In latest months, rising tensions between Washington and Moscow and intensified assaults in Ukraine have raised questions in regards to the position of Russia’s neighbors, particularly Kazakhstan. Leaders in Washington and Europe are actually contemplating the potential of secondary sanctions towards international locations that assist Russia acquire banned items.
To attain these objectives, EU legislators have already succeeded legislation for an eleventh sanctions bundle that will impose sanctions on corporations and people in third international locations who would assist Russia to evade sanctions. The international locations of Central Asia, specifically Kazakhstan, have been talked about by EU officers as attainable targets of this bundle.
In accordance with a recent report in line with the European Financial institution for Reconstruction and Growth (EBRD), EU, UK and US exports to Kazakhstan will improve by greater than 80 p.c by 2022, whereas Kazakhstan elevated its exports to Russia by greater than 22 p.c throughout the identical interval . A latest examine launched by OCCRP (the Organized Crime and Corruption Reporting Venture) along with Necessary Tales (Russia), Der Spiegel (Germany) and Vlast (Kazakhstan) revealed that Kazakhstan has change into a transit nation for imports of digital elements and different dual-use items to Russia, which subsequently utilized by the Russian army and protection corporations.
Tokayev’s challenges and guarantees
A lot of Kazakhstan’s skill to advertise and strictly implement the Western sanctions program will rely by itself trajectory. Moscow’s affect on Astana is rooted of their lengthy historical past, essential areas of mutual cooperation and geography. As such, there may be nonetheless a powerful notion in Kazakhstan that sustaining relations with Russia is useful. The significance Kazakhstan attaches to Russia’s favor is mirrored within the frequency of high-profile visits: President Kassym-Jomart Tokayev has made a number of visits to Moscow over the previous yr and has additionally Victory Day parade final month.
The connection between Kazakhstan and Russia is basically formed by geography and historical past. A shared Soviet and (partly) Tsarist previous has created deep social, infrastructural and enterprise ties between the 2 international locations. Their lengthy border signifies that Kazakhstan and Russia are additionally carefully depending on one another by way of safety. Kazakhstan is one in every of Russia’s most lively buying and selling companions and a member of the Eurasian Financial Union (EAEU), a Moscow-led buying and selling bloc dominated by Russia that additionally contains Belarus, Armenia and Kyrgyzstan. Kazakhstan’s principal supply of revenue comes from the oil and fuel business, which stays closely depending on Russia as an export and refining route; 80 p.c of Kazakhstan’s crude oil exports are shipped to Russia’s Novorossiysk-2 naval terminal on the Black Sea for refining and processing.
Magzum Mirzagaliyev, chairman of Kazakhstan’s nationwide oil and fuel firm KazMunayGaz, held talk with David Reed, director for sanctions on the UK Overseas, Commonwealth and Growth Workplace, in London on June 12. The principle level mentioned was the necessity to forestall the financial fallout of Western sanctions from affecting Kazakh oil exports by way of Russia.
Kazakhstan can also be a member of the Russian-led Collective Safety Treaty Group (CSTO), which Tokayev requested help for in the course of the January 2022 protests. Home political features additionally matter for the sort of relations the 2 international locations preserve. Two points are significantly related on this context: the big ethnic Russian minority in Kazakhstan and similarities in regime sort.
For Kazakhstan, the chance of secondary sanctions is not only hypothetical. A precedent was set June 2022when the US imposed it secondary sanctions towards an Uzbek firm engaged within the export {of electrical} elements to Russia. In mild of this and given a latest improve in enforcement motion by US, EU and UK authorities on Russia-related sanctions typically, there’s a chance that lawsuits could also be introduced towards people, banks and corporations based mostly in Kazakhstan .
