Is Kyrgyzstan a hub for re-export of goods to Russia in sanctions evasion schemes?

As the US and the EU fight sanctions evasion to make anti-Russian restrictions work, they should pay special attention to the countries that doubled their trade with Moscow.

After Russia launched its war against Ukraine, the economy of Kyrgyzstan sharply rose. Its imports from China have almost tripled. Statistics from the Institute of International Finance found that between March 2022 and October 2023, German exports of cars and parts to Kyrgyzstan had risen by 5,500 percent, The Kyiv Independent reported.

Bishkek trade volume suddenly jumped from across the EU, with imports from Poland, the Czech Republic, and the Baltic states. At the same time, Kyrgyzstan’s official trade statistics show that its exports to Russia jumped from $393 million in 2021 to $1.07 billion in 2022, when Russia launched a full-scale invasion of Ukraine.

Economy researchers say that many countries are underreporting their trade statistics, which is another loophole for sanctions evasion. The data on Kyrgyzstan’s trade boom feels opaque. Many items originate from unknown countries and are promptly scheduled for redelivery to undisclosed final destinations. Yet researchers deduce that these shipments might end up in the Russian Federation.

While the Western states focused on restricting the re-exports of sanctioned goods to undermine Russia’s military capabilities, third-party states in Central Asia and the Caucasus play a significant role in enabling Moscow to sustain its foreign trade, thus providing financial gains and technology imports that could be used for Russian war machines, according to research conducted by political scientists Erica Marat, an associate professor at the National Defense University in Washington, D.C., and Alexander Kupatadze from King’s College London.

Dr. Marat and Dr. Kupatadze traced how countries in Central Asia and the South Caucasus, like Kyrgyzstan and Georgia, are helping Russia evade Western sanctions and acquire goods of dual use—civil and military.

Growing trade figures are not a sign of Kyrgyzstan’s success in its economic development but of Russia’s ability to circumvent international sanctions implemented for its war against Ukraine.

Kyrgyzstan is not the only country where companies are helping Russians to evade sanctions. However, Bishkek’s trade data and historical ties to Moscow mean that the country is a particularly popular transfer point for Russia to benefit from parallel imports.

Kyrgyzstan’s dependence on Russia also means that the country will not prevent any parallel imports ensured by private businesses.

For Russia, parallel imports of dual-use goods have become a method to circumvent sanctions and fuel its war efforts. Countries that multiply supplies to countries such as Kyrgyzstan should ask themselves if they are not fueling Putin’s war.

The researchers provided a list of recommendations on how to stop evasion schemes in Kyrgyzstan and other third countries. Here are three of the proposals:

• Engage with governments in the Caucasus and Central Asia to bolster scrutiny of merchanting trade and re-exports, both to and from Russia, to deter any potential violations.
• Encourage Western-based companies to conduct more comprehensive due diligence regarding their partner entities in countries neighboring Russia.
• Increase reputational risk against Western companies based in the Caucasus and Central Asia by highlighting the negative consequences associated with engaging in sanction evasion schemes, thus promoting greater corporate responsibility.

Western governments should investigate such trade booms to identify sanctions violators, as punishment for sanctions evasion is one of the targets of the latest anti-Russian sanctions packages.