The European Commission announced the upcoming 11th package of anti-Russian sanctions, which will be now not against Russia, but against third countries supplying sanctioned goods to the Russian Federation. Central Asian states fell under suspicion because they boosted their exports to Russia in 2022. In March, the EU Special Representative made an ‘inspection’ visit to Kyrgyzstan, and similar meetings will be held in Kazakhstan and Uzbekistan at the end of April.
The details of secondary sanctions and possible time of their introduction have not been announced officially yet. In general, the position of European countries on this issue became obvious from the latest publications in the Western press. The Daily Telegraph published internal documents, which said that “we should give a strong signal to persons and entities in third states. The provision of material support to Russia’s military and defence industrial base will have severe consequences regarding their access to the EU market.”
It means goods that may have dual use. For example, microchips of washing machines or photo cameras, which, according to some experts, can be used to repair military equipment. According to the media outlet, the trade between Russia and Central Asian states saw a significant uptake between 60 and 80 per cent.
These overall figures are approximate and incorrect without the detailed analysis. CABAR.asia analysed the national databases of foreign trade for 2021-2022 and draw the following conclusions. The trade flow between Kazakhstan and Russia in 2022 increased by 6.1 per cent (rise in experts from Kazakhstan – 25 per cent). Kyrgyzstan boosted mutual trade with the Federation by 40.3 per cent (exports from Kyrgyzstan increased by 2.4 times). Bilateral trade between Uzbekistan and Russia showed growth in the value by 23.4 per cent, and exports to Russia – by 49 per cent.
Statistical committees of Tajikistan and Turkmenistan do not provide open data on foreign trade in the last two years, but their statistics can be tracked down by figures voiced during official visits of Russia’s representatives to these countries. Thus, according to the report of the head of Russia’s government, Mikhail Mishustin, the trade turnover between Moscow and Dushanbe in 2022 increased by 18 per cent and reached the record level of 1.5 billion dollars. Turkmenistan and Russia boosted mutual deliveries by 32.7 per cent (data available for eight months only – editor’s note). This customs statistical data shows the general growth, which is based on many factors, including by substitution of European suppliers in the extensive Russian market.
It is important to note that not all Central Asian countries can provide detailed statistical data that can absolutely prove the export of goods purchased in Europe, United States, not in China, from the regional countries to Russia.
We have tested this hypothesis on information available on Kazakhstan. It turned out that the share of imports to Kazakhstan from western countries and America is relatively low in different groups of commodities: phones – 7 per cent, computers – 16 per cent, refrigerators – 24 per cent, etc. The main portion of these high-value added products is imported from other states. It is difficult to check which commodities were exported to Russia – European or Chinese (which is not prohibited by sanctions) without disclosure of internal commercial information. We wrote about it in detail here.
First warning
The evidence base is very important when charged with evasion of sanctions, especially taking into account the official position that largest countries of Central Asia meet the requirements of prohibition of re-export to Russia.
Western media journalists, with reference to the source in the European Union, also said about hypothetical sanctions in the context of evidences available to prove parallel import to Russia. Therefore, before making big statements or imposing sanctions, representatives of the European Union planned to hold a range of meetings in the regional countries. One of them was already held on March 28 in Bishkek. Special envoy of the European Union, David O’Sullivan, visited Kyrgyzstan. The guest outlined his goal as follows:
“The purpose of my visits is to open dialogue with these countries in order to determine if sanctions are being evaded. If they are, it should be stopped somehow.”
In autumn, the European Union is going to send a team from Kyrgyzstan to do this job.
According to Aman Saliev, director of the Institute of Strategic Analysis and Forecasting (Kyrgyzstan), monitoring should not in any way violate the sovereignty of the independent state, e.g. Kyrgyzstan. The republic implements the open policy, including disclosure of information on foreign trade. The expert reminded that the trend towards boosting the trade turnover between Kyrgyzstan and European Union countries started long before the conflict in Ukraine and continues for several years.
“The visit of the special envoy of the European Union in Bishkek and his statements that the republic must provide cooperation in the implementation of sanctions, can partly be considered as interference in the domestic affairs of the republic. The Kyrgyz Republic took a neutral position since the beginning of the conflict in Ukraine and sticks to this position,” the head of the Institute said to the correspondent of CABAR.asia. “If EU representatives claim there are facts of so-called parallel imports to the Russian Federation through the Kyrgyz Republic, why don’t EU authorities take restrictive measures to sellers of those commodities directly in the European Union?”
