Kyrgyzstan is threatened by potential sanctions of the U.S. for alleged shipments of banned goods to Russia.
According to The Washington Post, the U.S. Administration prepares economic measures against Kyrgyzstan for helping Russia bypass sanctions. It became known that those were not just words in the evening of July 20. The U.S. Department of the Treasury introduced sanctions against four Kyrgyzstan companies involved, according to Washington, in shipments of sanctioned goods to Russia. RM Design and Development, GTME Technologies, Progress Leader and Cargoline fell under restrictions. Thus, five companies are already under American sanctions, with previously sanctioned Tro.Ya company.
The State Committee for National Security (GKNB) of Kyrgyzstan reacted to the message of involvement of the private sector of the country to shipments of banned goods to Russia.
“We admit that private companies and firms can be possibly involved in the breach of sanctions in their business and operating activities. The companies might be unaware of the end user of their products,” GKNB said.
The Intelligence Service said that it would conduct an investigation to detect exporters and stop shipments of banned goods, if any.
However, Kyrgyzstan categorically denies all allegations that the country supports shipments of sanctioned goods.
“Kyrgyzstan and its public agencies strictly comply with relevant international standards and rules,” the State Committee said.
Akylbek Zhaparov, head of the cabinet of ministers, also made a statement.
“A delegation of the European Union and U.S. has visited Kyrgyzstan and we take all preventive measures. The country is working on addressing the risks of falling under the sanctions by making trading transparent. We will continue to take measures to ensure that sanctioned goods do not cross our border and do not get to the country under sanctions,” the head of the cabinet of ministers said.
Gaps in official statistics
It would be unfair to foreign partners to say that Kyrgyzstan does not have any possibility to supply sanctioned goods to Russia, according to economist Kubanychbek Idinov. However, according to him, the scope of parallel import is greatly exaggerated.
“It has been long discussed that particular domestic companies reap from the situation in the region. But the point is that they try to show it as a system, which is not true. We do have a large trade turnover with Russia. By results of 2022, it showed growth by 1 billion dollars. However, in my opinion, it is not due to parallel import of banned goods to Russia, but due to reforms and digitalisation of economy of Kyrgyzstan in latest years. These two events have just coincided,” the economist said.
Moreover, according to him, improvement of tax and customs administration speaks that the republic has nothing to hide.
“The process of digitalisation makes us open everything. Therefore, our turnover has increased. Kyrgyzstan looks to make everything transparent and open. Today we have introduced cash registers, electronic invoices and other documents helping to track commerce. It speaks that particular reforms related to digitalisation happen in the national economy,” he said.
Despite the official denial of Bishkek of being involved in shipments of banned goods to Russia, international partners still have doubts about the neutrality of Kyrgyzstan. The change in the format of export data published by the National Statistical Committee has added fuel to the fire, according to the investigation held by OCCRP.
In particular, the export statistics in many countries of the world is usually divided into specific categories and uses 10-digit codes. For example, code 3603400001 means “non-electrical blasting caps”. However, there are shorter 4-digit codes, which have been widely used by the National Statistical Committee of the Kyrgyz Republic since April 2023.
According to OCCRP, four companies falling under the sanctions are just the tip of the iceberg. There are dozens of Kyrgyz companies that export banned goods to Russia. For example, Kas Impuls is the first factory in Central Asia to produce detonators. It sent 661 thousand devices to Russia from January to April 2023.
While many of those items may have been produced in China, at least 19,600 originated in Kyrgyzstan. The shipments went to ORICA CIS, a part of Evoblast Group, a Russian manufacturer of industrial explosives and initiation systems for the mining and construction industries. None of these exported detonators are indicated in official statistics.
Keep balance with all partners
According to Kubanychbek Idinov, Kyrgyzstan needs to comply strictly with the requirements of the West and United States regarding shipments of sanctioned goods to Russia, while continuing to enhance economic relations with all countries and to defend its interests. He said that the sanctions issue is more political.
“The West and the United States want us to join sanctions. But why does Kyrgyzstan have to break relations with Russia now? We have learned to work under the EAEU and taught our entrepreneurs to work in these conditions for all these years. How can we stop it all and break relations with Russia now? It won’t work and I believe we should not be involved in this politics,” Kubanychbek Idinov said.
However, according to political analyst Emil Dzhuraev, Kyrgyzstan does not need to break relations with Russia. Both the U.S. and Europe understand how difficult it would be for Kyrgyzstan to deny Russia and take sides with Ukraine. Everyone accepts that Kyrgyzstan has declared its neutrality regarding the war. But the point is to keep neutral in practice.
“We should pursue our national interest of achieving healthy relations with our partners,” Dzhuraev said. “The fact that Russia accepts that Kyrgyzstan puts its security from sanctions at risk in order to ship the goods to Russia is very selfish on the Russian part. I think we need to explain all our partners, with respect and explicitly, that we keep neutrality in this situation.”
According to the political analyst, it would be rather difficult for Kyrgyzstan to keep balance in relations with its partners without clarity.
“Kyrgyzstan and Russia have a very wide range of relations. And these relations, if we have serious partnership, should not depend on whether the republic is taking part in shipments of goods banned by international sanctions to the Russian Federation,” he said.