Political joyride:  How Central Asian countries helps Russia bypass Western sanctions

In a detailed article of the expert on the Asia-Pacific region – Anton Hanotskyi

In the wake of Vladimir Putin’s unsuccessful blitzkrieg strategy to conquer Ukraine and establish a “new geopolitical reality” in Europe, Western nations have responded by imposing a comprehensive regime of economic sanctions against the Russian Federation. These trade and financial restrictions, initially introduced eight years ago in response to the annexation of Crimea, have expanded into a far-reaching and impactful set of measures since 2022. Despite the initial intention to cripple the local economy and isolate the aggressor nation from the civilized world, progress in this regard has been only partial.

Almost 2 years of full-scale war, Moscow continues to maintain a relatively stable economic state, enabling the ongoing funding of military operations and even expanding profits in sectors such as IT, oil and gas industry. The key to this “success” lies in external assistance. The policy of “parallel imports” (circumventing sanctions) and the intensification of trade relations with China, India, and Central Asia assist Moscow in keeping its economy in a viable condition.

Central Asian states, particularly 🇰🇿Kazakhstan, 🇰🇬Kyrgyzstan, 🇺🇿Uzbekistan, and 🇹🇯Tajikistan (partially 🇹🇲Turkmenistan), play a crucial role in this scenario. They have transformed into resource hubs through which Russia obtains sub-sanction technologies and goods. Why do the governments of Central Asian countries continue to support the Russian economy post-February 2022? How do schemes to bypass anti-Russian sanctions operate, and what measures can be taken to counteract them? Find out more in this insightful article.

After the USSR collapse, Moscow retained its influence over the Central Asian countries, where former members of the Communist Party, such as President Emomali Rahmon of Tajikistan, have held or still hold power. Russian presence and dominance in this region are observed in political, military, economic, and cultural dimensions. Central Asian countries actively participate in regional intergovernmental structures led or involving Moscow: CSTO (Kazakhstan, Kyrgyzstan, Tajikistan), CIS (all Central Asian countries), EAEU (Kyrgyzstan, Kazakhstan), or SCO. Since February 24, 2022, the leaders of Central Asian states have maintained neutrality in the war of aggression started by Russia, either supporting or refraining from condemning Moscow on international platforms.

Indeed, Central Asian governments have called for an end to hostilities, achieving a ceasefire and humanitarian security in Ukraine, ignoring the demand for the withdrawal of Russian occupying forces from the country, thereby unofficially acknowledging Moscow’s claims to Ukrainian territories. In UN General Assembly votes, Central Asian representatives consistently do not support or abstain from voting on pro-Ukrainian resolutions. This indicates the continued preservation of Moscow’s political influence over the governments of Central Asian countries. Additionally, there is almost no communication between Central Asian leaders and the Ukrainian president. The only exceptions are two phone calls between Volodymyr Zelensky and Kazakh President Kassym-Jomart Tokayev.

One crucial factor in Russian dominance in the region remains military-technical cooperation. Kazakhstan, Kyrgyzstan, and Tajikistan are members of the CSTO, actively participating in military exercises even during the active phase of the Russian-Ukrainian war. Military bases of Russian forces and operational points of the FSB are present in these countries, placing local security services in significant dependence on Moscow (powerful espionage networks report information about the internal state of Central Asian countries to Russia). Overall, Central Asia serves as a buffer zone between Russia and Afghanistan, where the threat of the spread of Islamic extremism persists. Central Asian governments see Russia as a security guarantor, thus maintaining military-political relations with Moscow remains a priority for them, even despite Russia’s aggression against Ukraine.

Recently, a new significant player emerged in Central Asia – China. Beijing became the main economic partner of Central Asian countries, primarily due to projects under the Belt and Road Initiative. While the appearance of China seemed to weaken Russia’s position in the region, it instead complemented each other. Beijing essentially delegated security matters to Moscow, focusing on the economy, indicating the establishment of “proto-alliance relations” between communist China and Putin’s Russia. Despite assessments by many experts, after the start of the full-scale war against Ukraine, Moscow only strengthened its presence and geopolitical significance in Central Asia.