Aman Saliev also emphasised that the European Union still maintains active trade relations with Russia in many items and according to the published statistical data, the trade turnover between Russia and European Union in 2022 was record high in the last eight years. If we compare the roles of Europe and Russia for Kyrgyzstan, Russia, according to the speaker, is one of the main long-term trade partner, which can hardly be replaced in Europe.
According to the National Statistical Committee of the Kyrgyz Republic, in 2022 the share of Russia in the total trade turnover of Kyrgyzstan with other countries was 27.4 per cent. Last year, the states exchanged goods and services in the amount over 3.2 billion dollars (increased by 40.4 per cent). The trade with Europe in 2022 went into the red – 666 million dollars, which is 1.1 per cent less. Comparison of trade turnover amounts explains everything.
What could secondary sanctions against Central Asia be like?
Three experts whom we asked have the same opinion that imposing secondary hard-hitting sanctions by the west against Central Asian states at the national level is the unlikely scenario.
“If they prove the cases of re-export, the measures will be directed against violators, not the country. Kazakhstan does many things to minimise the circumvention of sanction restrictions via the territory of Kazakhstan,” said Yernar Serik, director of the Centre for Trade Policy Development of the Institute for Economic Studies (Kazakhstan).
The expert makes an example of mandatory electronic execution of dispatch notes on goods in mutual trade with EAEU countries, which allows monitoring the movement of goods in real time. Export of military goods is prohibited from Kazakhstan. The country has developed a plan of actions to mitigate risks of secondary sanctions. The website traderadar.kz accumulates information on sanctions imposed by the European Union against Russian Federation and Belarus.
The head of the subdivision of IES draws attention to the fact that Kazakhstan, whose key product is fuel and mineral resources, depends both on Europe, which is the main importer of these products, and on Russia, whose territory is used for the transit of oil. The country keeps neutrality and follows preliminary agreements with each conflicting party.
“Imposing large-scale secondary sanctions at the national level is highly unlikely. It will lead to the absolute split of the world and loss of American influence on many countries. Sanctions are being imposed at the level of particular companies, including in Central Asia, but do not affect the general situation,” said Nikita Mendkovich, head of the Eurasian Economic Club.
According to the political analyst of international affairs, the countries in the region “continue to participate on a large scale in the practice of parallel imports. In Kazakhstan, which regularly claims that it will not help evading sanctions as supplies of sanctioned goods is the business owned by political elite.”
According to Kyrgyzstan-based expert Aman Saliev, at the initial stage, sanctions imposed by the European Union will have only the short-term impact on the economy of Central Asia, but only until countries develop measures to substitute such prohibitions. It is likely, according to the speaker, that the region can re-orientate towards closest partners – China, Russia, Iran and possibly Türkiye.
“Based on available information, it is unclear what the sanctions will be, they will probably be restrictions on export of goods sanctioned in Russia to Central Asia, additional restrictions in the sphere of capital flow, banking services, or full closure of the European market for the region. In Kyrgyzstan, the European Union can restrict or stop funding of a range of humanitarian projects,” Saliev said.
What can be the outcome of secondary sanctions in Central Asia? Is it possible to have the visa ban scenario and restriction of entry into the European market for exporters from Central Asia?
“The hypothetical introduction of sanctions against Central Asia or their leaderships will cause not only the final breach with the United States, but also nationalisation of western assets in the region. Americans and Europeans gained control over many oil and ore deposits back in the 90s in Kazakhstan. Secondary sanctions will cause nationalisation of these facilities, and the society will support this measure. Visa ban for key politicians and wider population will cause counter measures of Central Asia and accelerate the breach with the west,” said Nikita Mendkovich.
The scenario with trade restrictions and visa ban is impossible, said Yernar Serik. This way makes no sense for any party. The countries in the region supply such commodities as oil, farm produce, and other raw materials to European markets, which lack them due to the Russian-Ukrainian events. Also, due to no Russian alternative, there is a transit flow of goods between the European Union and China via the territory of Kazakhstan.
If the break in relations happens, it can lead to significant reduction of trade and economic presence of the European Union in the region and replacement of the vacuum with another alternative, and to the loss of other tools of influence. This is the opinion of Kyrgyzstan-based expert Aman Saliev.
“Perhaps, Europe understands the possibility of such an outcome and tries to find a compromise first. If the European Union, United States and other countries continue to put pressure on the Kyrgyz Republic and its neighbours in the region, Kyrgyzstan and neighbouring republics would take it as interference in domestic affairs and the act of foreign political dictate, which would cause an enormous harm to prospective cooperation between the European Union and regional countries,” the speaker said.
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