing living standards and a fair distribution of wealth, 

according to official data Kazakhstan is the best performing of the five Central Asian states. 

While the long-term trend in Kazakhstan is positive, to a certain degree official data hide the 

actual problem. Consumer indebtedness and low income among people not working under traditional 

labour contracts, such as the pseudo self-employed, are a widespread problem in Kazakhstan 

(Kudaibergenova/Laruelle 2022: 2-3). However, it is important to note that the problem 

of social deprivation is rather relative than absolute, especially compared to the living standards 

in the other Central Asian states (Cornell 2022: 5). While urban elites are benefiting from Kazakhstan’s 

wealth, rural workers in the first sector and unemployed citizens are left behind (Cornell 

2022: 5). Among these groups, recent economic developments have fuelled fears that their economic 

prospects might further deteriorate in the near future. 

The very same factors driving the protest are also major risks that could severely undermine the 

Kazakh president’s ability to deliver on protesters’ demands for socio-economic reform. A first 

such factor is the bleak economic outlook, mostly due to the external exposure of the country’s 

economy and the COVID-19 pandemic. As Kazakhstan is a member of the EEU, its economy 

remains closely linked to that of Russia. In 2019, 36.67 percent of all imports came from Russia. 

As a market, Russia seems less important for the Kazakh industry, with only a share of 9.71 

percent of all exports going to the Northern neighbour (World Integrated Trade Solution 2022a). 

However, a closer look at the export structure reveals that exports to Western partners mainly 

include raw materials, while China (13.55 percent of all exports) (World Integrated Trade Solution 

2022b ) and Russia (World Integrated Trade Solution 2022c) are the biggest markets for other 

products. 

Due to its close economic ties with Russia, the Kazakh economy has been negatively affected 

by Russian economic development since 2009. For Russia, the global financial crisis, Western 

reactions to the occupation of Crimea and the COVID-19 pandemic have led to economic growth 

rates below the levels of the previous decade or even to negative growth. Overall Kazakh economic 

development closely follows that of Russia even though the country has managed to 

outperform Russia slightly since 2010 (The World Bank 2022b). Western economic sanctions in 

response to the Russian war against Ukraine will most likely have an even bigger negative effect 

on Kazakhstan than the previous economic crisis. This is even more probable as Kazakhstan 

has signalled willingness to comply with the Western sanctions and does not intend to profit 

from becoming a backdoor for trade with Russia. 

In addition to the insecurity caused by the Russian war against Ukraine, the COVID-19 pandemic 

remains an important unknown for the Kazakh economy. While the Kazakh Gross Domestic 


23


Product (GDP) returned to pre-pandemic levels in 2021 (World Bank Group 2022: 12), the prospect 

of future growth is highly dependent on how the pandemic will develop during the winter 

2022/2023. Analyses of the economic consequences of the previous lockdown in Kazakhstan 

show that measures to contain the pandemic severely affected the services sector, smaller companies 

and the informal sector. They also caused the complete shutdown of some industries 

(Khan 2021: 73-74). With Russia and China as Kazakhstan’s most important markets for other 

goods than raw materials under economic pressure, national consumption will be key to maintain 

pre-pandemic levels of economic growth. However, we will show later that current inflation 

and rising prices in Kazakhstan result in a negative outlook for strong consumer demand. A 

new wave of COVID-19 infections in winter 2022/23 could further impede economic re covery in 

Kazakhstan. While in February 2022 the outlook was still positive as the global economy was 

recovering from the pandemic, Kazakhstan will most likely struggle to remain on an economic 

growth path that would be necessary to fulfil citizens’ socio-economic demands. 

The structure of the Kazakh economy is a second risk that could undermine the prospect of 

making Kazakh society more equal in the long run while benefitting the current president shortterm. 

As mentioned before, the country is heavily dependent on the export of raw materials, which 

accounted for 69.34 percent of all exports in 2019 (World Integrated Trade Solution 2022d). 

During the pandemic, when global commodity prices were low, the Kazakh treasury experienced 

the downside of this extreme dependency on raw material exports. Since commodity prices 

have reached new heights (World Bank Group 2022: 11), revenues are going to increase considerably 

this year, giving the Kazakh government additional leeway for interventions to stimulate 

economic growth. Due to the negative economic outlook, however, the additional resources will 

be needed for emergency measures. 

This structure of the Kazakh economy entails potential risks for three reasons. First, the infrastructure 

for crude exports is routed to Russia, making Kazakhstan politically dependent on its 

Northern neighbour. As Kazakh pipelines crossing Russia have been shut down twice in 2022 

(Deutsche Welle 2022a), the Kazakh government has to build new infrastructure to mitigate its 

political and economic dependence on Russia and ensure stable revenues from raw material 

exports. Second, the manufacturing and services sectors remain underdeveloped. Therefore, 

Kazakhstan has to diversify its economic structure to offer more high-salary job opportunities 

to its citizens, which is key to increasing living standards. Third, the current high commodity 

prices and energy insecurity are a boost for green transition. Depending on how fast Western 

countries achieve considerable reductions in energy consumption, Kazakh revenues from crude 

exports could decline in the mid-term perspective. Being also a major uranium supplier, the 

country could compensate some of these losses if nuclear energy is to become a major element 

of the “green” transition. However, the greening and diversification of the Kazakh economy are 

additional challenges to be addressed by the Kazakh government. 

A third risk that could further fuel public anger are rising prices, especially for food, and the 

current inflation rate. Following hyperinflation in the early 1990s, Kazakhstan managed to bring 



down annual consumer price increases to levels below 20 percent. The inflation rate, however, 

has been rather volatile over the past 20 years, with peaks in 2008 (17.1 percent) and 2016 (14.5 

percent) (The World Bank Data 2022). Kazakhstan already faced a surge in inflation in 2021 as 

many consumer products were imported and supply-chain disruptions caused a sharp increase 

in transportation costs (World Bank Group 2022: 14). Increasing energy prices put inflation 

under additional pressure. As the initial trigger for the protests in January 2022 shows, this is of 

major concern to citizens. With regard to the upcoming heating season, the Kazakh government 

has already banned coal exports by road transportation to prevent speculation and further price 

increases. 

In addition to growing energy prices, sharply rising food prices have exacerbated inflation. 

Since March 2022, food inflation has jumped in Kazakhstan, reaching 19.2 percent in June 2022 

( Trading Economics 2022). Droughts, animal diseases (Eurasianet 2022), global supply chain 

disruptions and Russia limiting food exports have not only caused price increases but also food 

shortages in Central Asia. As Kazakhstan is a major grain exporter to the other Central Asian 

states, the effects on the country are not as severe as on the entire region, where food security 

has become a major issue (RadioFreeEurope/RadioLiberty 2022a), but the government has also 

reacted with export restrictions to secure food supply. If this development continues throughout 

the year, and there are no signs of a turnaround, inflation could become a major risk for system 

stability in Kazakhstan, putting the president and government under pressure to adopt emergency 

measures. 

An additional, non-economic factor undermining the Kazakh president’s ability to implement 

fundamental socio-economic reforms is the power distribution within the regime. In our paper, 

we focus on the economic and foreign policy dimensions of the Kazakh “Bloody January”, but 

the violent protests also have a power dimension. One widespread interpretation of why peaceful 

protests turned into violent riots is that they were hijacked by groups fighting for power in 

the Kazakh regime (Cornell 2022: 5). As a career diplomat, Tokayev does not have his own 

power basis within the Kazakh regime, which made him an excellent choice as a new president 

who cannot dare to challenge the power of the established elite. Accordingly, former President 

Nazarbayev has remained the éminence grise of Kazakhstan. As the political and economic 

reforms pursued by Tokayev since 2019 (Cornell/Starr/Barro 2021) began to undermine the 

power of the established elite, in the eyes of some commentators the protests were used as a 

pretext to challenge his rule (Cornell 2022: 5). The fact that Tokayev called for CSTO troops to 

intervene in Kazakhstan is read as a sign that he did not trust his own security services. 6 

In the end, the violent riots offered Tokayev the opportunity to embark on “de-Nazarbayevication” 

(Kudaibergenova/Laruelle 2022: 13). He took over the chairmanship of the National Security 

Council from Nazarbayev, removed a number of Nazarbayev confidants from public offices and 

dismissed the government, which had been in office since the rule of his predecessor. Officially, 

6 For details on the foreign policy dimension of the January events, see the next section. 


25


all this was done with the backing of Nazarbayev, who called on the Kazakh citizens to support 

Tokayev (Eastblog 2022). All in all, Tokayev proceeded with the “de-Nazarbayevication” very 

cautiously. The new government is a very good example that the changes do not mark a total 

breakup with the old elites: eleven of the new members of government already served in the 

previous one. This can be interpreted as a clear signal that beneficiaries of the old system do 

not need to worry much about their privileges. As Tokayev’s power is still potentially disputed 

by rivals in the regime, the established elite continues to set clear limits on how far reforms can 

go without becoming too painful for the oligarchs. On one hand, the elite remains a factor limiting 

Tokayev’s ability to pursue reforms and fulfil the protesters’ demands. This could result in 

new pressure for reforms from the streets. On the other hand, too far-reaching reforms to fulfil 

citizens’ demands can also be a potential risks to system stability as the possibility of another 

coup d’état initiated by rivalling groups in the regime cannot be ruled out. 

While the Kazakh president’s early reactions to the protests in January 2022 included the promise 

of socio-economic reforms, his reform agenda has changed since 24 February 2022. On 

16 March 2022, Tokayev addressed the Kazakh people with an early state of the nation address, 

detailing his reform agenda in ten thematic clusters. Nine of the ten clusters dealt with the 

political system of Kazakhstan, covering the powers of the president and parliament, a reform 

of the electoral system, the electoral process and the law on political parties, human rights, the 

administrative system and decentralisation (President of the Republic of Kazakhstan 2022b). 

Only the tenth thematic cluster comprised anti-crisis measures to mediate the economic fallout 

from Western sanctions on Russia. The first emergency measures were controls on capital 

flows as the tenge was closely following the Russian ruble in its decline. About six weeks after 

the Russian invasion, the exchange rate of ruble and tenge had stabilised. A second priority was 

the stabilisation of food prices by boosting national agricultural production, a challenge which, 

as outlined before, could be crucial for maintaining stability in Kazakhstan. Additional economic 

measures remained vague, but the president did announce his intention to initiate a structural 

reform package of de-bureaucratisation in the economic and public administration to increase 

the efficiency of crisis responses (President of the Republic of Kazakhstan 2022b). 

This economic reform priority is completely different from what citizens protesting in January 

2022 had in mind when calling for socio-economic reforms. The proposed measures consider 

citizens’ concerns; they do reflect that the government has understood how crucial socio-economic 

development is for maintaining its legitimacy. However, the proposed agenda mainly 

moderates expectations. The measures are realistic in that, given the previously described 

geopolitical and economic circumstances, stabilising the economy and preventing any further 

deterioration of citizens’ economic situation are the only achievable objectives in the short term. 

As the Kazakh president is aware that business as usual in domestic politics is a fundamental 

threat to his and the system’s legitimacy, he focuses on political reforms. Regardless of geopolitical 

circumstances, he can follow up on his previous reform agenda addressing the Kazakh 

political system. Based on additional legitimacy generated by the protests in January, he can 

speed up the process. Thus, the reforms proposed in the state of the nation address and those 



already decided in the referendum of 5 June 2020 address all levels of the Kazakh political 

system, whereas previous reforms mainly focused on the local level (Cornell/Barro 2022). Even 

though the reforms are more far-reaching than before, they are not a path to liberal democracy 

in Kazakhstan. As much as every step should be welcomed, the system as a whole will remain 

under the control of the ruling elite. Therefore, Tokayev’s reform agenda very unlikely is of 

concern to the Russian government. 

4 Kazakhstan’s Foreign Policy – Maintaining the Balance Is Becoming Difficult 

Kazakhstan’s foreign policy is characterised by a multi-vector foreign policy concept marked in 

particular by former president Nazarbayev to find a balance in external relations with regard to 

the country’s geopolitical position and its young independence as a post-Soviet state ( Ambrosio/ 

Lange 2014: 543). The concept aims to seek strategic independence while benefiting from the 

advantages of cooperating with larger and more powerful states 7 . As Ambrosio and Lange state 

in their analysis of Nazarbayev’s presidential addresses from 1997 to 2014, the former Kazakh 

president refers to this concept in almost all his speeches during the investigation period. Key 

points of the strategy are to manifest “a pragmatic, non-confrontational foreign policy which 

aims to balance positive relations with the major powers (Russia, China, the United States), as 

well as to ensure an active policy in the regions surrounding Kazakhstan (Eurasia, Europe, Asia, 

and the Islamic world).” (Ambrosio/Lange 2014: 549). The structure of markets for Kazakh gas 

and oil exports are a clear example of how the country seeks a balance in its external relations. 

As Ipek states, Kazakhstan follows a multi-vector foreign policy especially due to the geopolitical 

challenges of exporting goods from a landlocked country. The “geopolitical imperatives 

force the country to keep good relations with Russia and China as well as with the United States 

and the European Union, as counterbalancing partners” (İpek 2007: 1180). This results in a pragmatic 

approach to foreign policy. 

Although the EU aimed to intensify its relations with the Central Asian region by adopting the first 

Central Asia strategy in 2007 (Böttger/Braun/Plottka 2019), the Union was regarded only as a 

junior partner for Kazakhstan. Therefore, within the framework of the multi-vector foreign policy 

maintaining good relations with the EU has always been important for Kazakhstan, but only on 

a regular basis – not because the EU is an important partner beyond trade in raw materials, but 

to counterbalance Chinese and Russian influence. Nevertheless, with regard to current developments 

the question arises whether the EU could become a more important partner for Kazakh 

foreign policy. 8 To answer this question, a more detailed look must be taken at Kazakhstan’s 

foreign relations with Russia. 

7 The counterexample is Turkmenistan, which puts neutrality first in its foreign policy at the expense of refraining 

from international cooperation. 

8 In general, relations with the US could serve the same function. However, during the presidency of Donald Trump 

US interest in the region vanished for some time, making the US a less stable partner within a multi-vector foreign 

policy approach. 


27


Since the Russian annexation of Crimea, it has been discussed whether Russia is a potential 

threat to Kazakh territorial integrity. Both countries have more than 7,000 kilometres of land 

border, and the fact that a quarter of Kazakh citizens are ethnic Russians (mostly living in the 

country’s north) could be used as a pretext for Russian claims to Kazakh territory. The Russian 

government has never tried to defuse such fears, but regularly stokes them. In 2014, Russian 

president Vladimir Putin observed that his Kazakh counterpart had “created a state in a territory 

that had never had a state before. The Kazakhs never had any statehood. He created it.” (The 

Diplomat 2022). Bearing in mind the allegations of Russian propaganda against Ukraine, Putin’s 

words are quite ambivalent. The latest incited dates back to August 2022, when former Russian 

president Dmitry Medvedev called Kazakhstan an “artificial state” in a social media post. 

“In this century Kazakhstani authorities implemented resettlement policies of various ethnic 

groups inside the republic which can be qualified as genocide of Russians. And we do not intend 

to turn a blind eye to this. There will be no order until the Russians get there” (The Diplomat 

2022). 9 Considering that Kazakhstan is not a major military power but one of the largest uranium 

suppliers and has been nuclear-free since 1996 (Deutschlandfunk Kultur 2021), it becomes clear 

how dependent the country is on Russian goodwill not to challenge its territorial integrity. 

