The European Union, the United Kingdom, and the United States have sanctioned Russia for its aggression against Ukraine. However, despite these sanctions, Russia has found ways to maintain trade with Europe.
The American Brookings Institution, using data from the International Monetary Fund (IMF) on trade, has charted exports from several European countries to Asian nations in recent years, which are suspected of re-exporting European goods to Russia. These countries include Armenia, Kazakhstan, Georgia, and particularly Kyrgyzstan.
Kyrgyzstan is a small, landlocked mountainous country in Central Asia. According to Robert Khachatryan, founder and director of the American logistics company Freight Right Global Logistics, Kyrgyzstan has proven to be crucial for Russia in maintaining trade despite EU sanctions.
“Kyrgyzstan’s exports to Russia have increased significantly – reaching $393 million in 2021 and $1.07 billion in 2022, indicating a substantial increase in trade that makes it easier for Russia to circumvent sanctions,” said Khachatryan.
The growth of EU exports to Kyrgyzstan is staggering – 95 percent. Irina Tsukerman, president of the security consulting firm Scarab Rising, noted that Kyrgyzstan represents Russia’s most effective tool for bypassing sanctions related to imports from the EU.
“The sanctions made it difficult for Russia to access high-tech products, and the cost of doing business increased. Kyrgyzstan is extremely dependent on Russia and has few alternatives for trade. Countries like Kyrgyzstan, Kazakhstan, and Armenia have become re-export hubs for Russia. The reason for this is that trade within the Eurasian Customs Union (EACU) is not subject to mandatory customs declarations and inspections,” explained Tsukerman.
Additionally, she emphasized that this facilitates the circulation of Russian products in Europe.
“By re-exporting from Kyrgyzstan, Russian consumers were able to buy the latest cars, which alleviated economic pain and reduced the chances of a rebellion against Russian President Vladimir Putin,” she said.
She recalled that due to its geographical position, Kyrgyzstan serves as a transit point for goods transported between Russia and Europe. Therefore, as she pointed out, Russia is investing in infrastructure projects in Kyrgyzstan, including energy and transport projects. In fact, the aforementioned investments facilitate re-exporting from Kyrgyzstan to Russia.
Vuk Vuksanović from the Center for Foreign Policy Research at the London School of Economics noted that Central Asia is a logical route given its geographical position at the crossroads of Russia, China, and Europe.
“Kyrgyzstan is one of Russia’s most sincere partners in that part of the world. It is a member of the Eurasian Economic Union (EAEU), led by Russia, and the Collective Security Treaty Organization (CSTO). This landlocked country is heavily reliant on supplies from Russia. That’s why it made sense for Russia (in Kyrgyzstan) to seek other opportunities,” said Vuksanović.
He believes that the problem will be finding a new country from which to re-export if Kyrgyzstan is sanctioned. Additionally, he noted that the challenge lies in how to sanction all those willing to do business with Russia, as most countries worldwide have not joined the Western sanctions.
According to Vuksanović, the biggest issue is that this would not have happened without a large number of European countries still willing to do business with Russia, exploiting legal and logistical loopholes.
Lithuanian Business Confederation Vice President Marius Dubnikovas emphasized that Russia mainly imports machinery, goods, and electronic equipment from Europe through Kyrgyzstan.
Which European Countries Are Involved in This Trade?
The Brookings Institution identified countries such as Germany, Poland, Lithuania, Italy, the Czech Republic, and Serbia as having seen a rise in exports to Kyrgyzstan following the start of the war in Ukraine.
“Russia is well aware of the logistics of German-Kyrgyz trade and uses these supply chains to export its products to Germany. Furthermore, French companies are involved in investments in Kyrgyzstan’s energy and manufacturing sectors, thus engaging in business with Russia.”
What Products Are Being Exported?
Recently, Kyrgyzstan’s exports to Russia have significantly increased in sectors such as technology, vehicles, cosmetics, and others. Until then, Kyrgyzstan primarily exported copper, cotton yarn, and rubberized fabrics to Russia, as recalled by Michael Ashley Schulman, chief investment officer of Running Point Capital Advisors.
Additionally, hundreds of products from the European Union are among Russian military equipment. He also highlighted that the purchase of Russian metals in the EU has actually increased since the beginning of the aggression against Ukraine.
How Can the EU Stop This Trade?
Michael A. Witt, a professor of business and international strategy at King’s Business School in London, noted that sanctioning Kyrgyzstan would be a hit in the arm. In this way, he assessed, the country would turn even more towards Russia, and thus a portion of the global market would be left to other countries.
“Thus, Russia would ultimately get what it needs, just from another supplier, and Europe would lose economic power in relation to China as a geopolitical rival,” added Witt.
He believes that there are few options for export control for goods such as household appliances, the chips of which can be repurposed for military purposes.
On the other hand, Tsukerman calls for sanctioning European companies that evade sanctions against Russia, as well as sanctioning Kyrgyz politicians, oligarchs, and companies. Additionally, she calls for the seizure of Russian products imported into the EU, as reported by Euronews.
