Economy

What Happened: In 2022, Kazakhstan’s exports increased by $24.4 billion year-on-year. Roughly $14 billion worth of that can be attributed to the increasing price of oil, a major Kazakh export. But that leaves $10 billion unaccounted for. Meanwhile, Kazakhstan’s imports also surged by $10 billion in 2022, a leap unprecedented in the country’s history. “The most reasonable explanation for what the data shows is a phenomenon called ‘parallel imports,’” write Rahimbek Abdrahmanov and Kamshat Zhumagulova, both analysts at the Kazakhstan School of Applied Politics (KSAP). “The $10 billion increase in both imports and exports indicates that Kazakhstan imported goods and services worth $10 billion and then rapidly ‘exported’ them somewhere else” – specifically, to Russia, which is desperate to find ways around Western sanctions.

Our Focus: Kazakhstan’s government has been adamant that it is in full compliance with Western sanctions, but it’s questionable whether Astana could fully police re-export of sanctioned goods on to Russia, even if it tried. With both countries part of the Eurasian Economic Union, there are almost no customs inspections on their shared border, and Russians can easily establish businesses in Kazakhstan to source sanctioned goods. Meanwhile, corruption is rampant, making it easy to move trade off the books with a well-placed bribe. Abdrahmanov and Zhumagulova also note that Russia’s easy access to the Kazakh tenge – which can then be freely converted into U.S. dollars – has helped prop up Russia’s financial system at a crucial time.

What Comes Next: “It can be concluded that the parallel import system continues to develop on a large scale in Kazakhstan. The country’s control over this phenomenon is limited due to the customs union with Russia, free ruble conversion, significant levels of smuggling, and high corruption risks,” Abdrahmanov and Zhumagulova conclude. The steps Astana could take to combat the issue – exiting the Eurasian Economic Union (EAEU) and discontinuing the free conversion of the ruble, for instance – would risk serious retaliation from Russia. Thus Kazakhstan will continue to be Russia’s back door to Western technology and currency for the foreseeable future.

INTERVIEW

Michael Kugelman, the director of the South Asia Institute at the Wilson Center, on former Prime Minister Nawaz Sharif’s return to Pakistan: “Sharif and his party provide a vivid example of an evergreen theme of Pakistani politics: Political leaders tend to fall in and out of love with the military.”

Northeast Asia

It’s an eventful week for China-U.S. exchanges. Following a series of Cabinet-level visits to China by U.S. officials over the summer, China is finally sending a top official – Foreign Minister Wang Yi – to the United States on Thursday. Wang’s visit is expected to lay the groundwork for top leader Xi Jinping to potentially attend the APEC summit in California in November. At the same time, California Governor Gavin Newsom is in China to play up cooperation at the subnational level, especially on climate change.

South Asia

In early October, Pakistan’s government suddenly announced that all undocumented immigrants must leave the country by November 1, or face arrest and deportation. The decision caused panic among Afghan refugees in Pakistan, 1.7 million of whom fled across the border following the Taliban takeover. Many are undocumented and now fear deportation, while even those with papers are facing harassment and demands for bribes from police. “I do not want to go back, but I am helpless. Afghanistan is my homeland, but the situation there is bad and it is the beginning of a harsh winter. We do not have a place to stay,” one refugee confided.

Southeast Asia

China and the Philippines are trading bitter accusations this week following an incident on October 22 in which Chinese vessels blocked and collided with a Philippine Coast Guard ship and a military-run supply boat in a contested part of the South China Sea. The Chinese vessels were attempting to prevent the resupply of the Philippine-occupied Second Thomas Shoal, which lies well within Manila’s exclusive economic zone. The incident is the latest in a string of confrontations that have resulted from Chinese attempts to prevent the resupply of the BRP Sierra Madre, a warship that was grounded on the shoal in 1999. While no one was injured in the collisions, and the damage to the Philippine vessels was minimal, they point to the dangerous game of brinkmanship that Beijing is playing over the disputed feature, which runs the risk of drawing in the United States, the Philippines’ long-time security ally.

Central Asia

Uzbekistan, like several of its neighbors in Central Asia, is a country rich in fossil fuels – and reliant on gas and oil for its own energy needs. But that’s starting to change as Uzbekistan plans a big push into renewable energy, both to combat climate change and to shore up energy security. Tashkent has more solar and wind power plants planned than any other country in Central Asia; now the question is whether it can actually achieve those targets.

23 heads of state or government attended the third Belt and Road Forum in Beijing last week – down from 37 at the second edition in 2019.

Politics

Umeed-e-Pakistan, Urdu for “Hope of Pakistan,” the name chosen for the charter flight that brought former Prime Minister Nawaz Sharif back to Pakistan on Saturday.