Unlike Georgia and Ukraine, which have both moved closer to the West in the past decade, there 

is little probability that Kazakhstan would turn to the EU and away from the EEU. As the Russian 

government continues to prove, however, that speeches about a new Russian empire are no 

cheap talk (see the annexation of Crimea and the proxy war in Ukraine since 2014, and the war 

against Ukraine since 24 February 2022), Kazakhstan faces a foreign policy dilemma. On one 

hand, positive relations with Russia are essential for Kazakhstan’s security. Open confrontation 

between the two countries would entail severe political risk for the Kazakh government. On the 

other hand, too much dependence on Russia could also become a political risk as the example 

of Belarus shows. 

Against this background, the foreign policy dimension of the developments in January 2022 is 

of particular interest. President Tokayev described the demonstrators as terrorist gangs trained 

abroad and called for temporary deployment of a CSTO peacekeeping force. This reference 

to foreign influence was a necessary precondition for the deployment of CSTO troops, as the 

organisation does not interfere in internal affairs of its member states. Previous calls by CSTO 

member states for deployment of troops were rejected on this basis. This time, Armenian prime 

minister Nikol Pashinyan, as serving chairperson of the CSTO, immediately agreed to the deployment. 

Russian paratroopers arrived the next day. The CSTO peacekeeping force also included soldiers 

from Armenia, Belarus and Tajikistan. While violent clashes continued and Kazakh security forces 

were allowed to fire without warning from 7 January 2022, it is important to note that CSTO 

troops from abroad were not involved in the clashes but protected official buildings. Therefore, it 

9 The post was deleted later on and Medvedev claimed his account had been hacked. 



is very likely that the president’s call for CSTO troops was not a request for help from Russia, but 

a domestic political signal. There were reports of Kazakh security forces joining the demonstrators 

and Tokayev could not be sure of their loyalty. In both directions, the CSTO troops were a 

clear signal that the president had a plan B just in case. He could use the foreign troops to secure 

his position of power in domestic politics. Apparently, the signal was sufficient to solve the situation 

to his advantage. 

For Russia, the deployment was beneficial as it refuted earlier criticism that the CSTO existed 

only on paper. Since the hasty withdrawal of Western troops from Afghanistan, Central Asia has 

been confronted with a new security problem. The countries in the region – especially Tajikistan 

– are expecting Russian support in security operations, such as the anti-terrorism exercises 

within the framework of the CSTO at the end of 2021. In the long term, however, Russia can 

only provide such support through CSTO if its partners trust the organisation. The mission in 

Kazakhstan was a step in this direction. 

In foreign policy, Tokayev will now have to balance Russian expectations, the indirect consequences 

of Western sanctions against Russia, and the expectations of his citizens. In addition, 

regarding the domestic influence on foreign policy, ethnic aspects within Kazakh society also 

need to be considered. On the Russian border, ethnic Russians make up 60 to 70 percent of the 

population – in the entire country they make up a quarter of Kazakhstan’s 16 million inhabitants. 

Russians and Kazakhstanis living in Kazakhstan differ in their opinions on the war in Ukraine: in 

April 2022, a survey conducted by the Kyiv School of Economics found that “40% of the Russians 

in Kazakhstan think that Russia’s goal in Ukraine is ‘to protect the Donbass people’”( Kyiv School 

of Economics 2022), while only “10% of Kazakhs hold this opinion.” (Kyiv School of Economics 

2022). In addition, while many ethnic Kazakhs wonder whether the north of their country, 

very rich in oil, natural gas and uranium, will be next, almost all Russians in the country support 

Putin’s policy (Deutschlandfunk 2014). 

The first foreign policy decisions were marked by restraint. President Tokayev’s comments 

on the war in Ukraine on 1 March 2022 were representative of a multi-vector foreign policy: 

neither was the Russian attack directly condemned, nor was any explicit side taken for either 

of the states. Instead, he emphasised “the critical need to ensure the security, sovereignty and 

territorial integrity of Kazakhstan” (Ministry of Foreign Affairs of the Republic of Kazakhstan 

2022). He also offered Kazakhstan as a mediator by stating: “The geopolitical situation has 

escalated in an unprecedented way, and it is now time to talk about irreversibility of this trend, 

to much regret. Therefore, we call on both states to find common ground at a negotiating table, 

to reach an agreement. There is no other way. A bad peace is better than a good war. Without 

peace, there will be no development.” (Ministry of Foreign Affairs of the Republic of Kazakhstan 

2022). One day later at the UN General Assembly, the Kazakh position lost its neutral stance. 

The country’s abstention in the UN General Assembly is considered a clear sign against Russia’s 

war. This move was followed by the non-recognition of the Luhansk and Donetsk republics in 

early April 2022, support for Ukraine with civilian aid and the cancellation of the military parade 


29


to commemorate the victory over Nazi Germany (RadioFreeEurope/RadioLiberty 2022b). On a 

symbolic level, Kazakh foreign policy is moving as far away from Russia as possible without 

publicly condemning the Russian war against Ukraine. This course earned Tokayev the support 

of the Kazakh people and has strengthened his position (Carnegie Endowment for International 

Peace 2022). 

In other areas, pursuing multi-vector foreign policy is even more difficult. Tokayev has also 

emphasised Kazakhstan’s economic integrity with regard to the sanctions against Russia by 

taking measures to “overcome difficulties and challenges together” (Ministry of Foreign Affairs 

of the Republic of Kazakhstan 2022), to ensure the functioning of the economy in the crisis. 

Furthermore, he states that the resulting challenges should neither be underestimated nor 

exaggerated. This can be seen as a clear signal to both Russia and the sanctioning rest of the 

world – especially the European Union. The sanctions are neither condemned nor explicitly 

welcomed. These developments cannot meet Russian expectations, as a member state of 

the EEU with close trade relations with China and the West would be the perfect backdoor to 

circumventing Western sanctions. However, the Kazakh government has sent clear signals to 

the EU that it is willing to comply with Western sanctions (Cornell/Barro 2022: 17). On another 

level, Kazakhstan is also approaching the EU, signalling clear interest in deepening cooperation. 

The question how to “further strengthen bilateral relations” between the EU and Kazakhstan was 

discussed at the EU-Kazakhstan Cooperation Council in June 2022, especially with regard to 

economic relations and alternative trade routes to connect Europe and Asia. (European Council 

2022) 

That this foreign policy course creates tension with Russia has been shown by the three-time 

shutdown of the main export route for Kazakh oil, which crosses Russia. The terminal to load 

Kazakh oil on ships in the Black Sea has been closed twice since 24 February 2022. In March 

damage following a storm and in June the search for World War II underwater mines were cited 

as reasons to justify shutting down the export facilities. On 5 July 2022, a local Russian court 

ordered the third-time closure of the pipeline of the “Caspian Pipeline Consortium” due to noncompliance 

with environmental protection regulations. Incidentally, the decision was taken a day 

after Kazakh president Tokayev discussed additional exports to Europe with the president of the 

European Council, Charles Michel (Deutsche Welle 2022a). The Kazakh government reacted by 

discussing alternative options to export oil and gas through Azerbaijan (Wiener Zeitung 2022) 

and the court soon ordered a reopening of the pipeline. Recent speculation about a trade war 

between Russia and Kazakhstan is clearly exaggerated (Deutsche Welle 2022b). The Russian 

government seems to show signs, however, that Kazakh foreign policy is slowly approaching red 

lines that Russia is not willing to see crossed. 

While Kazakhstan’s current foreign policy course clearly eases internal contestation over Kazakh 

relations with Russia and wins support for the president, pursuing a multi-vector foreign policy 

is becoming increasingly difficult. Contestation between Kazakhstan and Russia is rising. As 

the Russian government starts to think in terms of friends that are with Russia, and foes that 



are with the West, it remains unclear how long Kazakhstan will be able to pursue its multi-vector 

foreign policy, which is based on good neighbourly relations with all partners. Therefore, Russian 

foreign policy is the major political risk to Kazakh foreign policy. Speculating about how far 

Russia might be ready to go on its current course is difficult as the policy is no longer based on 

rational calculation. 

5 Conclusion – Internal Stability and External Political Risks 

Based on our assessment of the political risks arising from the protests of January 2022, we 

conclude that Kazakhstan will most likely remain the most stable country in Central Asia. With 

regard to the economic situation and Kazakh foreign policy, external factors are probable causes 

of instability, while under difficult circumstances the government can be expected to take steps 

to stabilise the situation. 

We have found that the peaceful protests were mainly driven by socio-economic concerns of 

impoverished parts of Kazakh society – mainly in rural areas –, who demanded a fair share 

of the country’s wealth. In his initial response, the Kazakh president acknowledged these 

demands and promised to implement socio-economic reforms with a focus on fighting corruption. 

Following the Russian invasion in Ukraine on 24 February 2022, priorities changed and the 

government started to moderate expectations. With a focus on food security and preventing any 

further losses in purchasing power, the economic reforms turned out to be a crisis management 

package. 

This agenda seems realistic as economic prospects are bleak due to Kazakhstan’s close ties 

with the Russian economy, which is negatively affected by Western sanctions, and a potential 

new wave of COVID-19 infections in autumn 2022. High inflation and rising food prices are the 

major political risk that could put the Kazakh government under additional public pressure. The 

sharp increase in global commodity prices, however, offers the Kazakh government the financial 

leeway to fund crisis measures. Its large agricultural sector, which exports to other countries, 

provides the opportunity to ease price pressure by increasing production and limiting exports. 

Therefore, it seems very unlikely that the economic situation in Kazakhstan will put the government 

in danger in the near future even if it is unable to meet the socio-economic demands of the 

citizens. 

Instead, the government has turned to political reforms of unprecedented scale in Kazakhstan. 

This trend, which dates back to the time before the “Bloody January”, is of particular interest, as 

President Tokayev lacked sufficient support for his reform agenda until the end of 2021. Having 

won the political power struggle entailed in the events of January 2022, he has new legitimacy to 

speed up reforms now. These reforms are taking the opposite direction to democratic recession 

in Kyrgyzstan (currently establishing a presidential autocracy) and tightening authoritarianism in 

Tajikistan. The developments in Kazakhstan are reminiscent of what Schieck has described as 


31


new authoritarianism in Uzbekistan (Schieck 2017). He argues that authoritarian systems can 

no longer rely on repression alone but need additional sources of legitimacy. As under current 

circumstances the Kazakh president cannot generate additional legitimacy by increasing the 

income levels of the most disadvantaged citizens, he increases political participation rights instead. 

As these reforms do not mark the beginning of democratic transition in Kazakhstan, they 

are highly unlikely to result in additional stability. 

Kazakh relations with Russia are a further potential source of instability. The deployment of 

CSTO troops in Kazakhstan and Russia’s nationalist rhetoric are fuelling fears among ethnic 

Kazakhs that Russia could also intervene in their country. Tokayev’s response of maintaining an 

independent Kazakh position regarding the war in Ukraine has earned him support in Kazakhstan 

and helped dispel the reputation of having handed the country over to Russia. However, pursuing 

this traditional multi-vector foreign policy increases tensions with Russia. Under these circumstances, 

balancing external actors is becoming increasingly difficult for the Kazakh government. 

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in US$ Thousand 2015-2019. https://wits.worldbank.org/CountryProfile/en/Country/KAZ/ 

StartYear/2015/EndYear/2019/TradeFlow/Export/Indicator/XPRT-TRD-VL/Partner/RUS/ 

Product/All-Groups (15.08.2022). 

World Integrated Trade Solution (2022d): Kazakhstan Trade. https://wits.worldbank.org/ 

CountrySnapshot/en/KAZ (15.08.2022). 

Zeit Online (2022): Kasachstan. Knapp 1.700 weitere Festnahmen in kasachischer Stadt 

Almaty. 12.02.2022. https://www.zeit.de/politik/ausland/2022-01/kasachstan-almaty-unruhen- 

festnahmen (15.08.2022). 



Central Asia between the European 

Union and Eurasian Economic Union: 

Sovereignty Underestimated 

Abstract 


In the circumstances of the overgrowing tensions within the Eastern Neighborhood 

countries and the war on the Eastern flank of the European Union (EU), the 


focus on searching for possible economic partnership is moving to Central Asia. After dozens 

of years of oblivion, the region found itself as the arena of competition among global leaders 

but also as a battleground for regional leaders – Kazakhstan and Uzbekistan. The paper starts 

with the assumption that a key reason for the poorly-designed external economic strategy lies in 

neglecting the place and role of economic sovereignty as a key driver of regional development. 

A comparative analysis of the regionalisms offered by the European Union (EU) and the Eurasian 

Economic Union (EAEU) demonstrates that leadership is most effectively exercised with a view 

to recognising equality in geo-economic positions and respecting sovereign decision-making 

rights. In this paper, it is argued that underestimating economic sovereignty of five developing 

economies in Eurasia for multinational corporations (MNCs) would be fatal in the context of 

hyper-competition between the European Union (EU), Eurasian Economic Union (EAEU) and Belt 

and Road Initiative (BRI) for the regional leadership on the emerging markets. 

Keywords: Economic Sovereignty, Regional Integration, Leadership, EAEU, EU, Central Asia, 

Sustainability, MNCs, Russia, China 


The paper’s point of departure is the assumption that today we are witnessing a profound 

structural change in the post-Westphalia system of international relations. This crisis has its 

roots in the geopolitical tensions of globalisation and reciprocal regionalisation and is driven 

by the need to rethink the role of nation states in strategic geo-economic decision-making. The 

latter is shaping the global economic agenda in terms of global and regional leadership through 

multilateral and bilateral relations. Multinational business plays a crucial role as a mediator there. 

In the mid-20th century, the growing research interest in the relationship between sovereignty 

and the movement of capital through investment was coupled with the notion of economic 

growth as a horizon for strategic decision-making (Penrose 1959). The growing influence of 

international organisations and multinational corporations led to questioning the reality of economic 

sovereignty by nation states (Vernon 1971). Furthermore, the discourse on the alignment 

of integration and sovereignty is currently being driven by a debate on the possibly diminishing 

role of the nation state in the world – system and delegating some of its functions to supranational 

institutions within the framework of integration alliances. 


37


These discussions are even more relevant regarding the so-called economic sovereignty of 

the state, the exercise of its regional or global leadership and the mechanisms of geopolitical 

and geo-economic decision-making. As defined by Keohane and Nye (1977), ‘sovereignty is the 

exclusive right to determine the framework of rules, regulations and policies within a territory’. 

According to institutional and poststructuralist accounts, the state is seen as anchored in a wide 

cultural environment (Anderson 1986; Spruyt 1994). Sovereignty is viewed as a social status 

recognized that legitimates states to make decisions on behalf of community as supreme and 

independent of outside authorities (Biersteker/Weber 1996; Jarvis/Paolini 1995). There is also 

external sovereignty, which is caught by the process of legitimation through recognition from 

outside. As Charles Doran (1989) noted, ‘international political role reflects the set of foreign 

policy interests that a state has actually achieved’. These interests are located in-between of 

national capabilities and aspirations, and the willingness of other recognized members to allow 

the state to achieve its interests. Thus, these are interstate relations within the international 

system. 

Autonomy of internal and external decision-making and governance are tightly linked with 

power control and policy efficiency, and such policy efficacy as operational sovereignty is not 

constrained by external forces (Waltz 1969; Keohane 1993). Globalization questions the primary 

idea of governance based on geographical jurisdiction that is state sovereignty. Multinational 

enterprises play a central role in the process of such alienation as a result of digitalization and 

of the rise of networked strategic alliances, increasing importance of transnational actors and 

further regionalisation. 

