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Russia’s War Puts Central Asia’s Economies in a Difficult Position

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Russia’s War Puts Central Asia’s Economies in a Difficult Position

The states of Central Asia were, unsurprisingly, on a recent list of possible  “transshipment points” Russia and Belarus may use to evade sanctions.

Russia’s War Puts Central Asia’s Economies in a Difficult Position
Credit: Depositphotos

Central Asia is intimately tied into trade networks that stretch across the former Soviet Union, a fact that may open the countries and companies of the region to sanctions. The existing risk intensified with the Russian invasion of Ukraine in February and has drawn increasing attention as the war drags on. Meanwhile, U.S. diplomats continue to repeat Washington’s aims to help minimize the negative impact of international sanctions on Central Asia’s economies, acknowledging the difficult spot the region finds itself it.

A recent U.S. government alert identified Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan among a group of 18 countries as “transshipment points through which restricted or controlled exports have been known to pass before reaching destinations in Russia or Belarus.”

In late June, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued an alert urging “increased vigilance for potential Russian and Belarusian export control evasion attempts.”

The alert provided an overview of current export restrictions, including a list of “commodities of concern for possible export control evasion,” and identified a series of “transactional and behavioral red flags” for financial institutions to look for in trying to catch those trying to evade sanctions. The first of 22 red flags noted mentioned the use of “trade corridors known to serve as possible transshipment points for exports to Russia and Belarus.”

A footnote identified a group of 18 countries as “common transshipment points” — Armenia, Brazil, China, Georgia, India, Israel, Kazakhstan, Kyrgyzstan, Mexico, Nicaragua, Serbia, Singapore, South Africa, Taiwan, Tajikistan, Turkey, the United Arab Emirates, and Uzbekistan.

Among the commodities BIS identified “as presenting special concern because of their potential diversion to and end use by Russia and Belarus to further their military and defense capabilities” were aircraft parts, antennas, cameras, GPS systems, integrated circuits, oil field equipment, and more.

The alert stated that in some cases, “controlled U.S. items may be legally exported to these and other jurisdictions as inputs for the production of other finished goods.” But it added that “further export to Russia or Belarus of those finished products and goods, potentially through additional transshipment points, may be prohibited.”

Central Asian (and other) companies face substantial risks if they do business with sanctioned Russian companies. An Uzbek company, Promcomplektlogistic, was the first Central Asian enterprise sanctioned for actively supporting the efforts of Radioavtomatika, a Russian business, to evade sanctions.

Diplomatic engagement with the Central Asian states by Washington has emphasized the intention to minimize the impact of sanctions on Russia in the region. For example, in late May after U.S. Secretary of State Antony Blinken met with Kazakhstani Foreign Minister Mukhtar Tileuberdi in Washington, D.C., State Department spokesperson Ned Price reiterated that “Secretary Blinken confirmed our commitment to minimizing the impact on allies and partners, including Kazakhstan, from the sanctions imposed on Russia in response to Russia’s unjustified and unprovoked war against Ukraine.”

A few days later, Assistant Secretary of State for South and Central Asian Affairs Donald Lu led a delegation across the region, meeting with officials in Kyrgyzstan, Uzbekistan, Tajikistan, and Kazakhstan. At each stop, a core topic of discussion was “minimizing the negative impact of international sanctions” as the Kyrgyz Foreign Ministry summarized after Lu’s visit. The U.S. Embassy in Uzbekistan in a Telegram post noted that after congratulating Acting Foreign Minister Vladimir Norov on his new role, Lu and Norov “discussed regional security, including our effort to ensure Uzbekistan’s development plans are not negatively impacted by the sanctions imposed on Russia.” 

It’s not clear specifically how the United States will minimize the impact of sanctions, but in Kyrgyzstan “the possibilities of increasing investment cooperation” were discussed; in Uzbekistan Lu met with the country’s Investment and Foreign Trade minister to discuss “Opportunities for practical cooperation in the field of attracting American business… to Uzbekistan.” Similar conversations certainly occurred in Kazakhstan and Tajikistan, too. Whether what’s on offer by the U.S. is enough to motivate cooperation in enforcing international sanctions (the Central Asian states have not announced their own sanctions on Russia and no one truly expects them to) is a matter of debate and time.