An illustrative example is the behavior of Kazakh President Kassym-Jomart Tokayev, who, in the presence of Putin in 2022, refused to recognize the “LNR” and downplayed Russia’s role in suppressing protests in January 2022. Changes in legislation occurred in Kazakhstan, elevating the status of the Kazakh language, compelling many Russian migrant workers to learn the local language for employment. Russian propagandists began spreading stories about “Russophobic sentiments” in Kazakhstan and threatening to occupy the northern part of the country. Despite seemingly anti-Russian rhetoric, Astana continues to maintain close relations with the Kremlin. Notably, after being elected president of Kazakhstan, Tokayev chose Moscow as his first destination for a visit, indicating the priority of the Russian vector in Astana’s foreign policy. This dependence extends not only to political-security aspects but also to economic-logistic ones. The latter factor plays arguably the most crucial role in strengthening Russia’s role in Central Asia.

After the introduction of Western economic sanctions against Russia for the invasion of Ukraine, Moscow had to reformat its transport-logistics routes to ensure its military-industrial complex and economy. Trade volumes from 2022 between Russia and Kazakhstan increased by 6% ($26 billion), with Kyrgyzstan by 40% ($3.2 billion), Uzbekistan by 23% ($9.3 billion), Turkmenistan by a staggering 86% ($1.6 billion), and with Tajikistan by 18% ($1.4 billion) according to UN Comtrade data. This trend demonstrates the strengthening geo-economic interest of the Kremlin in the region, as traditional avenues of external economic activity directed towards the West have been almost entirely blocked or restricted. This compelled Russians to redirect resources to the East: Central Asia, China, and India. One of the leading directions of cooperation between Russia and Central Asian countries is the transit and sale of energy resources.

Despite significant oil and gas reserves in the region, Uzbekistan, Tajikistan, Kyrgyzstan, and Kazakhstan face an energy deficit, especially in the winter. Russia not only monopolizes the supply of oil products from Central Asia to the EU but also utilizes the region’s gas transportation system to supply energy resources to India and China. On October 7, the ceremony for the launch of the transit of Russian natural gas through Kazakhstan to Uzbekistan via the Central Asia-Center gas pipeline took place, laying the groundwork for a potential “gas union” between Moscow, Astana, and Tashkent.

None of the Central Asian countries has completely restricted Russian media and the activities of Russian cultural centers (such as the “Russkiy mir” (“Russian World”) foundation). Only recently Kazakh TV broadcasting company TVCOM announced that the Russian TV channels will no longer be broadcast in Kazakhstan as a result of a policy that aims to reduce access to channels “with an informational agenda”. Separately, the company stated that the share of foreign channels that broadcast the information agenda will continue to decrease in the future.

Central Asian states provide support for the instruction of the Russian language, starting from primary school. Branches of Russian higher education institutions still operate in each Central Asian country. By implementing this approach, the governments of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan remain in a shared political, security, economic, and cultural environment with Russia. Despite this, some of Central Asian countries attempt to keep a distance from Moscow, maintaining relations with other poles of power, such as China, the EU, India, Turkey, and the US. However, Russia has successfully maintained connections with the region and a network of interdependence, enabling the formation of a substantial shadow hub to circumvent Western sanctions, ultimately saving the Russian economy from collapse.

The Gray Zone

Today, the Russian Federation leads with the highest number of sanctions imposed against individuals and entities (14,081 sanctions as of March 2023). Despite being subjected to economic isolation since 2014, Moscow has adapted to the conditions through stimulating its military-industrial complex and energy sector. The Western sanctions, implemented after Russian full-scale invasion of Ukraine, had only a short-term impact, with a 2.1% GDP drop in 2022. Russians successfully adjusted to the new circumstances, primarily due to the revitalization of the military-industrial complex and energy sector. Predictions indicate a modest 1-2% GDP growth of 2023, marking a significant success for the Kremlin.

The ongoing flow of dual-use technologies, especially semiconductors, remains a persistent challenge to Western economic restrictions. How did Russia manage to circumvent these sanctions?

Parallel Imports: Russia’s Tool for Bypassing Sanctions

Russia employs a strategy known as “parallel imports” to bring prohibited goods and technology into the country. This involves re-exporting sanctioned goods and technical equipment through “gray schemes” from the territories of Central Asian countries, Armenia, and Turkey. The surge in trade between Russia and Central Asia over the last two years affirms the active use of parallel imports. Kazakhstan, Uzbekistan, and Kyrgyzstan emerged as Moscow’s most active collaborators in evading sanctions, accounting for increased exports to Russia in 2022.