In this paper the particularities are questioned of the sovereignty exercise in developing economies 

and the extent to which economic sovereignty interfaces with complex regionalisations, 

using Central Asia as an example. The case of Central Asia is chosen as experiencing both 

pressures from the multi-vector integration projects of the EU, EAEU and One Belt One Road, 

and internal gravitational pressures. The widespread idea of the “sunset” of state sovereignty 

is investigated as a strategic decision-maker in the external economic policy, as well as the 

possible implications for multinational corporations as a necessary link in the regional leadership 

strategy undertaken in emerging economies. 

First, the terms of economic sovereignty, leadership, and power are defined, which are frequently 

used in the vast majority of literature on regionalism transformations, nation-states positioning 

and contested integrations. Next, the chapter examines the geopolitical context in which 

Central Asian economies operate and the risks faced by companies. Finally, the implication of 

the globalization and regionalization on Central Asia strategy and the possible impact of multivectoring 

on MNCs will be examined. 


Central Asia between the European Union and Eurasian Economic Union: Sovereignty Underestimated 

2 Economic Sovereignty, Geopolitical Leadership and Regional Integration 

Starting from Vernon (1971), the relations between state sovereignty and multinationalism 

reveal several issues, such as the reluctance of most governments to give up the advantages of 

multinationalism; global ambiguity of subsidiaries’ responses to challenges of a nation-state; an 

understanding of multinationalism as an instrument of pressure and exercising influence of one 

state on another (Kobrin 2009). In other words, the weakening of state control over the economy 

and economic actors is named as the most feasible challenges that national governments of 

emerging economies meet. 

What is interesting is that losing state control and weakening economic sovereignty resulted 

from growing interdependence and booming regionalization. Sovereignty decline is linked with 

the supranational integration boom, such as the EU, EAEU etc. (See: Krasner 2002; Savanovich 

2011). Technological development, transportation corridors, digitalization of financial flows 

and businesses made interdependence and globalization inevitable. In such circumstances 

multi nationalism became a vehicle for deepening these processes. Moreover, the increasing 

linkage between trade, official development assistance (ODA) and foreign direct investment 

certainly lowers the ability of individual governments to control economies internally and provide 

sovereign economic policy externally (Strange 1996). Asymmetry is observed also between the 

political willingness of governments to control and their growing dependence on business. 

At first glance, the exploding growth of multinational enterprises by the 1980s has questioned 

some formal characteristics of sovereignty and, at the same time, has strengthened core 

values of the post-Westphalian international system, namely, the need for state approval 

and recognition for any economic and political activity before being granted. Globalization 

transcended economic, political, social, cultural etc. processes toward a new world order, which 

is emerging of the shadow of the nation state. Globalization involves the deep integration and 

interconnectedness of networking heterogeneous organizations. 

Thus, the next wave in sovereignty transformation overlapped with new regionalism rise. 

Regional integration involves the delegation of part of individual state sovereignty to supranational 

structures. The various attempts have involved international cooperation among 

sovereign states and international organizations that are comprised of sovereign states as members 

( Kobrin 2009). Since the 2000s further globalization has caught up with complex relations 

of interdependence between sovereign states of the post-Westphalian system and vertically 

integrated economic actors recognized and legitimized by those sovereigns. With transnational 

networks and the internationalisation of production, the focus in political economy relations has 

shifted from trade to investment. Consequently, the boundaries between the national and the 

international have blurred. Thus, internal sovereignty has become problematic and state control 

has eroded. 


39


The new wave of transformation is characterized by remarkable features. Deepening integration 

and mushroom-like rising regional associations found MNCs as conductors and agents. The 

dramatic increase of technology as a strategic industry has changed the perception of market 

constraints, bringing production to a level beyond national markets. A transnational network of 

relations, operating outside states, is becoming a modern characteristic. Markets migrate to a 

cyberspace messing up virtual and physical region of activities. 

These circumstances not only raise the question of the role of the state in the world-system, 

but also how leadership is exercised regionally or globally. The concept of leadership (Lake 

1993; Kai/Skaperdas 2005) describes how a group of highly developed states predetermines 

the nature and pace of global economic development and acts as a natural ‘centre of gravity’ for 

developing economies. In a sense, regional associations are structurally composed of drivers 

promoting association and weaker economies or geopolitical actors. Such centres of gravity – 

drivers often use patronage as a political economy tool to create a special relationship between 

the dominant and the dependent; this is usually done for cultural reasons. In other words, 

patronage as a mechanism for exercising leadership is a strategy for acquiring, maintaining, and 

enhancing political power by patrons (Kaufman 1974). Patronage is a particular type of dyadic 

exchange, characterized by unequal power and status (perceived or real); a particularistic and 

private r elationship governed by the principle of reciprocity. However, this complementarity 

does not necessarily mean unidirectional dominance. “Clients”, i.e. emerging economies also 

use this mechanism to build strategies to protect and promote their interests, and their use is 

conditioned by the set of incentives and disincentives provided to them (Peimani 1998; Piattoni 

2001). As I have argued elsewhere (Karnaukhova 2022), that, since patronage implies that it 

imprints on the behaviour of politicians and influences the way these politicians represent their 

interests, patron leaders use this tool by binding their clients with strong historical and cultural 

ties which resist radical political transformations. As global development shows, on the one 

hand, the way relations between global geopolitical actors are shaped and represented depends 

on the strategies and instruments applied, and on the other hand, on the recognition of the 

equal importance of Western and non-Western, non-European actors (Bossuyt 2019; Laruelle 

2021). Thus, within the trend of regional integration and competition of leadership strategies, the 

question of sovereignty, and, even more so, of economic sovereignty receives new impetus as 

the question of embedding oneself in global networks of geo-economic relations to strengthen 

one’s own competitiveness. Within the Westernized discourse of geoeconomic leadership, 

striving for national competitiveness and following economic sovereignty does not undermine 

global cooperation; on the contrary, openness promotes competitiveness. Central Asia demonstrates 

that the complex geopolitical context impedes the harmonious development of relations 

in the region. 



3 Central Asia in Contested Integration Projects 

Central Asia has survived several waves of integration, but even today is caught between the two 

integration unions of the EU and EAEU, being under pressure from China and Turkey, and torn 

by intra-regional rivalry for the ‘centre of gravity’ of the Eurasian region. With the collapse of the 

Soviet Union in 1991, the independent Central Asian republics faced serious security problems 

related to border demarcation, a difficult economic situation and ethno-religious conflicts. At the 

same time, this period was favourable for the start of new integration processes in the region, 

as the economies of the Central Asian republics were formed within a single Soviet system and 

did not have time to break down their interdependence. Moreover, in the 1990s, Central Asia was 

neglected by Russia, China and the US, and the European experience, while demonstrating the 

benefits of geo-economic integration, could not serve as a practical model for regional association. 

There were several projects survived through 1990s, although diverse in terms of resources 

and strategic goals, include the US’s New Silk Road Initiative (NSRI), India’s International North- 

South Transportation Corridor (INSTC), and Turkey’s Middle Corridor. 

The 1994-2005 period saw several attempts to launch different autonomous mechanisms of 

economic and political integration in the region: the Central Asian Union (CAU) (1994-1998); the 

Central Asian Economic Community (CAEC) (1998-2001); and the Central Asian Cooperation 

Organization (CACO) (2001-2005). These alliances were aimed at establishing a free trade area, 

i.e. a customs, monetary and financial union based on the EU model. A key factor in the failure 

of all the projects was the gap between the political discourse and the economic practice of 

integration. The similarity of political regimes did not promote integration; on the contrary, the 

long-standing practice of authoritarianism in the region continued to be supported by national 

political elites. Economic sovereignty was strongly supported by the reluctance of states to 

coordinate economic reforms and create compatible economies – in other words, to delegate 

some of the decision-making autonomy of states to the supranational level. 

Asymmetry in the chosen leadership strategy can still be observed in the region. Not all of the five 

Central Asian republics have equally realised the integration impetus. Kazakhstan, Kyrgyzstan, 

Uzbekistan and Tajikistan (joining later and only partially) were involved in the integration 

process in the region. In 1995 Turkmenistan declared its ‘neutral’ status of non-alignment to any 

of its neighbours’ initiatives, but also to regional initiatives in general. The political regimes in 

Central Asia thus vary in their degree of openness, from Turkmenistan’s most closed society to 

Kyrgyzstan’s. 

The next wave of regional integration in the early 2000s is caused by the changing geopolitical 

environment around Central Asia. International security returns to the region as a key issue. The 

question of the military operation in Afghanistan, and the corridor through Central Asia for drug 

trafficking, human trafficking, etc., receives close attention from international organisations, but 

also in the foreign policy strategies of global leaders. Russia is shifting its attention back to 

the region, and China is becoming more interested in geo-economic projects there, while the 


41


European Union is including closer cooperation with the CA5 on its agenda for global leadership. 

Russia’s renewed interest in the region was embodied by its joining the Central Asian Cooperation 

Organisation in 2004. However, at that time, the emerging competition with the Eurasian 

Economic Community led to CAC’s merger with EuroAsEC in 2005 and further fragmentation of 

the Central Asian geo-economic landscape. Central Asia is thus becoming involved in the arena 

of competition between external powers. 

The collapse of CACO in 2005 led to a deterioration of cooperation between the Central Asian 

states and the disappearance of the regional dialogue format. Whereas the functioning of 

integration structures – albeit ineffective – facilitated regular meetings, negotiations and 

exchanges of views between the states, after 2005 the leaders of the Central Asian states meet 

only during bilateral visits or summits within the CIS, which was conceived as a platform for 

preserving historical-cultural, educational and humanitarian dialogue, but did not include effective 

mechanisms for economic (re-)integration. This widens the gap between the states, reduces 

the chances of finding rational solutions to the most pressing issues on the regional agenda and 

paralyses cooperation between the countries of the region (Krapohl/Vasileva-Dienes 2020). 

Serving as a model for successful integration and being a recognized leader, the European Union 

is still a relatively new player in the region. It had limited contacts with the Central Asian states 

and a few interests in close interactions before the 2000s (European Commission 1995). By 

nowadays the engagement is seen as connected with different development projects for funding 

and recently added security concerns including China (EU Security Strategy 2007; European 

Council 2012). 

Since the independence of Central Asian (CA) states, the EU has gradually intensified its 

involvement in the region through the Official Development Assistance (ODA). Following the 

OECD dataset, the ODA has been distributed unevenly across the CA states. The difference 

reflects the selectivity of targets and specific interests of the donor. One of the largest recipients 

of the EU institutions’ ODA appears to be Kyrgyzstan with about US $593 million of grants and 

loans by 2018 mainly aimed at the logistic projects. Tajikistan allocated $622 m. for education, 

public health, and rural development, followed by Uzbekistan – $263 m. Kazakhstan has gained 

$300 m. for development assistance. Finally, the smallest recipient of the EU ODA is Turkmenistan 

with around $104 m. assistance 1 . Thus, the EU is one of the major donors for the region with 

competitors from Russia, the USA, and China. For comparison, Russia allocated for the Kyrgyz 

Republic about $1,042 bn., naturally increasing its investments after 2015 via the Russian-Kyrgyz 

Development Fund, while Tajikistan was the primary main assistance object for the USAID. 

The Strategy 2007 was an agenda for global and comprehensive positive leadership promotion, 

whose efficiency was driven by the “the political goes first” idea: a state willing to apply and be 

qualified for economic assistance has to answer to strict terms of the Europe-oriented political 

1 Source: OECD, Aid (ODA) disbursements to countries and regions. 



reforming. Yet, in the Strategy security took priority, demonstrating the high importance of the 

issue and defining crucial internal and external interests of the EU. It was quickly incorporated 

into the orbit of interests as a “bridge” between the Eastern Neighbourhood countries and the 

ASEAN (European Council 2007). Later on, the CA became a playing card in relations with the 

Eastern competitors Russia and China, but not an equal and sovereign partner. Thus, the EU has 

questioned the principle of economic sovereignty and the autonomy of states to make strategic 

decisions for its own sake. Approaching Central Asia as a peripheral zone, especially in decisionmaking, 

and contrasting EU values and interests with those firmly rooted in the region deprive 

the Strategy of specificity and affect the effectiveness of implemented measures in practice. 

The pragmatic coherence and credibility of the relationship is confronted with threats of political 

and civilizational differences. Measures and mechanisms of support through the allocation 

of specific funds to the sectors of production concerned should, in the EU’s view, be in line 

with legislation on deepening democratisation. Unlike in the Eastern Neighbourhood, Central 

Asia does not see the European Union as a desirable place for integration, seeing itself as an 

independent player in the region and being able to choose its allies from a list of global powers. 

The ‘one size fits all’ approach clearly does not work with Central Asia. 

Despite the many instruments potentially available for regional development and sustainability, 

the EU acts as a major donor, but is less visible in the region than, say, China or Turkey. EU 

logistics projects such as TRACECA appear neglected, while infrastructure is dominated by 

Chinese and US investments, and soft power instruments are shared predominantly by Russia 

and Japan (OECD 2018; OECD 2019). 

Compared to the previous iteration of the EU Global Strategy, the new version looks more 

pragmatic (Tocci 2016), but the basic idea of connectivity, aimed at Asia as a target of European 

engagement, remains unchanged through sustainable, inclusive, and rules-based initiatives. 

Another concept mirrored in the EU itself is sustainability. It exploits the image of the EU as a 

bastion of stability, positivity and unobtrusiveness that compensate for relatively limited economic 

investment. 

The new EU Strategy for Central Asia, adopted on 17 June 2019, proposes an enhanced partnership 

in the areas of economic development (‘prosperity’), comprehensive security (‘resilience’) 

and enhanced cooperation with and within Central Asia (EEAS 2019). The Strategy confirms that 

the EU has already earmarked €1.1 billion for cooperation with Central Asia, including over €454 

million for regional programmes promoting cooperation in the fields of sustainable development 

and regional security. Geopolitical tensions are seen as one of the challenges to networking 

in the region, with specific social networking practices, shadow entrepreneurial behaviour and 

autocratic powers; this challenge has to be overcome. For instance, the EU-Kazakhstan Enhanced 

Partnership Agreement, ratified and in force since 1 March 2020, expands the effectiveness of 

its policies through cooperation with state and non-state actors. All joint projects must comply 

with the ‘euro-standard’ of connectivity (Saari 2019), which competes with those of Russia and 

China, i.e. the EAEU and the BRI. 


43


Following the Strategy, the EU goes beyond governments and looks at civil society participation, 

demonstrating its ‘blindness’ to the authoritative presence of most of their visions, as ‘as experts 

on the ground, they often lead the process of sustainable development’ (Von der Leyen 2019). 

The difficulty with this approach is the failure to understand that all Central Asian elites are 

interested in maintaining a system of patrimonial rule. Moreover, Central Asia presents itself 

as an arena of intra-regional competing leadership projects, shared between Kazakhstan and 

Uzbekistan respectively. In particular, Uzbekistan’s concerns about its own sovereignty, its 

leadership position in the region and its ‘safe belt of friendly neighbours’ (Development Strategy 

2017) demonstrate the complexity of intra-regional ties and influence the interpretation of the 

content of the partnership with the EU. 

To understand the internal mechanisms of Central Asia’s inclusion in relations with the EAEU, 

attention should be paid to the concept of the ‘near abroad’ as an area of direct interest and 

strengthening Russia’s leadership position in the Eurasian region. The concept of the ‘near 

abroad’ in Russian foreign policy has been and remains an important concern of the Russian 

Council on Foreign Affairs, which supports and promotes Russia’s geopolitical interests in the 

region. This position is illustrated by the Collective Security Treaty. The Consortium was created 

as an extension of the Commonwealth of Independent States (CIS) in 1992 before the NATO- 

Russia summit in Rome and expanded into an organization in 2002. It meant an alliance of Russia 

with Tajikistan, Kyrgyzstan and Kazakhstan. The last two mentioned countries later joined 

the EAEU, with Kazakhstan as a founding state. 