The official narrative in Astana might give the impression that Kazakhstan is taking considerations about sanctions from the West significantly and is taking duty for the best way items transported throughout its territory are handled. used. As a part of this wider framing effort, Kazakhstan launched a new tracking system that will supposedly enable real-time monitoring of the whole motion chain of products from border to frame. Tokayev and his diplomats have additionally mentioned Kazakhstan’s neutrality with higher urgency in latest months. In comments on the EAEU Discussion board in Moscow, Tokayev confused that the “EAEU is an solely financial and never a political car”. Afterwards, Tokayev’s press secretary, Ruslan Zheldibay, acknowledged that “Kazakhstan has no intention or intention of becoming a member of an allied state.”
But this solely tells half the story. The larger image exhibits that Tokayev’s private assurances, nonetheless honest, didn’t assist to fully halt the resale of dual-use items to Russia. This commerce continues to extend and in actuality there seems to be an absence of devoted efforts by the Kazakhstan authorities to fight the difficulty of parallel commerce by their territory. An instance of this are the Kazakh banks Get on to concern Kazakh Particular person Identification Numbers (IIN) to Russian residents with out really having to be within the nation in particular person. This IIN permits the holder to conduct enterprise and commerce within the nation. In accordance with the Kazakh authorities, the full variety of Russian taxpayers registered in Kazakhstan final yr was about 70,000; as we speak it’s estimated between 300,000 and 1 million. Nevertheless, given the dearth of knowledge transparency, this statistic might be a lot greater. Many small companies in Kazakhstan have additionally stepped up profits carry the sanctions towards Russia by buying items that Russian corporations can not acquire immediately.
Secondary sanctions: closing the loophole
Secondary sanctions are a reasonably new mechanism that has been put in place by the US within the final 5 years, significantly with regard to Iran. These sorts of sanctions as Jack Lew, the previous US Treasury Secretary, mentioned in 2016“typically [are directed] in the direction of overseas individuals. These measures threaten to exclude overseas people or corporations from the US monetary system in the event that they have interaction in sure conduct with a sanctioned entity, even when none of these actions immediately have an effect on the US.” As talked about in Bloomberg“Imposing secondary sanctions is designed to power corporations, banks and people to make a tough selection: proceed to do enterprise with the sanctioned entity or with the US, however not each.” Because of the dominance of the US greenback as a retailer of worth within the world economic system, most corporations prioritize sustaining good relations with the US.
The aim of a spherical of secondary sanctions can be to attempt to stress Kazakh officers to push for a coverage change internally. The US and, till not too long ago, the EU are the 2 principal actors pursuing a secondary sanctions coverage. In June, the The 11th EU sanctions package was adopted with an emphasis on stopping the circumvention of pre-existing commerce sanctions reasonably than introducing new bans. It is very important notice that secondary US and EU sanctions goal corporations, banks and people (reasonably than international locations) suspected of undermining the effectiveness of sanctions. Nonetheless, it stays unclear whether or not secondary sanctions towards Kazakhstan corporations, banks and people suspected of aiding Russia would power a coverage change. Enterprise leaders most likely have essentially the most to lose, as disruptions in commerce and funding with Western companions will primarily have an effect on enterprise.
Conclusion
Given the shut financial ties between Astana and Moscow, secondary sanctions towards corporations, people and banks in Kazakhstan might be very pricey to their economic system. With solely blended Kazakh help, closing the loopholes can be tough to attain. Western policymakers ought to deal with areas the place Russia is asymmetrically depending on overseas items, know-how and finance coming in by Kazakhstan. If secondary sanctions have been launched, Western leaders must be certain that credible threats are accompanied by credible ensures. With the US and the EU saying a shift in focus in the direction of Kazakhstan and wider Central Asia, these developments may also be carefully monitored by Russia.
Towards this background, Astana doesn’t see the selection earlier than it as a binary selection and desires to keep away from changing into a chunk on the proverbial geopolitical chessboard being pushed round by bigger powers. As an alternative, Kazakhstan is making an attempt to keep up constructive relations with two behemoths – a balancing act to make certain, however a manageable and vital one from their perspective.