Central Asian countries, characterized by economic parallels with Russia and the absence of effective mechanisms to monitor and prohibit sanctioned foreign enterprises, emerge as favorable gray areas for circumventing economic restrictions targeted at Russia.

Economic Cooperation: A Coordinated Effort

Central Asian countries actively contribute to Russia obtaining sanctioned oil and gas equipment. Kazakhstan’s state company, “KazMunayGas,” collaborates with Russian partners in servicing and repairing the Caspian Pipeline Consortium, running through the Russian nation’s territory to Europe. Notably, the pipeline is not under sanction, likely influenced by the lobbying efforts of Chevron Corporation, a U.S. company that supplies some of Kazakhstan’s oil to the West.

In July 2022, the U.S. Department of Commerce’s Bureau of Industry and Security added Kazakhstan, Kyrgyzstan, Uzbekistan, and Tajikistan to its list of “countries cooperating with Russia in circumventing sanctions.” These nations were accused of supplying Russia with sub-sanctioned goods for military use, including aircraft parts, testing equipment, engines, hydroacoustic systems, antennas, GPS systems, vacuum pumps, and more.

Defense Production Collaboration

Given the close interdependence of Russia’s defense industry and Central Asian countries, they are involved in producing equipment for the Russian military. Kazakh companies like “Tynis,” Kyrgyzstan’s “Dastan,” and Uzbekistan’s “Promcomplektlogistic” manufacture components for Russian aircraft, helicopters, military vehicles, submarines, and surface ships.

Positions of exports to the Russian Federation from Central Asian countries, the volume of trade of which increased in 2022. Albek Kulchumanov/Radio Azattyk

Additionally, Central Asian companies have been involved in transporting stolen Ukrainian grain from the temporarily occupied port of Berdyansk to Turkey, contributing to Russia’s access to Western equipment and products under sanctions.

Despite documented evidence of Central Asian governments participating in violating Russian sanctions, the U.S. and Europe have been hesitant to impose punitive measures against these nations. The reasons behind special position.

The US and EU are well aware of Central Asia’s role in the shadow export of sanctioned goods to Russia. Over the past year, the U.S. State Department and the Treasury Department have repeatedly published lists of individuals and entities from Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan suspected of collaborating with the Russian side to circumvent sanctions. However, decisive actions against these violators are not being taken, despite evidence of sanctions being imposed on some companies.

On November 2, the U.S. Department of Commerce imposed restrictions on the Uzbek company “Mvizion,” which, according to a document published by the U.S. agency, “supports Russian armed forces by procuring, developing, and disseminating Russian unmanned aerial vehicles.” The number of such cases is disproportionate to the scale of involvement of Central Asian firms in the illegal supply of prohibited goods and technologies to Russia. It is clear that local businesses are not conducting these operations with Russian partners without the government’s permission. Therefore, Astana, Tashkent, Bishkek, and Dushanbe consciously agree to and encourage economic cooperation with Russia.

Despite these facts, Washington and European capitals refrain from taking harsh steps to interrupt these flows and schemes. There are no restrictive measures against the governments of Central Asian countries that indirectly lobby for sanctions evasion, as this stimulates the growth of the local economy. The main reason for Western countries ignoring violations of sanctions by Central Asian states lies in geopolitical interests. The contemporary world is rapidly fragmenting in the midst of the transformation of the international relations system, pitting major actors against each other in competition for political, economic, and natural resources. Russia’s full-scale invasion has accelerated this process. In recent years, there has been a growing interest from global players in the Central Asian region, which, after the collapse of the USSR, remained on the sidelines of international politics. Awareness of Central Asia’s transportation and logistical potential, along with the discovery of a large number of valuable rare earth metals and energy resources, fuels the struggle among global powers for the favor of local governments.

For a long time, Central Asia was perceived as a region under the patronage of the Russian Federation. Today, this influence remains, but it has significantly weakened due to Russia’s military aggression against Ukraine. A significant power vacuum emerged, and many were eager to fill it. China became the trailblazer in this process, spreading its economic presence throughout the region, largely thanks to the Belt and Road Initiative. Beijing aims to secure alternative trade routes to the West through Central Asia. Additionally, China participates in the extraction of rare earth metals and energy resources in Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan, and Tajikistan. China has already become the largest trading partner of Central Asian countries, strengthening its influence not only in the economic but also in the political and cultural environments.