In 2001, the Agreement on the Eurasian Economic Community (EurAsEC), signed by the Russian 

Federation, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan, gave new life to the Eurasian 

Community Customs Union. The Treaty confirmed the hierarchy within the Union’s membership 

and Russia’s privileged position: 40% of the vote was given to the Russian Federation. Russian 

became the official language of the Union (see the 2000 Treaty on the Eurasian Economic Union). 

Armenia joined the EurAsEC as an observer in 2003, and Uzbekistan became a member in 2006. 

Intraregional integration efforts faced competition from a stronger player and lost out (CACO 

and EurAsEC merged in 2005). Regional actors had different views on the cooperation regime 

and their political hierarchy meant that intra-regional attempts rather quickly led to a merger into 

larger inter-regional institutional structures with influential decision-making leaders. 

In 2011, as prime minister, Putin announced the creation of “a powerful supranational association 

capable of becoming one of the poles of the modern world and serving as an effective bridge 

between Europe and the dynamic Asia-Pacific region, that is, to transform the Customs Union of 

Russia, Belarus and Kazakhstan into the Common Economic Space and then into the Eurasian 

Union” (Putin 2011). The system of bilateral and regional multilateral agreements makes 

Eurasian integration more comprehensible for existing members and potential participants, and 

the emphasis on scrupulous adherence to the principle of economic sovereignty makes it more 

resilient to global challenges. An important addition is the assertion of Russian leadership in 

global economic, political projects, especially in the so-called security regions, i.e. Central Asia. 



In contrast to the EU, the EAEU demonstrates flexibility and “blindness” to differences in the 

political regimes of its potential members, which are distributed on a symbolical scale from 

relatively democratic (the Kyrgyz Republic) to the most authoritarian and socially closed (Turkmenistan). 

The proclaimed ‘economic prosperity for security’ looks like an advantage for Central Asian 

political elites to join the EAEU, in contrast to the EU with its strong desire for ‘political reform 

for security’. However, ‘the economy does not come first’. The likely merger of the Eurasian Economic 

Union (EAEU) and the Silk Road implies the creation of a common economic space on 

the continent, ‘combining the potential of all integration formats such as the EAEU, the Belt and 

Road (BRI), the Shanghai Cooperation Organisation (SCO) and ASEAN’ (Silk Road Briefing 2017). 

The EAEU’s 2018 ‘Declaration on the Further Development of Integration Processes within the 

Eurasian Economic Union’, which captures the idea of a ‘Greater Eurasian Partnership’, introduces 

the next iteration of the same concept (Declaration 2018). 

4 “All eggs in one basket?” 

Apart from the risks associated with the difficult choice for Central Asian states in favour of one 

of the regional integration projects, a “new normal” agenda of a global scale has emerged over 

the last decade. As the World Economic Forum reports in 2022 (The Global Risks Report 2022), 

geopolitical contradictions are named among the most severe global risks for the next dozen 

of years. In such circumstances it looks interesting that on June 9 th , 2022, during the Amundi 

World Investment Forum in Paris, Central Asia was announced as a desirable destination for 

European investments for two main reasons – the economic sovereignty of emerging markets 

and decoupling geopolitical ties either with Russia and China (AWIF 2022). While respondents in 

Kazakhstan, Kyrgyzstan, and Tajikistan cited interstate conflicts and geopolitization of strategic 

resources as the most conceivable risks, Uzbekistan and Turkmenistan did not provide sufficient 

data. 

Global Competitiveness Reports have demonstrated a ripple effect of global powers’ interest in 

Central Asia, both in terms of assessing investment performance and trying to compete with the 

region’s leaders for influence – China, Russia, the US and Turkey. The EU’s attention to bilateral 

and multilateral engagement has declined since 2014, despite the adoption of the EU Strategy 

for Central Asia in 2019. 

Scenarios for the South Caucasus and Central Asia (2014) found that although short-term wins 

could be achieved by a nation state individually, the long-term effects are possible only in regional 

cooperation. The question rather revolves around characteristics of such regional associations 

from geoeconomic and geopolitical points of view. 


45


In 2022, among the CA5, only Kazakhstan sufficiently demonstrates its leadership capabilities 

and willingness to compete with established regional leaders – Russia, Turkey, etc. – in the 

struggle for a favourable investment climate. In 2022 Kazakhstan took the 43rd place of 63 

national economies presented in the Global Competitiveness Index (GCI 2022) with 35th for 

the previous year. Among five Central Asian republics, only Kazakhstan is represented in the 

World Economic Forum’s annual assessment. Among the challenges for 2022 presented by 

the Economic Research Institute (JSC of the Ministry of National Economy of the Republic of 

Kazakhstan) there are political transformation, increase in household incomes and reduction 

of inequality, strengthening human rights institutions, providing food security, and decentralization 

of local self-government (ibd). Curiously, the economic landscape looks as follows: government 

efficiency as well as business efficiency sound sustainable for the period of 2018-2022 

and is on the 25th and 32nd place respectively. A significant drop in the index of economic 

performance from the 49th to the 58th position is a cause for concern. Comparably, Tajikistan 

took the 104th place in 2019, and Kyrgyz Republic the 96th. Uzbekistan and Turkmenistan have 

evaded assessment (GCR, 2019). Report 2019 hints at the need for structural change in the face 

of projected geopolitical risks, thus linking the geopolitical context with economic sustainability. 

Kazakhstan’s trade turnover with countries outside the Eurasian Economic Union (EAEU), as 

reported by the State Revenue Committee on July 19, 2022, increased by 51.6 percent (The 

Astana Times, 2022a). Despite an economic slowdown caused by the global pandemic and 

the recent geopolitical events in Central Asia and Russia, Kazakhstan remains firm in its goal 

to provide a favorable investment climate and attract more investors. The role of the Foreign 

Investors’ Council (FIC), a Kazakh advisory and consultative body for investment, remains as 

important as ever (The Astana Times, 2022b). 

In addition to the demonstration of individual leadership from 2020, a unique format of regional 

integration has resurged on the grounds of mutually beneficial economic cooperation, the C5+1. 

The C5+1 economic cooperation format was created on the margins of the UN Assembly in 2015 

at the initiative of the United States. It envisages a multilateral dialogue platform for cooperation 

between five Central Asian states – Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and 

Kyrgyzstan – and their vis-à-vis worldwide. 

On October 15, 2020, the Foreign Ministers of the five Central Asian states and Russia met online 

to adopt a “Statement of the Foreign Ministers of the Central Asian states and the Russian 

Federation on Strategic Directions for Cooperation” (Statement 2020). The third meeting of this 

kind signals the emergence of a diplomatic format similar to the American ‘C5+1’ that was established 

a few years ago. It should be noted that China, for its part, is also trying to secure a similar 

“C5+1” approach to the region. 

The Kommersant newspaper writes: “From now on, Moscow will not only develop bilateral 

ties, but will consider Central Asia as a whole... This is a kind of new strategy of Russian foreign 

policy in Central Asia”. However, it turns out that this is not a new strategy at all but the old 

one, as, “ according to Moscow’s plan, the result of this process should be a joint vision for the 



development of cooperation, and Russia was seen by the “five” not so much as a “+1”, but, in fact, 

as the sixth member of their association.” (Kommersant 2020). 

Meanwhile, the five Central Asian countries have developed their own format of Consultative 

Meetings of Presidents. These countries have been developing since 2018. There have already 

been two meetings in this format: in March 2018 in Astana and in October 2019 in Tashkent. 

“The Central Asian Stans” is gradually acquiring its actorness in the international system. This 

actorness as a capacity to behave independently and interact with other actors in the international 

system has to be taken into account when analysing the modality of the different 5+1 

formats. Often in the analysis the focus lies on the figure on the right side of this arithmetic 

formula (i.e. on the 1), and underestimates or even neglect the figure on the left side (i.e. the 

figure 5). The cooperation platform C5+1 (5 Central Asian states+1 partner) has become an 

arena with a supermarket effect, where cooperation initiatives coming from outside are widely 

discussed from the perspective of regional benefits and national interests (Statement 2020). 

C5 version would mean that Central Asia is structurally coherent and closed to entry by other 

states; but open functionally. The C5 formula should be a substantial principle for intra- regional 

development. When the great powers’ policies in Central Asia are analysed, they are often viewed 

through the prism of the interests of these leaders. It is extremely important to increasingly 

emphasize the interests of the Central Asian states themselves, as Kazakhstan does, specifically 

their joint interests as an integrated region. It is essential that the membership of the two 

states in the EAEU should not contradict or interfere with the regional relations of the Central 

Asian states. This step is intended to destroy the postcolonial situation and to avoid a patronage 

policy of any kind. 

5 Conclusion 

The world has entered a period of leadership restructuring. What is critical to this approach is the 

understanding and acceptance of the role of new powers from former global peripheries. Central 

Asia is among the regions that have been reimagined from a less important to a high priority 

‘neighbourhood’ position. This region of ‘security’ is localised between two eastern powers – 

Russia and China – and one western power – Europe. Central Asia’s central position in Eurasia 

and its complex history have made it an important target of geopolitical security strategies and 

clashing economic interests. After February 24th 2022, it seems clear that the Central Asian 

vector in the struggle for regional leadership between the EU and the EAEU will intensify. Despite 

the external ethno-cultural and ideological similarities, however, the region cannot yet lay claim 

to collective decision-making. Each of the CA5 states has the potential to be an emerging market. 

And it is precisely this characteristic that reduces the effect of ongoing economic diplomacy 

efforts. Multilateral (cooperative) architecture with a strong focus on economic stability, political 


47


security, and avoidance to evolve any question of sovereignty in strategic decision- making looks 

more efficient for the target region. 

6 References 

AIWF (2022): Conversation of O. Canuto and T.Fordham at the Amundi World Investment Forum. 

June 9th, 2022 Paris, Carrousel du Louvre. https://www.academia.edu/video/jYeEOj?email_video_ 

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David Morris 

The Huawei battleground: 

A critical case of political risk in the 

new global power contest 

Abstract 

David Morris 

At a time of global power contest between the United States (US) and China, Corvinus University of Budapest 

& United Nations Economic and 

Huawei has become emblematic of the political risks to firms. New technologies Social Commission for Asia and 

are a key battleground between the two major economies and the leading role of the Pacific (ESCAP) 

Huawei in Fifth Generation (5G) mobile networks and other technologies of the 

so-called Fourth Industrial Revolution – and the national security implications – have placed the 

firm in the firing line of US sanctions. This business case study raises questions about identifying, 

assessing and managing cyber risks, likely European bandwagoning with the US in its strategic 

competition with China, the global governance of new technologies, potential decoupling of 

technological value chains and the impacts on businesses from all countries. 

One of the critical areas of European interdependence with China that paradoxically simultaneously 

exhibits conflict, competition, convergence and cooperation is the rapidly evolving array of 

products, services and platforms that rely upon digital connectivity. New technologies promise 

to transform lifestyles and industries in the years ahead, driven by innovation in computing, communications, 

artificial intelligence and data analytics. This Fourth Industrial Revolution (Schwab, 

2016) is widely expected to connect devices and much of the physical environment to transform 

energy, transport, industrial production, consumption and waste management by radically 

reducing costs and yielding huge quantities of data to target products and services to meet in individual 

needs and to transition to greater sustainability. These transformative new connectivities 

raise questions about technological governance, such as the values underpinning new business 

models, rules, norms and standards and their impact on the public good and personal privacy. 

They also raise important challenges for national security. Both the US and China have taken a 

security-focused approach to technology and this has impacts across all businesses as well as 

on the broader international system. Huawei is examined here as a particular target of the US 

contest with China that illustrates a wide range of political risks. 

Huawei, a leader in Fifth Generation (5G) wireless and fibre telecommunications networks, which 

will underpin Fourth Industrial Revolution technologies, was first singled out by the US and some 

of its allies with alarming claims of espionage risks and other threats to national security. Further, 

the US and others have also become concerned that Huawei and other Chinese firms are constructing 

international infrastructure and developing global rules and standards that will extend 

Chinese state power. Because of the nature of national security (including espionage and other 

information that may never be made public), the debate to date has been largely evidence-free, 


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David Morris 

but nevertheless raises serious risks. In spiralling distrust in Eurasia and between the US and 

China, expectations are growing that complex technological interdependence may collapse and 

multiple regions of competing technology rules, norms and standards could develop, potentially 

decoupling Europe from Asia. 

The Huawei case is a rapidly changing contemporary case. This analysis is based on a series of 

interviews with key stakeholders and experts across a range of geographies, participation in a 

range of relevant online and live events including Huawei events, as well as a survey of the contemporary 

literature, think tank reports and media. 

1 Introduction to Huawei 

Huawei Technologies Co. Ltd was established in Shenzhen in 1987 by an early-retired People’s 

Liberation Army engineer, Ren Zhengfei, who set out to pursue business success in the early 

years of China’s “reform and opening up” period. The company that he founded initially traded 

in telecommunications equipment and gradually grew as a manufacturer, with its business 

success over time based on a culture of customer service, which differentiated Huawei in an 

industry in which large, complacent telecommunications companies rarely focused on their 

customers. Unable initially to compete with major international firms in the major cities of China, 

Huawei focused on providing low-cost solutions to customers in unserved markets, from underdeveloped 

rural telecommunications markets in China to developing nation markets from Asia 

to Africa. The firm was unique in China (and unusual in the world) in its corporate structure, in 

which Ren himself retains a small 1.4 per cent stake and shares ownership with more than half 

of the global staff, with a rotating chair. This unusual structure has endured, even as the firm 

has risen to global scale, and may indeed contribute to the company’s “wolf” culture of long 

hours and dedication to business success. Its representatives interviewed for this research also 

believed Huawei’s unique structure allows the firm to continue to think long term and to endure, 

despite the barrage of challenges it has faced in the international business environment, when 

a public company may find its share value would have driven it out of business long ago. The 

unique culture of Huawei, enduring against a wide range of risks to its own operations, has 

encouraged it to keep “fighting” and to double down on its long-term strategies to lead in new 

technologies. Huawei has invested over decades in a massive research and development effort 

to achieve its contemporary market-leading position in 5G telecommunications and a range of 

other products and services (Tian 2017). 

Like other globalised Chinese firms, Huawei is deeply embedded in international value chains, 

partnering with firms and governments around the world, developing communications network 

equipment and infrastructure, and consumer communications products and services. It provides 

equipment to many of its competitors in Europe and elsewhere and indeed holds the majority of 

patents and other intellectual property in relation to 5G telecommunications. 


The Huawei battleground: A critical case of political risk in the new global power contest 

2 The geopolitical response 

Despite deep interdependence in technological value chains that developed over the decades 

of globalisation since late in the twentieth century, states can be expected to seek to benefit 

from such interdependence while mitigating vulnerabilities to competitors and indeed seeking 

to exploit competitor vulnerabilities. Such actions are consistent with interdependence theory 

(Keohane 1982, 1984; Keohane/Nye 2021) but became more overtly weaponised during the 

tumultuous years of the Donald Trump presidency of the US. Trump sought instinctive disruption 

rather than international cooperation and rhetorically raised the strategic option of the US 

decoupling from China, which at its most extreme would have led the dismantling of the international 

system on which globalisation had been built. While US actions did not match the rhetoric, 

Huawei was however singled out in the Trump years as a target to demonstrate US resolve. 

