Parallel imports from Kazakhstan to Russia are a complicated formula with variables that range from the customs union to corruption. And it creates loopholes for sanctions evasion by the Kremlin.
Despite President Tokayev’s assurances to the Western nations that Kazakhstan will comply with sanctions, the country remains a significant source of “parallel imports” for Moscow.
Exports increase from Kazakhstan to Russia
In 2022, according to trademap.org data, Kazakhstan increased imports from the US ($1.9 billion vs. $1.3 billion) and from China ($11 billion vs. $.82 billion). In parralel, Kazakhstan increased exports to Russia from $7 billion to nearly $8.8 billion in 2022.
Two product categories experienced the most noticeable increase:
- Nuclear reactors, machinery, and mechanical appliances; parts thereof;
- Electrical machinery and equipment and parts thereof; sound recorders and reproducers; television.
So, it seems that electronics, machinery parts, and technical equipment were going from Kazakhstan, which did not have any significant production of these products, to Russia. We can assume that Kazakhstan increased the imports of these products from China and the West and re-exported them into Russia, which was not able to buy them directly anymore due to sanctions.
Kazakhstan imports electronics and machinery parts from China and exports these products to Russia
It is proven by the fact that Kazakhstan increased Chinese imports from the very same product category: “Electrical machinery and equipment and parts thereof; sound recorders and reproducers; television.”.
An unusual increase in Kazakhstan’s external trade turnover in 2022 is evident from the official trade data, and it deserves a careful examination. The exponential and unusual development of exports to $84.4 billion in 2022 is difficult to explain just through an increase in oil exports, Kazakhstan’s principal commodity.
Oil exports in 2022 will be $15 billion higher than in 2021. However, total exports in 2022 climbed by $24.4 billion compared to 2021, a $10 billion increase that deviates from the regular export structure.
When we compare the volume of imports in 2022 to the average annual import level during the previous seven years, we can see that Kazakhstan’s imports have hovered around $34 billion on average since 2015. The significant increase in imports from $40 billion in 2021 to $50 billion in 2022 is unusual in recent history and impossible to explain in terms of local consumption growth.
Hidden import of prohibited goods from Kazakhstan
But the scale of sanctions evasion might be bigger, as not everything might be official. However, today, it is typical for the commodities imported into Russia to differ from what the contract indicates. In practice, the Kazakhstani government shows little concern for the commodities imported into Russia.
According to The Diplomat, a truck may appear to be bringing women’s wigs or canned goods, but it is actually carrying UAVs or microchips from Kazakhstan to Russia. The primary explanation for this is Kazakhstan’s and Russia’s participation in the customs union.
Because there are no customs posts along the border with Russia, shippers can escape inspections, and the most scrutiny a package may face is a check of shipping documentation on the way to the border. Smugglers purchase many sanctioned commodities in cash and transport them across the border in car trunks, large suitcases, passenger buses, and other similar vehicles.
In addition, Russians can create firms in Kazakhstan to import banned goods. For Russian citizens, registering a Kazakhstani firm takes a few days and requires little paperwork. Kazakhstani firms may then enter into deals with proxy entities of sanctioned Russian industries. That is precisely how parallel imports work.
Western sanctions can’t be effective with loopholes in Kazakhstan
The concern is whether anti-Russian sanctions can be effective if Kazakhstani firms are still free to purchase sanctioned commodities from Europe without being able to trace their eventual destination. Isn’t it time to halt our trade with Russia’s customs union allies? After all, if the West fails to enforce the sanctions regime, aid to Ukraine and penalties against Moscow for its war will have little impact.
The practice of gateways for sanctions evasion for Russia must be stopped, and the Central Asian enterprises implicated in assisting Russia in circumventing sanctions and fueling Russia’s war must be punished because they assist the Kremlin troops in strengthening their military capabilities, resulting in more Ukrainians being murdered by Russian strikes.
It is evident that cotton from Uzbekistan and Kazakhstan is fueling the Putin regime’s war against Ukraine. After all, supporting Putin’s war machine undermines Western efforts to support Ukraine in repelling the Russian invasion and brings the war closer to the EU’s borders.