This course of events deeply concerns the United States and the EU. Americans had experience dealing with Central Asian countries in the mid-2000s during the White House’s military operation in Afghanistan as part of the “war on global terrorism.” Later, Washington’s interest in the region began to wane, but since 2022, American interest has returned, primarily due to China’s significant presence in the region. On February 28, 2023 U.S. Secretary of State Antony Blinken made an unexpected visit to Astana, where he held talks with Kazakh President Kasym-Jomart Tokayev and the foreign ministers of Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan. The economy and restraining Russia were the main topics of discussion in Astana that day. Subsequently, there was an activation of diplomatic activity by the United States, with American diplomats sequentially visiting Central Asian states. The culmination of such White House activity was the holding of the “Central Asia – U.S.” summit in New York on September 20 at the leaders’ level. The agenda of the dialogue included the question of joint work towards further strengthening the sovereignty, stability, and prosperity of Central Asia through the “C5+1” partnership in the fields of economy, energy, and security.

The most interest in developing relations with the United States and EU arises from Kazakhstan. Astana emerges as a leader in the region and a convenient partner for all parties. One of the main events in the region on November 1, president Macron met with President Tokayev in Astana. The topics of conversation included the expansion of economic cooperation, the construction of a nuclear power plant in Kazakhstan, and an increase in the supply of uranium to France. The latter issue is particularly important for Paris, considering that Astana ranks first in the world in uranium production and second in reserves, surpassed only by Australia. Before the military coup in Niger, Niamey was the main supplier of uranium to France. Additionally, the energy factor remains crucial. Kazakhstan, Uzbekistan, and Turkmenistan have become significant gas exporters to Europe amid the EU’s refusal of Russian energy resources.

The economic feasibility prevents the West from reacting radically to the violations of anti-Russian sanctions by the Central Asian (CA) governments. However, the geopolitical factor remains equally important for the United States and Europe. Washington and Brussels do not want to surrender Central Asia to China’s influence in future confrontations. Western policymakers understand that it is impossible to force Central Asian states to limit cooperation with Beijing or Moscow through geo-economic factors. Yet, there is confidence in the possibility of ensuring the neutrality of these countries in the U.S.-China geopolitical rivalry. Keeping Central Asia at an acceptable distance from Beijing is an achievable goal for Washington. Countries like Kazakhstan also serve as shadow mediators between the West and Moscow on issues where consensus is still possible (e.g., counterterrorism). President Kasym-Jomart Tokayev frequently meets with Western leaders and Russian dictator Putin. As one Kazakh opposition figure noted, Tokayev is a “Lavrov with wider powers,” conveying Moscow’s messages to Western partners. The geopolitical interests of the U.S. and Europe compel their governments to partially ignore Russia’s assistance from Central Asian countries in bypassing sanctions.

Is there a way out of the situation?

Summarizing the above, it can be confidently stated that Central Asian countries play a leading role in violating the regime of sanctions imposed against Russia. Despite the initial dissatisfaction of the region’s leaders with Russia’s aggressive actions in Ukraine, Moscow remains their main political, security, economic, and cultural partner. Since 2022, this partnership has even strengthened due to the expansion of trade and economic relations with Central Asia. The relocation of sanctioned enterprises to Central Asia, parallel imports, and cooperation with local businesses help Russia acquire the necessary technologies and goods for its military-industrial complex.

The President of the European Parliament Charles Michel and the leaders of the Central Asian states during the meeting in Kyrgyzstan in June 2023. Photo by Getty Images

Is it possible to stop the activities of this “gray zone” of circumventing anti-Russian sanctions? The only positive aspect in relations with the governments of Central Asia is their neutrality and support for Ukraine’s territorial integrity. The only way out of this situation is to establish a joint Western response to sanctions violations, namely improving the identification and detection of individuals and entities involved in illegal cooperation with Russia.

The problem in this matter is the lack of information about the subjects and intermediaries involved in violating the sanctions regime between Russia and Central Asia. More targeted imposition of restrictions against Central Asian companies involved in supplying products to the Russian military-industrial complex and their detailed identification can reduce the intensity of the movement of sanctioned goods and technologies to Russia. This way, it will be possible to avoid such an undesirable deterioration of relations with Central Asian countries for our Western partners. Improving the tracking process for dual-use goods, especially high-tech products, can help better identify the end recipient and the routes of arrival in Russia. This will allow more effective interception of contraband schemes for the supply of sanctioned goods. 

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