Huawei was amongst the first and certainly the most prominent firm to be singled out as a 

cyber security risk in the US-China tech contest. The firm certainly challenges US aspirations 

to maintain technological dominance, although interestingly no US firm has become globally 

competitive in 5G and indeed many US firms had – until US bans on Huawei and other Chinese 

technologies – built supply chain integration with Huawei products and services. Huawei has 

long been considered a national security risk by the US security establishment because of the 

military background of its founder and other personnel links to state security services, as well as 

the capability of all telecommunications equipment and service providers to intercept traffic or 

to be subject to interception by state espionage agencies (Balding 2019). 

As one interviewee for this research commented “telecommunications is 100% geopolitical”. 

Further, the same interviewee (a former Huawei employee) claimed Huawei generates more 

complex user profiles than technically necessary and exports data to China for technical 

network and protocol support, rather than to provide full services within country. Nevertheless, 

little evidence has been presented publicly of widely-repeated claims that Huawei has facilitated 

espionage and Huawei has – in turn – consistently denied such claims. The claims of cyber 

risks are nevertheless regularly repeated in think tank and media reports (RWR Advisory Group 

2019). Huawei has also been accused, like many Chinese firms, of stealing intellectual property, 

although the most high-profile legal action making such a claim, a suit launched by Cisco in 

2003, was not successful (Tian 2017). 

Huawei was first banned from installing a 5G network on national security grounds by Australia, 

a staunch US ally, in 2018, based on assessments that risks to critical infrastructure could not be 

managed otherwise (Morris 2021). By May 2019, the US had followed, placing Huawei on a trade 

blacklist, deploying its global market power and its leading position in semiconductor technology 

to restrict access to US components, later tightening those restrictions to prevent Huawei from 

accessing all semiconductors based on US technology (Lim/Ferguson 2019). The US brought 

the battle to Europe by promoting a so-called “Clean Network”, an alliance of “trusted” counties 

and firms committed to removing “ authoritarian malign actors, such as the Chinese Communist 


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David Morris 

Party” from their cyber supply chains (U.S. Department of State 2020). This was accompanied 

by a range of new measures securitising technology supply chains, increased investment in 

strategic research and development to compete with China, a fund for re-shoring semiconductor 

manufacturing to the US and a $60 billion International Development and Finance Corporation 

fund to encourage developing countries not to buy from Chinese suppliers (Capri 2020). The 

sanctions have crippled Huawei’s mobile phone business and the company’s financial performance 

suffered in 2020 and 2021. 

In a dramatic episode in December 2018, the US requested its ally Canada to arrest and detain 

Huawei’s Chief Financial Officer, Meng Wanzhou, while she transited Vancouver airport. The US 

sought her extradition for fraud, charging that Meng covered up attempts by Huawei entities to 

evade US sanctions against Iran. The personalised action against Meng (the daughter of Huawei’s 

founder Ren) suggested an element of geopolitical theatre. Targeting a senior executive was a 

highly unusual action and, indeed, while numerous US and other international firms have been 

pursued for violating US sanctions against Iran, senior executives have not typically been arrested 

or taken into custody (Sachs 2018). The drama continued with China detaining two Canadians, 

Michael Kovrig and Michael Spavor, on spying charges, in what appeared to be alarming tit- fortat 

punishment of Canada (indeed both were freed following an agreement reached to return 

Meng to China in September 2021). 

Despite the US campaign against Huawei, the firm nevertheless continues – at the time of writing 

– to be an attractive partner to a wide range of governments, firms and consumers across much 

of the world because of its technological leadership and cost competitiveness. Huawei has 

partnership with more than fifty international carriers to provide 5G network equipment and 

services (Pham 2019) and Huawei itself claims to be serving more than 120 countries with its 

full range of products and services, or about one third of the world’s population. In the developing 

world, Huawei has become a key actor in China’s so-called “digital silk road” partnerships, in 

which Chinese banks provide a mix of concessional and commercial finance to support developing 

countries in development of satellite, underwater and terrestrial communications networks 

and so-called “safe cities” and “safe ports”. These latter systems utilise artificial intelligence and 

surveillance technology for security services, all ostensibly aimed at improving public safety 

and crime detection but criticised for exporting Chinese “surveillance state” models (Hillman/ 

McCalpin 2019). Huawei has been accused of providing intercepted data to African governments 

to spy on, locate and silence political opponents (McMaster 2020; Hillman/Sacks 2021). 

In Europe, some have followed the US lead in banning Huawei and some have not, at least so 

far. In many European companies there is a highly competitive environment between Huawei – 

on the one hand – recognised as leader in 5G network technology as well as being the lowest 

cost supplier, and – on the other hand – Ericsson, considered by many in the industry to provide 

higher quality. Huawei has won contracts to supply half the 5G network in Germany and Spain, 

while Ericsson has won contracts in Norway and Hungary (Fletcher 2019). Both Germany and 

the United Kingdom (UK) planned to proceed with Huawei for non-core components of their 5G 



networks despite confidential US security briefings (Ikenson 2019; Perez/Lau 2019; Mikhailova 

2020), although after the US extended its sanctions on Huawei in May 2020, impairing its likely 

future capabilities, the UK announced it would phase out all Huawei equipment by 2027 ( Dowden 

2020). UK intelligence agencies had for several years scrutinised Huawei, which allowed full 

examination of its hardware and software products by local security experts at a jointly- managed 

cybersecurity evaluation centre with an independent Oversight Board, the Huawei Cyber Security 

Evaluation Centre. While the centre had reported technical issues of concern in Huawei’s 

engineering processes, it did not find these were the result of Chinese state interference (Soo/ 

Zhang 2020). The UK National Cyber Security Centre (NCSC) had recommended in early 2020 

that limits should be placed on “high risk vendors” in telecommunications networks and that 

equipment from such vendors should only be used when a specific risk mitigation strategy is in 

place supervised by the NCSC. A risk management strategy had been in place between NCSC 

and Huawei since 2010. The Centre issued a report after the introduction of the May 2020 US 

sanctions in which it noted that its updated security advice on Huawei was driven by the US 

sanctions which increased caused the increased risk to UK networks due to the uncertainty of 

future supply including supplies of equipment to the Huawei Cyber Security Evaluation Centre, 

an important component of the UK’s risk management regime (NCSC 2020). The NCSC further 

noted that the immediate exclusion of Huawei would generate new resilience and security 

risks for the UK’s networks by reducing competition to two providers and therefore maintaining 

current Huawei equipment subject to risk mitigation measures was recommended in the transition 

period. This attribution of increased risk due to the US sanctions had little impact on the 

popular discourse on Huawei. Indeed, Huawei has established similar “cyber security and transparency 

centres” in several countries including Belgium and Germany, although the European 

narrative surrounding Huawei remains centred on geopolitics rather than engineering. 

Experts interviewed for this research noted that countries of Central and Eastern Europe in 

particular, had the need for Chinese technology and investment (and finance) but had a lack 

of engagement and understanding of China, which tended to cloud views about firms such as 

Huawei with an emotive reaction. In other words, as more than one interviewee stated, China is 

perceived as a bad actor. It is often conflated with Russia, a trend accentuated since the Russian 

invasion of Ukraine. Cooperation with China is commonly emotionally interpreted as a slap in 

the face for European liberal democratic values, rather like the US interprets the world according 

to its own perceived (and often performative rather than consistent) values. In an absence 

of trust, some countries have developed institutional capacities for risk management, such as 

Germany, and yet interviewees believed even Poland, with relatively strong institutional capacity, 

may not have enough regulatory capabilities to manage the new technological risks, let alone 

other smaller states. The role of the EU at a regional level in Europe is therefore critical. 

Huawei representatives themselves claim their firm makes a critical contribution to the emerging 

economies of Europe, noting for example its work to supplement 4G networks operating in 

Ukraine even during the Russian invasion, so that people could stay in communication with 

each other while sheltering in city metro networks and other challenging locations. Despite the 


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way the firm is depicted in the English language media, as a security threat, thief of intellectual 

property and suspicious arm of the Chinese state, the Huawei public relations team in Europe 

confidently state that four out of five media stories in other European languages are positive, 

with the one in five representing those stories sourced from English language media. 

The firm is diversifying away from narrow reliance on manufacturing equipment, deepening 

and broadening its investment-intensive research and development efforts into new areas of 

Fourth Industrial Revolution business including cloud computing, assisting firms and cities to 

digitalize, improving efficiency of renewable energy systems and providing the digital capabilities 

for auto nomous vehicles. Despite the hit to its bottom-line profit, Huawei increased research 

and develop ment spending in 2021 to CNY142.7 billion. Huawei’s Rotating Chairman, Ken Hu, 

told Huawei’s 2022 Global Analyst Summit that the firm remained the world’s leading provider of 

connectivity, with over 20,000 global partners, 2.6 million developers working with its cloud ecosystem 

and 6,000 new applications already launched in the Huawei cloud marketplace. Huawei 

is making ambitious claims to be reducing carbon intensity each year. Hu pointed to Huawei’s 

role in the world’s largest renewable energy project at Qinghai, the world’s largest green energy 

storage project in the Red Sea, reduction in energy use of its global data centres, a 30 percent 

increase in solar power share for its services in Poland and reduced energy usage by 30 per 

cent by its green wireless sites in Indonesia. Solar energy is now supplementing Huawei’s manufacturing 

operations in Dongguan, with an aspiration to move ultimately to fully clean energy 

( Huawei 2022). Electricity use will grow exponentially with the rollout of digitalization and to 

meet its ambitious goals, Huawei will need that electricity to be renewable, with its spokespeople 

well aware that as a leading Fortune 500 company Huawei will be expected to lead the 

green transition. At a Darwin’s Circle event in Vienna, Huawei Austria presented on a Tech for All 

biodiversity project in the Neusiedler See-Seewinkel, in which Huawei is using online and offline 

sensors to track amphibian and bird life and collecting huge data sets to monitor and protect 

endangered species. This is part of a series of similar projects, including salmon fertility in Norway 

and Poland’s large national park on its border with Belarus, in which Huawei is seeking to 

demonstrate through community projects that its technology can be a force for good. 

Huawei’s Wang Zhiqin told the 2022 Global Analyst Summit that China leads the world in 5G 

deployment at scale, with 1.4 million 5G base stations and another 600,000 to be built in 2022, 

more than half supplied by Huawei, serving 1 billion users. He noted that such scale will allow 

a green and intelligent network to roll out applications beyond mining, energy and ports and 

into every industry. Huawei’s Gan Bin argued the 5G capabilities Huawei is providing will ensure 

telecommunications is no longer the bottleneck between the tech advances of big data, artificial 

intelligence and the cloud merging, to massively improve efficiency and to reduce energy consumption 

across value chains. Huawei’s Jimmy Gu said this Fourth Industrial Revolution empowered 

by 5G reliability, stability and capacity will mean more flexible manufacturing, more 

precise quality management and more targeted logistics. 



Leaving aside Huawei’s sophisticated attempts at public relations, it appears likely through its 

pursuit of innovation in products and services and its unique culture to be able to survive and 

adapt in a new, even more challenging geopolitical environment. Huawei has thus become central 

to the debate in particular in the US and its allies but also in an increasing number of countries 

that are interdependent with both the US and China, about cyber opportunities and risks. To be 

sure, the risks are heightened as the new high-speed connectivity capabilities of 5G will generate 

an exponentially greater number of potential vulnerabilities across the anticipated Internet 

of Things, with a theoretical threat of weaponization at any one of those points of vulnerability. 

3 The problem of assessing cyber and other risks 

Each actor will make a different assessment of the risks of doing business with Huawei. There 

is no objective, proportionate scale for risk assessment that will be appropriate for all actors. 

Cyber risk assessment is inherently subjective, based up the norms and narratives that frame the 

worldview of the assessor (Creemers 2022). To be sure, the deepening, broadening and transformation 

of the digital economy is enlarging the objective risk environment, creating exponentially 

more points of potential risk, and we might reasonably expect that state actors are actively 

exploring these vulnerabilities to leverage political (or geopolitical) advantage, as well as other 

actors such as criminal organisations and other kinds of hackers. State actors whose national 

security is integrated with the US may certainly assess that Huawei represents more risks than 

benefits. The UK is one of the closest allies of the US and is phasing out Huawei equipment from 

its 5G networks by 2027, although primarily as discussed above because of the risks that US 

sanctions on Huawei will threaten future supplies and reduce its established capabilities for risk 

mitigation. Hungary represents the other end of the spectrum, also a NATO ally, but prioritising 

the economic benefits from attracting and retaining Huawei as not only a provider of equipment 

and services, but also for its potential to further invest in making Hungary a logistics hub for 

related technologies. Hungarians tend to expect all actors to engage in espionage and to represent 

potential security risks, no doubt because of that nation’s troubled history. In between the 

UK and Hungary are a broad range of perspectives across Europe. 

The risks that are identified by stakeholders and in the literature include national security 

risks as well as broader risks to the economic interdependence that has been the hallmark 

of globalisation. The most serious security risks are claims that Huawei could be used as a 

vector for cyber-attacks on critical infrastructure, perhaps only likely in worst-case scenarios of 

major power confrontation, but of concern nonetheless. The more common fears of espionage 

represent qualitatively different, although also serious, security questions. Even in normal conditions 

of geopolitical competition, states can be expected to engage in espionage, including 

cyber-espionage. Given the well-established evidence of electronic espionage by the US and 

its “Five Eyes” partners, including with and without the knowledge and cooperation of telecommunications 

firms (Snowden 2019; Biddle 2020), it would appear highly likely that China also 

utilises all available means to conduct electronic espionage, whether with or without Huawei’s 


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knowledge or cooperation. Because of China’s less transparent political and legal system, we 

may never see evidence of such, unless it can be produced by China’s strategic rivals. Further, 

Huawei’s “smart city” and other partnerships in the developing world, often in partnership with 

Chinese government organisations, generate claims that China is exporting its “surveillance 

state” model. Overall, the paradox that we cannot know to what extent such claims are geopolitically 

inspired requires actors to take these security risks seriously. 

The security risks rest upon the theoretical proposition that Chinese-sourced technology underpinning 

international communications systems could be weaponised by the Chinese state. The 

US and its allies, amongst others, distrust the authoritarian Chinese party state and fear its growing 

technological and military capabilities. Despite being a private firm, it is feared that Huawei 

could be co-opted to serve the national security interests of the Chinese government and forced 

to facilitate espionage or cyber-attacks (Gilding 2020). Article 7 of China’s National Intelligence 

Law of 2017 requires Chinese firms and employees to cooperate with national intelligence agencies 

lawfully carrying out their work (Girard 2019). That these are similar to powers that the US 

utilises is not in question, but trust in China is the question. 

Russia has demonstrably used cyber-attacks as a matter of policy, in peacetime such as its welldocumented 

undermining of the 2016 US presidential election, in wartime such as its attacks 

on Ukraine infrastructure and against other targets as punishments or threats (Orenstein 2022). 

Russia has no equivalent of Huawei, which underlines the supplier-blind nature of cyber risks, but 

also illustrates the risks of how major powers can act. 

There are other risks raised by the Huawei case, with effects that arguably undermine international 

cooperation and complex interdependence, which could have spillover effects as serious 

as technological decoupling into rival economic zones that spell the end of globalisation as we 

know it. The geopolitical campaign against Huawei and other Chinese technology firms could be 

considered likely to weaken efforts to develop functioning global rules, norms and standards for 

the digital economy. Further, the potential demarcation of the digital economy into US-led and 

China-led spheres would tend to strengthen the foreign influence of those major powers over 

other states within their spheres, including not only favouring firms originating in each major 

power but increasing the likelihood states may be influenced to support their major power partner 

on other matters from international rule-making to targeting firms (or even individuals representing 

firms) with sanctions. Regardless of the merits of domestic security concerns, the Huawei 

case represents a stark example of the risk of economic coercion by a major power targeting a 

firm and wielding a wide range of state measures to constrict that firm in international markets, 

a notable political risk in this new era of geopolitical tension. The implications of the actions 

against Huawei transmit throughout global value chains, with all international firms that supply 

Huawei impacted by US executive and legislative restrictions. Decoupled supply chains, even if 

considered necessary from a national security standpoint, also risk significant adjustment costs 

and long-term inefficiencies of duplication and higher cost suppliers than otherwise available in 

an open trading environment. 



4 A European/Eurasia governance alternative? 

Where does all of this leave Europe and Eurasia? The security of 5G and future generation networks 

will become even more important for the connected technologies of the future, with critical 

infrastructure connected to such networks as well as sophisticated European products and 

services across global value chains. Indeed, risks will not only be generated by major power 

geopolitical contest, but governments and firms will also need to protect against cyber-attack 

from other states, criminal organisations, and rogue individuals. Whether Europe develops rules 

and norms that are globally integrated or whether it must decouple from one or more technology 

realm is one question. Whether Huawei must be excluded as a vector of risk or alternatively 

enlisted as a partner in risk mitigation, in a European-governed system of risk management, may 

depend upon normative perspective. 

An EU coordinated risk assessment noted that the technological change represented by 5G 

will increase the overall attack surface for potential cyber threats across networks and in software 

development and update processes, as well as in relation to reliance on network operators 

and their role in supply chains. Without naming Huawei, it drew particular attention to the 

importance of the individual risk profile of suppliers and the increased risk of dependency on a 

single supplier. The EU is developing and deploying high system security strategies for cyberrisk 

assessment and mitigation in an increasingly complex of global supply chains, involving 

thousands of actors and sources of software code. The EU toolbox of risk mitigating measures 

includes strengthened regulatory powers and technical improvements to improve security of 5G 

networks and equipment, including restricting “high risk” suppliers (understood as originating in 

countries without democratic checks and balances) from providing core network assets and diversification 

of vendors to avoid dependency on one supplier. Further, it recommends strengthening 

local EU capacities to supply 5G and post-5G technologies (European Commission 2020). 

Industry experts warned in the interviews for this research that there is however a danger in 

Europe, unlike the US, that telecommunications providers have neglected their capabilities to 

manage their own networks, often outsourcing to equipment vendors, including Huawei. Relying 

on Huawei to monitor cyber-risks that some claim originate from or through Huawei would 

appear to be unwise. Governments taking a risk management approach need to require service 

providers to maintain full service technical expertise and comprehensive security capabilities, 

and to ensure they maintain reliable monitoring capabilities, or to develop automated solutions 

(Hubert 2020). While many supply chains in technology, as in other sectors, originate in China, 

Huawei has moved to manufacture 5G network equipment in France for the European market 

and all of its chipset security is conducted in Finland (Huawei 2020), which mitigates risks. 

The Huawei case exposes a critical gap in global governance. Inadequate rules, norms, standards 

and institutions exist to manage risks of globally interconnected technology. In the absence 

of rules, norms, standards and enforcement, technologies generating risks have developed 

ahead of technical capabilities to manage those risks. While some technical experts claim 


61

David Morris 

the complexity of telecommunications technology renders it impossible to guarantee against 

malicious code or backdoors in equipment (Lysne 2018; Chang 2020), nations will assess how 

to engage with China differently. The US and its closest allies may understandably fear the rise 

of China, but it remains an open question whether Europe as a whole will seek to decouple from 

China or to find a risk management solution to prosper from the next phase of globalisation. If 

the latter, the EU may already have a model for risk management in its highly developed set of 

regional rules and standards for the digital economy, including its comprehensive Cybersecurity 

Act, General Data Protection Regulation and Directive on Security and Information Systems. 

Technology experts interviewed for this research were mostly of the view that cyber-risk management 

should take a “zero-trust” approach that is blind to suppliers and that applies layers of 

monitoring and testing for vulnerabilities, as threats could actually come from anywhere – not 

just one particular geopolitical competitor – at any time. It was considered by industry insiders 

that risk management should be developed according to internationally agreed rules, norms and 

standards, as well as institutions for enforcement. The risk of malicious state action has not 

prevented the international community from developing – and largely abiding by – rules, norms, 

standards and institutions in numerous similarly complex areas of strategic importance, such 

as nuclear technology for peaceful use, food safety or aviation. The lack of cooperative global 

dialogue about governance options for emerging technologies is therefore remarkable. 

5 Conclusion 

There has traditionally been very little cross-fertilisation between business literature on political 

risk and international relations literature on interdependence (Fägersten 2015), yet this discussion 

demonstrates that risks for governments, firms and other actors in the Huawei case are 

entirely bound up in questions of complex interdependence and may require new approaches to 

risk management at global, regional and national levels. 

The Huawei battleground is not simply about the rise of one firm from China to threaten US 

supremacy or generating cyber-risks. Huawei is a proxy for fear of China itself, its likely future 

capabilities and possible intentions. Whether China acts according to high risk threat scenarios 

may be related to the state of the international system itself and whether it descends into conflict 

or whether international cooperation can be maintained. 

The US and some of its allies appear to so deeply distrust China that they are unwilling to 

attempt to construct new international rules, norms, standards and institutions to govern a new, 

inter dependent digital economy. The alternative, a world of decoupled and rival technological 

systems, may deepen distrust and reinforce the kind of hostile state action we fear. Of course, 

if the worst-case scenarios prove to be correct, we could be headed in that direction anyway. 



The Huawei battleground is therefore more than simply a problem for international business 

but represents a crisis of interdependence in the international system. For Europe and its interdependence 

across Eurasia, it is a central test whether it will be possible to sustain and build 

new processes for engagement, co-existence, norms, verification and enforcement for sustainable 

new value chains and indeed to maintain peace and security. 

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index.html 


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The impact of sanctions on Russia 

and the consequent Russian business 

relocation to Armenia 

Abstract 

The Armenian and Russian economies are tightly knitted and the sanctions 

imposed on Russia will have a significant short- and long-term impact on the 

economic life of Armenia. In the article, we discuss how the companies that 

used to operate in Russia look for new places to relocate themselves and to 

develop their business. Business relocation may be required for various reasons, 

including establishing new connections, finding a more profitable tax system, 

convenience and access to technology and cheap labor. How ever, changing 

the location has become one way of how to avoid the pressure of sanctions 

and restrictions for Russian organizations. The first wave of relocations 

encompassed companies from the high-tech and service sectors. Even though 

they have benefited from tax exemptions and deferments for the IT sector, these 

companies have contributed to the improvement of economic activity as well as 

generated additional consumption and rent payments. Armenia has capitalized 

additional output and export increase of some industries. However, the economic 

growth is not proportional. The impact of sanctions against Russia has 

already been manifested in Armenia by the instability of the exchange rate, the 

significant increase in prices, intensified inflation pressure, etc. Indeed, difficult times await not 

only Russia, but also Armenia, as long as the latter continues to be over-integrated into the 

Russian economy which entails partly sharing the burden of the consequences of the westimposed 

sanctions. Under the conditions of increasing economic turbulence, Armenia should 

further diversify its policies and economy. 

Keywords: sanctions, impact, foreign companies, relocation. 

Albert Hayrapetyan 

Armenian StateUniversity of 

Economics, Yerevan 

Susanna Aghajanyan 

Armenian StateUniversity of 

Economics, Yerevan 


The political and economic arenas are undergoing extensive, broad-based developments in the 

twenty-first century. Globally, businesses have been impacted by the pandemic. The tumultuous 

environment compelled businesses to evaluate their strategy and adapt to the shifting needs of 

customers, suppliers, and workers. In addition to addressing the crisis, businesses are focusing 

on preparing for the post-pandemic scenario by taking lessons from the recent pandemic and 

its effects on international trade. The region’s top multinationals have started and are stepping 

up strategic initiatives to build more resilient supply networks (Agadjanyan 2020). However, the 

Russian-Ukrainian confrontation and the resulting sanctions against Russia have now become a 

new concern for businesses. Nearly all of the issues discussed at the inception of the pandemic 

still exist: value chains are disrupted, logistics supplies are difficult to organize, raw materials 

and packaging materials are in limited supply, prices are changing, etc. (Agadjanyan 2022). 


67


Nevertheless, despite the experience obtained in managing the aforementioned issues, the Russian 

market is becoming relatively vulnerable in light of the current geopolitical and economic 

realities as major foreign corporations purposefully exit the Russian market. Sanctions alter 

actions of investors and foreign companies in the market. Today the situation in Russia is complicated. 

Despite the political nature of the sanctions, they have a clear economic dimension. The 

sanctions are renewed every minute and are becoming more and more severe resulting in trade 

restrictions, a shortage of resources, and as a result, a number of businesses reject working with 

Russia or cease their operations. Western economic sanctions primarily target the country’s 

financial system, energy companies and airlines, transport system, advanced technologies and 

other sectors with a variety of negative effects. In the medium term, the economic recession 

and the economic and technological isolation of the country curb the further development of the 

Russian economy, and, at the same time, put the major non-western economic partners under 

jeopardy of experiencing the secondary effects of the sanctions. 

The influence of economic sanctions on the activity of foreign companies in the Russian market 

is complex and multi-level. Foreign businesses tackle problems including platform blocking, a 

drop in demand, a rapid rise in purchasing prices, etc. 

Russia faces a number of dead-ends under the influence of these limitations. Foreign enterprises 

face more challenges than just sanctions that occurred because of the economy’s precipitous 

decline, retaliatory measures and reputational risks. Yet many international companies are forced 

to wait for further developments or find new solutions due to the uncertain environment and the 

necessity to protect assets as well as fulfill existing responsibilities and agreements. It means 

that uncertainty alters the pattern and volume of a company’s activity as foreign companies 

want to take full advantage of their ownership abroad. Decisions made by some multinational 

businesses, such as ceasing operations in Russia and halting projects and investments, highlighted 

the necessity to assess the relocation opportunities. Exit is a sensible strategy, so companies 

look for alternate solutions to adapt to the dynamic environment, much like chameleons, 

which quickly change their appearance to match changing environmental conditions due to 

increased flexibility, internal competition, and other causes. 

The Eurasian Economic Union (EEU) member states including Armenia hosted numerous companies 

‘’emigrated’’ from Russia. These companies have a chance to create a parallel mechanism 

of management, money transfer and logistics in Armenia. Armenia can gain from and take risks 

in the situation that was just stated. Some companies consider moving to Armenia, while others 

have already done so. In the interim, there is a chance that Armenia may make a new start, 

while others see this as a way to send economic shocks and additional sanctions. (Makhmutova 

2019). 


The impact of sanctions on Russia and the consequent Russian business relocation to Armenia 

2 Research 

Russia came under pressure and was subject to sanctions from the West and other countries 

as a result of the military escalation between Russia and Ukraine. The sanctions are a direct 

response to the Russian Foreign policy (Shufan 2015). Russia’s invasion of Ukraine has resulted 

in a slowing the economics growth and accelerating inflation all over the world (Kammer/Azur 

2022). Meanwhile, the effects of Russia’s recession and the sanctions imposed on it will be 

seen in neighboring and integrated countries. In particular, these countries will face disruptions 

in trade, supply chains and money transfers. The business outlook has also clouded due to the 

Ukraine conflict as decreased business confidence and increased uncertainty for investors will 

negatively influence capital flows. Sanctions have led to corporate exodus of many transnational 

corporations operating in Russia. The TNCs from different industries announced to leave the 

Russian market and thus multiplying the negative impact of sanctions. 

The first wave of selling Russian assets included retail companies such as Prisma, Jysk, OBI, 

Nike (did not extend the franchise agreement with Inventive Retail Group) and many other 

transnational corporations have announced the possibility of selling their Russian actives. 

The oil and gas companies such as BP, Shell, Fortum, General Electric, OmV and many others 

have suspended deliveries, new investments, or the full activity in Russia. The TNCs from the 

telecommunication sector such as OneWeb, Cisco, Lumen, and NEC suspended their activity, 

investments or export operations. YIT, Herzog & de Meuron, MVRDD suspended their activities 

in construction and architecture. 

International companies need to ensure the supply of necessary components in case the 

USA imposes restrictions on the export of high-tech production to Russia; they are looking for 

alternative sources of raw materials. 

In total, more than 5,000 foreign corporations operate in Russia and thus directly form 2-3% 

of jobs in the Russian economy. Other foreign businesses operating in Russia responded 

differently to the current circumstances. More than half of the businesses continue operating 

normally and have not issued any work restrictions. In particular, 21% of the leading 600 corporations 

suspended activity, with 46% declaring their intention to limit their business in some way 

on the territory of Russia (Prokudina/Pleshakova 2022). 

The range of organizations and sectors leaving Russia is very wide, and the exodus of transnational 

corporations from Russia included different mechanisms of suspending activities 

(cancellation of ongoing projects and deliveries, investments, technical assistance, stopping 

payments acceptance, disabling of monetization, disabling of contextual advertising and user 

registration in the cloud service, stopped broadcasting and other forms). 

The most important industries and TNCs which were dealing with some cancellation process 

are from the following sectors: transportation and delivery (Fedex, DHL, UPS, Cyprus Post), 


69


airplanes (Boeing, Airbus, AerCap, EASA, PowerJet), technology (Apple, Dell, Intel, Nokia, HP, 

Panasonic, IBM, ASUS, Acer), software (SAP, Microsoft, Autodesk, Adobe, Figma, Avast, Miro, 

Norton, Corel), Internet (Galaxy Store, Google, Facebook, Rutracker), gaming (Playstation, 

Nintendo, Steam, Ubisoft, Niantic, Koch Media), Internet shops, services (Bolt, Ebay, Airbnb, 

Upwork, Amazon, SerpStat, Canva), hotel and restaurant business (McDonalds, Hyatt, Mariot, 

Papa John’s, Starbucks, Laduree) and others (Сравнц 2022). 

Companies from Spain, Sweden, Japan, Poland and Switzerland were the ones that limited their 

activities on the Russian market the most actively, while those from Austria, France, Canada, the 

Netherlands, Denmark and Italy were the least active ones. About 90 companies have announced 

their final withdrawal from Russia. Some of them chose a scenario of hard exit (with the liquidation 

of the Russian subdivision and the transfer of some of their employees to other countries). 

These companies were mainly from the field of consulting and IT (Prokudina/Pleshakova 2022). 

The statements about the suspension of their activities on the Russian market do not always 

mean the refusal of foreign suppliers to fulfill their obligations under already concluded contracts. 

Some of the companies sold their actives to Russian companies. The option of full exodus is 

more typical of the largest companies with a global reach, for which the Russian market is small. 

Companies for which sales in Russia accounted for a significant share of revenue are more 

likely to adapt to new regulatory conditions and characteristics of demand and supply and will 

continue to work on the domestic market. In particular, this refers to the average foreign business 

from neighboring countries (Poland, Czech Republic, Finland, Hungary and others) (Prokudina/ 

Pleshakova 2022). 

In many cases the sanctions did not require companies to leave but the political pressure on 

commercial structures was so great that foreign partners of Russian enterprises do not understand 

which consequences the continuation of work in the Russian Federation would entail. 

External sanctions, currency fluctuations, difficulties with logistics, broken supply chains, 

problems with cash circulation, payments and settlements between Russian organizations and 

their foreign counterparties, constant adjustments of the imposed restrictions complicate the 

activities of Russian and foreign companies. The business must have predictability and planning 

possibility but here we see increased investor uncertainty. 

The introduction of sanctions has resulted in the collapse of existing prospects for economic 

development and increased capital outflow suspending many important projects. The socioeconomic 

situation in Russia remains difficult, as unprecedented Western sanctions against 

Moscow have created new risks for the region’s economy. 



Why Russian companies choose Armenia? 

Western sanctions are spreading far beyond Russia. The economies of the former Soviet Union 

and Russia are interconnected. Since Russia served as a hub for many businesses connecting to 

other CIS nations, the new distribution chains should be considered. As an alternative, businesses 

can relocate to lower-risk countries. The service sectors can relocate more quickly than industrial 

facilities. Confronted with uncertainty, companies are constrained to optimize businesses and 

seek new markets to maneuver the sanctions and limited resources. The s olution to this issue is 

business relocation, which not only makes it possible to retain operating results but also helps 

to foster the growth and creation of new business sectors. 

Armenia is one of these destinations. Since the beginning of the Russian-Ukrainian conflict, some 

companies have relocated their businesses to Armenia. Armenia represents a new opportunity 

or chance for global TNC’s subsidiary relocation. However, the size and capacity of the Armenian 

market is small, but it could be the intermediate basis for changing their strategy in the region. 

The choice of relocating legal subsidiaries depends on the parent company’s decision, its global 

business patterns and preferences. Financial, commercial and other reasons can lead to business 

relocation, but it is crucial for companies to comprehend the implications. The companies 

can choose one of the following forms of business relocation: full migration, use of Intellectual 

property (IP) holding companies and regional hubs, offshoring, changing the risk model, etc. 

(Thornton 2015). 

Some businesses are sensitive to market perception. Any restructuring that could result in headline 

news in the media could detrimentally affect the profitability of those businesses (Thornton 

2015). It is also necessary to choose the right country in order to leave the possibility of cooperation 

with both domestic residents and foreign ones. 

However, global companies choose the countries that are more predictable for them considering 

not only economic but also political benefits. The challenge for global companies is to be ready not 

just for the Russian fallout, but for developing a responsible strategy for the next country selected. 

For relocating businesses abroad, companies need access to markets, competitive advantages, 

simplified procedures, tax incentives and costs reduction. The relocation is associated with 

costs, legal and tax matters. The costs of relocation depend on the relocation type. Even in case 

of staff relocation, companies are associated with higher costs, as professionals must ensure 

having competitive relocation packages. The essential consideration is whether the financial 

advantage of relocating workers will surpass the expense of the movement. 

From this perspective, Armenia is the favorable destination for relocation as EEU citizens, who 

work in the Republic of Armenia, as well as their family members, are exempted from the requirement 

to obtain any permission type document for the whole period of their employment contract 


71


in accordance with the Treaty on the EAEU. 1 The legal entities registration process is also simplified. 

The government provides additional tax incentives to Armenian resident entities that meet 

several criteria. The Armenian government has also begun a program for relocation assistance. 

Armenia has attracted Russian businesses, notably those in the service and IT sectors, as 

opposed to worldwide firms relocating there. The companies moving to Armenia are directly 

connected with Western markets and need to mitigate some risks and prevent more losses or 

disruptions to their businesses. Now, approximately 1.7 thousand companies and 3,000 individual 

entrepreneurs have registered in Armenia (Armeniasputnik.am 2022). Thirty thousand citizens 

moved to Yerevan for long-term residence and more than seventy thousand bank accounts of 

Russian citizens were opened in the Armenian banks (Banks.am 2022). 

Meantime, some companies have used the documentary relocation form. It involves moving 

“on paper”, that is, registering a business abroad without actually transferring production and 

moving employees. Most often, this solution turns out to be the most profitable: it involves minimal 

financial costs but helps to bring the organization to the international level, transfer assets 

to another jurisdiction, and also reduce the tax burden. 

The fact that there are numerous companies registered in Armenia does not imply that they have 

moved formally there. It can involve changing contractual relationships with businesses in other 

countries, structuring business using foreign infrastructure, reorienting cash flows, etc. 

Various types of companies moved to Armenia. The first ones are companies that are working 

for a foreign parent company and have signals that employee relocation is imminent. The second 

category are exporting companies working for clients from the so-called ‘’unfriendly’’ countries 

for Russia. They have moved, their offices out of Russia “on paper” or actually in order to sign 

contracts, receive orders as well as receive money from customers abroad due to concerns 

about sanctions violations and issues with currency transfers. The third category consists of 

freelancers whose marketplaces have ceased to function, where they earned money by selling 

their own applications and providing software development services. If the freelancers choose 

Armenia as a permanent place for their activities, it will have a positive effect on Armenia’s 

economy. 

Relocation of high-tech industries was impossible as it was forbidden to export equipment 

from Russia. In addition, for relocation production facilities local sources of raw materials, 

even recyclables, are necessary. Business considerations such as the presence of skilled labor, 

suppliers, and customers in a specific area influence the relocation of value-added functions. 

There might still be potential to consolidate these in a regional hub that is both cost and tax 

effective. Of course, there are also some cases of expanding production facilities to Armenia. 

1 Migration Service of the Ministry of Territorial Administration and Infrastructure of Armenia, System of Work Permit 

https://workpermit.am/en/about 



The main advantage of this process is the possibility to import European and American raw 

materials and technologies, and export to the world and Russia. 

For example, the IT companies that entered the Armenian markets can have both a positive 

and a negative influence on the IT industry of Armenia. The sector is currently undergoing a 

significant transformation: the shift from the outsourcing model to in-house product development 

and entrepreneurship is increasing (World Bank 2019). In addition, in order to maintain 

growth based on high-quality labor, the country is currently faced with the issue of ensuring 

sufficient supply due to the scarcity of labor and the small size of the country, as well as the 

increased competitiveness between the local industrial sector and international organizations. 

At the current stage of development of the sector, this is a difficult task, as the skills shortage 

increases with the positive dynamics and development of the economy (World Bank 2014). This 

means that Russian companies offering higher salaries can attract the Armenian workforce. On 

the other hand, the presence of international companies brings industry-specific culture to the 

country. In addition to that, the international boom of start-ups is also driving the development 

of the entrepreneurial model among IT and high-tech professionals. The local tax revenues and 

the spillover effects are promising. 

Nevertheless, we should consider that the IT industry is one of the main sectors of the economy, 

which has tax incentives. The Law «On State support in the sector of information technologies» 

determines the activities, which are subject to tax incentives, mainly software development, 

data processing, web hosting and others. There is a requirement that a company receiving the 

tax incentives certificate does not have more than 30 employees. (ARLIS 2014). The Law on 

State Support of the Information Technology Sector of the Republic of Armenia enables newly 

established organizations to pay only 10% income tax and be exempt from profit tax. In addition, 

companies operating in the ICT sector can benefit from advantages and tax benefits of the Free 

Economic Zone ECOS. 2 

Since the adoption of the law, 2049 organizations have already benefited from the tax exemption 

provided to IT companies. However, the year 2022 is unprecedented in the number of 

applications and issued certificates. The number of certified companies is 1039, the founders of 

716 are citizens of other countries. 3 These tax incentives enable Russian companies to conduct 

business with organizations from all over the world and significantly save on payments. 

When we generally talk about the opportunities provided by foreign-invested companies in the 

host country, we often mention job creation, increased tax revenues, localization of marketing 

and management skills, etc. For registered Russian companies in Armenia to have a certain 

long-term positive effect, it is necessary to find out if these businesses are prepared to extend 

their operations in Armenia in the future and what the requirements are. 

2 ECOS Free Economic Zone: https://fez.ecos.am/am#rec94931229 

3 State support to IT industry: https://hti.am/pages.php?lang=1&id=7890&page_name=news 


73


The impact of relocation on the Armenian economy 

From the perspective of Armenia, it is important to comprehend the impacts which take many 

different forms. Meanwhile, the economy of Armenia is significantly impacted by the relocation 

of Russian businesses. Armenian economy gained new possibilities, and is transformed into 

a commercial, logistical, and financial hub. The influx of Russian citizens and capital sharply 

accelerated economic growth in Armenia. As a result, the actual rate of economic growth in 

2022 has been far higher than predicted. The increase in both local and international demand is 

accountable for the revised projection of 12.9% economic growth (Inflation report 2022b). 

As we can see from table 1, the index of economic activity in Armenia increased by 14.5% from 

January through October 2022 in comparison to the same period in 2021. The increase in the 

economic activity index was driven mainly by growth in services and trade. 

Table 1: Indicators of the socio-economic situation of the Republic of Armenia 

January-October 2022 in comparison to same period in 2021, % 

Economic activity index 114.5 

Trade volume 115.5 

Services volume 127.9 

Construction volume 114.4 

Source: Armstat 2022 

According to the Central Bank of Armenia demand has increased, which is largely due to an 

increase in international visitors (primarily from Russia). This is also reflected in an increase in 

the services sector’s output and exports. The additional capital and labor inflows will contribute 

to the potential growth of GDP during 2022. It will mainly reflect in the extension of IT services 

by providing higher economic growth in 2022 than in 2021 (Inflation report 2022a). During 2022, 

the growth was mainly registered in the following sectors information and communication and 

the accommodation and catering. 

The volume of receipts from abroad was 922 million dollars from January to June 2022, an 

increase of 97.3% over the same period in 2021. During the same time period, transfers from 

Armenia increased by 326 million dollars, or 57.7%, to 891 million dollars (Armenian Banking 

Sector Overview 2022). In this context, the Russian-Ukrainian conflict and the sanctions imposed 

on Russia and their duration caused certain changes in the exchange rate market of Armenia. 

The large financial inflows lead to the devaluation of the Armenian currency. The Armenian dram 

is steadily strengthening its position, especially against the dollar and the euro. In this case, the 

exporters are at risk, but they are too important for the economy. 



The transfer of the economic shock from Russia to Armenia is also combined with inflationary 

effects on the Armenian economy from the external sector and a slowdown in the growth of 

other partner countries. Of course, in the short term, there are positive impulses in terms of 

additional consumption, rent payments and general economic activity. 

Today Armenia as a member of the Eurasian economic union uses all available opportunities for 

developing trade and promoting Armenian products to Russian market. The economic relations 

between the two countries developed successfully. The volume of Russian-Armenian trade 

turnover is increasing consistently. Being a member of the EEU Armenia has new opportunities 

to expand trade and economic ties with Russia. However, the deep correlation between Russian 

and Armenian economies in terms of trade, investments, labor migration, exchange rates and 

other economic relations can lead to economic downturn in Armenia. Russia’s military operation 

in Ukraine and sanctions imposed on Russia will have a significant impact on the economic life 

of Armenia in the medium and long term. The systemic implications for the global economy 

and the spillover effect on Armenia, and countries and markets connected with Russia, will be 

significant. 

The close ties between Armenia and Russia in the field of trade and payment systems will affect 

trade, money transfers, investments and tourism, which will negatively affect economic growth, 

inflation, foreign operations accounts and budget accounts (Kammer/Azur 2022). Having not 

diversified its economy, Armenia continues to be over-integrated into the Russian economy, thus 

also being entangled with the sanctions to some extent. The most serious risk for Armenia is the 

possibility of secondary sanctions and their consequences. 

The impact of the first wave of sanctions on Armenia’s economy can be assessed positively, due 

to the fact that there is a noticeable activation of the economy and business sector, particularly 

in the field of information technologies, an increase in demand in the market of both real estate 

and consumer goods and services, and currency flows. 

Armenia continues to remain in the EEU, which implies a free trade regime with Russia under 

sanctions. For this reason, we think that Armenia should increase its vigilance, so the West will 

not interpret it as an indirect support. 

3 Conclusion 

The intensification of geopolitical confrontation in the world not only adds uncertainty to 

forecasts, but also highlights the tendencies leading to a new world order. The Russian-Ukrainian 

conflict with large-scale sanctions and its consequences have created uncertainty in the region. 

Severe sanctions imposed on Russia will persist in the short and medium terms, and problems 

in supply, value chains, or in international trade flows will not be resolved quickly. The sanctions 


75


and their consequences are long-term, and the situation can last for years, even if the hot phase 

of the Ukrainian conflict will end in a few months. 

Russia’s invasion of Ukraine has already had and will continue to have significant political and 

economic consequences for many countries in the world, especially for countries economically 

interconnected with the conflicting parties, including Armenia. Russia will likely try to find 

ways around the sanctions. In this context, Armenia is in a somewhat vulnerable position. 

The deepening Russian-Western divide and sanctions have and will continue to have negative 

consequences for Armenia. We are concerned that there is a real danger that Armenia may 

come under Western sanctions because of helping Russia to avoid them. 

For now, Armenia has some positive signals in terms of relocated labor and capital, but the latest 

trend creates high uncertainty and significant risks for the Armenian economy. Capital-financial 

flows to Armenia, their nature, size, duration and the possible transformation of economy can 

have both a positive and a negative impact on the economic development of Armenia. 

But the stability of Armenia in the process of the new reorientation of the world depends on the 

country’s defense capability, supply of strategic resources and internal cohesion. In this regard, 

Armenia should rethink the strategy and logic of the EEU interaction by ensuring internal stability 

and self-sufficiency. 

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Agadjanyan S. (2022): New Turbulence in Pharmaceutical Market or Panic Demand Destabilizes 

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amberd/2022-year-2/0.pdf 

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List of Contributors 

Susanna Aghajanyan, PhD 

Armenian State University of Economics, Yerevan 

Susanna Aghajanyan, Candidate of Economic Sciences, Assistant Professor at the Department of 

International Economic Relations, Armenian State University of Economics – Yerevan, Armenia. 

Dr. Susanna Aghajanyan works at the Armenian State University of Economics (ASUE) combining 

academic and practical experience. She is an invited expert at the “Amberd” Research Center. She 

has participated in several local and international conferences. She is the author of scientific and 

widely available analytical papers. During the last years, she has participated in three scientific 

projects, one of which is international. Her main areas of interest include international economic 

relations, the activity of transnational corporation, international competitiveness, integration 

and globalization, global economic problems, as well as tourism markets and hospitality. She 

has approximately 18 years of experience in managing a pharmaceutical company. Dr. Susanna 

Aghajanyan is actively participating in international exchange programs and has held lectures at 

many European universities. 

susy_agadjanyan@yahoo.com 

Florence Ertel (formerly Reiter), M.A. 


Florence Ertel (formerly Reiter) is Research Associate and PhD candidate at the Jean Monnet 

Chair for European Politics, Director of the Science Hub for Europe (SHE) and Strategic Advisor 

to the University Vice-President for Europe at the University of Passau. She is member of the 

Jean Monnet Network “The EU and the EEU: Between Conflict and Competition, Convergence 

and Cooperation” (EUCON). Previously, the trained journalist worked in the online editorial team 

of the Passauer Neue Presse. Her research interests include European integration; external 

relations of the EU; foreign, security and defence policy; CSDP; strategic cultures; political 

communication and (online) campaign communication; text mining methods and web archiving. 

florence.reiter@uni-passau.de 

Albert Hayrapetyan, PhD 

Armenian State University of Economics, Yerevan 

Albert Hayrapetyan holds a PhD in Economics. He is a Senior researcher at the ‘Amberd’ Research 

Center of the Armenian State University of Economics and also an Assistant Professor at the 

Chair of International Economic Relations in the Armenian State University of Economics. He 

also holds Master’s degrees from the College of Europe and the American University of Armenia. 

His main areas of interest include EU politics, policies and polity as well as regional integration. 

He is the Research Coordinator of the ‘’Restart’’ Foundation for Education and Science. 

Dr. Hayrapetyan is the author of 20 scientific articles and three collective monologues and was 


79

a guest lecturer at the University of Applied Sciences BFI Vienna, the University of Gdansk, the 

Poznan School of Economics and Business and the Corvinus University of Budapest. 

alberthayrapetyan@gmail.com 

Oxana Karnaukhova, PhD 


The academic background includes BA History and Social Psychology and Ph.D. Cultural 

Studies. Her research focuses on regional integration dynamics, international relations and 

EU-EEU regional politics, global political economy. Credentials include a wide list of publications 

and leadership in international projects, such as Memory and Securitization in European Union 

and Neighbourhood; Super-Diversity, Citizenship, and Integration in the European Union; The 

Eastern Neighbourhood of the EU: Competition, Conflicts and International Business. Her 

most recent publication is Regional Economic Integration and Global Competition in the Post- 

COVID-19 Era: European Union, Eurasian Economic Union and Belt and Road Initiative. Hershey, 

PA: IGI Global (2022) (co-authored Shevchenko, D.). 

eu.ceusr@gmail.com 

Mag. Dr. Johannes Leitner, MA 

L&M PRISK 

Johannes Leitner is Managing Partner of L&M PRISK. He is a recognized expert in the fields 

of political risk management and business strategy with more than 15 years of professional 

experience. Having led research projects on political risk management, Johannes Leitner served 

as an external advisor to the European Commission and is a recognized expert on political risk in 

Eastern Europe, Turkey and the post-Soviet space. Johannes Leitner frequently leads expert and 

academic panels at international conferences, including, among others, at Cambridge University. 

He received his PhD from the Vienna University of Economics and Business and graduated 

in International Business Studies at the Vienna University of Economics and Business and in 

Southeast European Studies at the University of Vienna. In addition, he was a visiting scholar at 

the Stockholm School of Economics. Johannes Leitner has also been interviewed as an expert 

on political risk by, among others, the Frankfurter Allgemeine Zeitung and the Süddeutsche 

Zeitung. 

johannes.leitner@lm-prisk.com 

Dipl.-Pol. Dr. Hannes Meissner 

UAS BFI Vienna 

Dr. Hannes Meissner is academic coordinator of the EUCON project at the University of Applied 

Sciences BFI Vienna. He is an internationally recognized expert on political risk analysis and 

political risk management with a strong focus on the post-Soviet space of Eastern Europe, 

Russia, the South Caucasus and Central Asia. His academic research deals with state capture, 


informal networks and practices, and the consequences thereof for MNEs and FDIs, such as a 

weak judiciary, informal practices, expropriation and a low guarantee of property rights. 

Hannes.Meissner@fh-vie.ac.at 

David Morris, MBA 

Corvinus University of Budapest & United Nations Economic and Social Commission for Asia and 

the Pacific (ESCAP) 

David Morris is a former Australian and multilateral diplomat, currently Vice Chair of the UN 

ESCAP Sustainable Business Network and member of a number of other international boards 

and advisory committees. He is Research Fellow, Institute of Global Studies, Corvinus University 

of Budapest, where he is completing a PhD and a member of an Erasmus+ Jean Monnet 

Research Network studying links between the European Union, the Eurasian Economic Union 

and the Belt and Road Initiative. He has an MBA from Henley Business School and BA (Hons) 

from the University of Sydney. 

davidmorrisps@gmail.com 

Julian Plottka, Dipl.-Pol. 


Julian Plottka is Research Associate at the University of Passau and the Rheinische Friedrich- 

Wilhelms-Universität Bonn. His research focus includes the EU’s external relations with Central 

Asia. He is member of the Jean Monnet Network “The EU and the EEU: Between Conflict and 

Competition, Convergence and Cooperation” (EUCON). Before, he was senior researcher at 

the Institut für Europäische Politik (IEP) in Berlin, where he was package leader in the Horizon 

2020 project “Strengthening and Energizing EU-Central Asia Relations”. He coordinated the PhD 

support programme “The EU, Central Asia and the Caucasus in the International System” and 

the Master’s programme “Studies on the EU and Central Asia in the International System”, and 

he advised the German Federal Foreign Office on establishing a youth policy dimension in EU- 

Central Asia relations. 

julian.plottka@uni-passau.de 


81

Working Papers und Studien der Fachhochschule 

des BFI Wien 

2022 erschienene Titel 

Working Papers 

Working Paper Series No 112 

Johannes Jäger: Akkumulation, Regulation und Wohnungspolitik: Wege zu leistbarem und nachhaltigem 

Wohnen. Wien August 2022 


Stefanie Wöhl: Perspektiven auf Wohnen: Geschlecht, Einkommen, Migrationsbiografie im Kontext 

der Internationalen Feministischen Politischen Ökonomie. Wien November 2022 




Michael Reiner: Der Report der High Level Group of Experts on Pensions der EU-Kommission: 

Impulse für die betriebliche Altersvorsorge in Österreich? Wien Dezember 2020 


Roland Schuster / Jürgen Radel: Dokumentation des Teaching Labs zum Lehrveranstaltungstyp 

Projektarbeit. Wien Dezember 2020 




Harun Pačić: Rechtsethik des Daoismus. Wien März 2019 


Harun Pačić: Katholische Rechtslehre: Der Codex Iuris Canonici aus dem Jahr 1983. 

Wien März 2019 


Harun Pačić: Vergleichende Rechtslehre: Einführung in die Grundlagen der Rechtsvergleichung. 



Andreas Nachbagauer / Iris Schirl-Böck / Edgar Weiss: Erfahrungen und Übertragungsmöglichkeiten 

von Human-Factors-Praktiken für den Umgang mit Unerwartetem in komplexen Projekten. 

Wien April 2019 


Harun Pačić: Europäische Demokratie: Der (Unions-)Begriff der Demokratie als Inbegriff der 

menschengerechten Rechtsstaatlichkeit. Wien August 2019 


83




Michael Reiner / Robert Horvath: Das neue europäische private Altersvorsorgeprodukt PEPP 

(Pan European Personal Pension Product) und seine Marktgängigkeit im Binnenmarkt – Eine 

kritische Intervention. Wien Februar 2018 


Judith Brücker / Johannes Jäger / Andreas Nachbagauer: Regionale Headquarters lateinamerikanischer 

Multinationals in Wien. Wien April 2018 


Andreas Breinbauer / Sandra Eitler: Typologisierung der Headquarters in Wien im Hinblick auf 

die Nachhaltigkeit. Wien April 2018 


Johannes Leitner / Hannes Meissner. Politisches Risikomanagement aus der Perspektive österreichischer 

Managerinnen und Manager. Wien Mai 2018 


Andreas Nachbagauer / Iris Schirl-Böck / Edgar Weiss: Vom Umgang mit Unerwartetem − Human 

Factors-Praktiken für ProjektmanagerInnen. Wien Dezember 2018 


Nathalie Homlong / Elisabeth Springler: Impact of Chinese Multinationals on Global Labor Conditions 

and European Strategies. Wien Dezember 2018 


Andreas Breinbauer / Judith Brücker / Johannes Jäger / Andreas Nachbagauer: Emerging Market 

Multinationals in Europe – Implications for a Smart Location Policy. Wien Dezember 2018 




Andreas Nachbagauer / Barbara Waldhauser: Standortkriterien zur nachhaltigen Ansiedlung von 

regionalen Headquartern. Wien Juli 2017 


Andreas Beinbauer / Johannes Leitner / Katharina Becker: Identifikation und Best Practice Beispiele 

für eine nachhaltige Standortentwicklung. Wien Juli 2017 


Edgar Weiss: Was das Projektmanagement von der Human Factors Foschung lernen kann – 

Möglichkeiten der Übertragung. Wien September 2017 


Gerhard Ortner / Iris Schirl-Böck: Erfolgreiches Management von Unsicherheit in Projekten. 

Wien September 2017 


Andreas Nachbagauer: Management des Unerwarteten: Eine organisationstheoretische Sicht. 






Roland Schuster: Essentials of the course „Organisational and Group Dynamics“, Writings on 

intervention science, (Degree Program SHRM, 3rd Semester). Wien Mai 2016 


Roman Anlanger / Wolfgang A. Engel / Roland J. Schuster: Gelebtes Corporate Social Responsibility 

in der Lehre. Wien August 2016 


Johannes Jäger / Bianca Bauer: Lateinamerikanische Multinationals und ihre Transnationalisierungsstrategien 

– Investitionspotenzial für Europa/Österreich/Wien. Wien August 2016 


Andreas Breinbauer / Johannes Leitner: Internationalisierungsstrategien und ADI-Dynamiken 

türkischer und russischer multinationaler Unternehmen mit Bezug auf Österreich/Wien. Wien 

August 2016 


Nathalie Homlong, Elisabeth Springler: Ökonomische Ansätze zur Erklärung der Attraktivität 

europäischer Staaten für chinesische Direktinvestitionen. Wien August 2016 

Studien 

Roman Anlanger / Wolfgang A. Engel / Roland J. Schuster / Gregor Weiche: Technischer Vertrieb 

Panelstudie 2016. Wien September 2016 




Nachbagauer Andreas: Charakterisierung eines Begriffes der sozioökonomischen Nachhaltigkeit 

für Headquarterstandorte. Wien April 2015 


Nachbagauer Andreas: Internationalisierungstheorien und sozioökonomische nachhaltige Entwicklung 

von Headquartern. Wien April 2015 


Johannes Jäger / Elisabeth Springler: Eigentumsstrukturen, grenzüberschreitende Investitionen 

und Entwicklungsdynamiken. Wien August 2015 

Studien 

Roman Anlanger / Wolfgang A. Engel / Roland J. Schuster: Technischer Vertrieb. Panelstudie 

2015. Status quo des technischen Vertriebs. Wien Juni 2015 


85




Jäger Johannes / Mader Katharina / Springler Elisabeth: Zur Verknüpfung von postkeynesianischen 

und kritischen politökonomischen Perspektiven zur Analyse von Krisen. Wien Dezember 

2014 


Jäger Johannes / Springler Elisabeth: Räumliche Rekonfiguration in Europa und Implikationen 

für Entwicklungsstrategien. Wien Dezember 2014 

Studien 

Roman Anlanger / Luis Barrantes / Wolfgang A. Engel / Roland J. Schuster / Gregor Weiche: 

Technischer Vertrieb Panelstudie 2014. Wien Mai 2014 




Karin Brünnemann: The Strategic Importance of Intercultural Competency for Project Managers 

in the 21st Century. Wien Februar 2013 


Marcus Kliaras / Matthias Maurer: Spread Risk und Solvency II - Vergleich internes Modell vs. 

Standardansatz. Wien März 2013 


Patrick Burger / Marcus Kliaras: Jump Diffusion Models for Option Pricing vs. the Black Scholes 

Model. Wien Mai 2014 


Peter Sturm: Modelle, Normen und Methoden des Qualitätsmanagements und ihre Praktikabilität 

für die hochschulische Qualitätssicherung. Wien November 2013 




Wolfgang Aussenegg / Christian Cech: A new copula approach for high-dimensional real world 

portfolios. Wien Jänner 2012 


Roland J. Schuster: Aus der Praxis für die Praxis: Didaktik Best Practice aus dem Studiengang 

TVM. Praxisbeispiele zum LV-Typ Projekt(arbeit). Wien März 2012 


Björn Weindorfer: QIS5: A review of the results for EEA Member States, Austria and Germany. 

Wien Mai 2012 


Björn Weindorfer: Governance under Solvency II. Wien August 2012 



Johannes Jäger: Solvency II. Eine politökonomische Perspektive auf die europäischen Regulierungen 

im Versicherungssektor. Wien August 2012 


Silvia Helmreich: Solvency II. Derzeitige und künftige Anforderungen an das Meldewesen der 

Versicherungen. Wien September 2012 


Christian Cech: Die Eigenmittelanforderungen an Versicherungen im Standardsatz von Solvency 

II. Wien September 2012 


Christian Steinlechner: Konzept zur Datenerhaltung für Forschungszwecke. Wien November 2012 


Alois Strobl: Immobilienindizes als Zeitreihe und als Funktion makroökonomischer Variablen. 

Wien November 2012 


Björn Weindorfer: A practical guide to the use of the chain-ladder method for determining technical 

provisions for outstanding reported claims in non-life insurance. Wien Oktober 2012 


Axel Zugschwert: Avatare und soziale Kompetenz von ProjektleiterInnen in globalen virtuellen 

Projektteams. Wien November 2012 

Studien 

Roman Anlanger / Luis Barrantes / Gerhard Karner: Vertriebscontrolling. Wissenschaftliche 

Studie 2012. Status quo des Vertriebscontrolling. Wien April 2012 

Roland J. Schuster: Schriften zur Interventionswissenschaft. Organisationsform Hierarchie. 

Wien April 2012 

Elisabeth Kreindl / Gerhard Ortner / Iris Schirl: Outsourcing von Projektmanagement-Aktivitäten. 





Roland J. Schuster: Zur Methode der psychoanalytischen Organisationsbeobachtung. Wien Juli 

2011 


Björn Weindorfer: Solvency II. Eine Übersicht. Wien August 2011 


Elisabeth Brunner-Sobanski: Internationalisierung und berufsbegleitendes Studieren. Wien 

August 2011 


87


Roland J. Schuster / Anton Holik / Edgar Weiss: Aus der Praxis für die Praxis – Didaktik Best 

Practice aus dem Studiengang TVM – Teamteaching. Wien Dezember 2011 


Grigori Feiguine: Versicherungswirtschaft in Russland. Chancen und Risiken der ausländischen 

Unternehmen auf dem russischen Versicherungsmarkt. Wien Dezember 2011 

Studien 

Elke Holzer / Rudolf Stickler: Die österreichische Versicherungswirtschaft. Struktur, Wirtschaftlichkeit 

und Entwicklung. Wien April 2011 

Elisabeth Kreindl / Ina Pircher / Roland J. Schuster: Ein kritischer Blick auf die (Un)Tiefen des 

Begriffs Kultur im Projektmanagement. Wien Dezember 2011 




Grigori Feiguine: Einflüsse der internationalen Finanzkrise auf den Finanzsektor Russlands. 

St. Petersburg 2010 


Johannes Jäger: Bankenregulierung in der Krise. Wien April 2010 


Günter Strauch: Gibt es Zwilligskompetenzen? Untersuchung 2010 mit dem KODE® System. 



Elisabeth Kreindl: Virtuelle Arbeitsumgebungen. Zukünftige Arbeitswelten von geographisch 

verteilten Projektteams? Wien Dezember 2010 


Ina Pircher: Motivationsfördernde Maßnahmen und Anreizsysteme für Projektpersonal an Hochschulen 

am Beispiel der Fachhochschule des BFI Wien. Wien Dezember 2010 

Studien 

Wolfgang A. Engel / Roman Anlanger / Thomas Benesch: Technischer Vertrieb. Panelstudie 

2010. Status quo des technischen Vertriebs. Wien Mai 2010 


Fachhochschule des BFI Wien Gesellschaft m.b.H. 

A-1020 Wien, Wohlmutstraße 22 

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ISBN 978-3-902624-70-3

The EU, the EEU, and the War in Ukraine: Political Risks and Management Options

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