Boom in UK exports to Kyrgyzstan sparks fresh war sanctions evasion concerns

Boom in UK exports to Kyrgyzstan sparks fresh war sanctions evasion concerns
British goods that reach Russia via Kyrgyz 'middlemen' operations are another concern for Western sanctions enforcers. / bne IntelliNews
By bne IntelIiNews August 13, 2023

British goods exports to Russia’s ally Kyrgyzstan boomed more than 4,000% in the 12 months to March, with the trade explosion coming in the wake of the Kremlin’s invasion of Ukraine. The sheer scale of the trade expansion has triggered fresh concerns that Moscow is comfortably circumventing sanctions to obtain Western goods.

UK government trade data shows the extraordinary rise in shipments to Kyrgyzstan occurred roughly in the same period that Kyrgyz exports to Russia also doubled. The obvious conclusion for analysts is that British goods are exported to Kyrgyzstan, from where they are re-exported to Russia. Similar conclusions have been drawn about EU goods following the publication of figures showing a trade expansion in the same ball park. On July 20, concerned by such trade flows, the US Treasury Department listed 18 individuals and more than 120 entities based across Kyrgyzstan and Russia it has made subject to Ukraine war sanctions.

A big concern for Western officials are dual-use goods that can be ordered by civilian contractors who can then divert them for defence industry purposes.

Exports of machinery from the UK to Kyrgyzstan, including power generators and road vehicles—but  not including cars—expanded significantly in the reported period. Other exported items included “office machinery” and “general industrial machinery”.

After the newspaper i reported the data, a UK official told the publication: “We have introduced the largest and most severe economic sanctions ever imposed on a major economy and have wholly or partially sanctioned over 96 percent of goods traded with Russia in 2021.

“We assess all credible allegations of breaches of sanctions law, and we have a range of enforcement options available – those breaking the law could face a heavy fine or imprisonment.”

In the data, total UK exports to Kyrgyzstan in the 12 months to March, including services, are shown up 264% to £51m, with goods shipments leaping 4,100% to £42m, up from £1m in the previous 12-month period.

Robin Brooks, chief economist at the Institute for International Finance, told the leap in exports had “all the telltale signs of sanction evasion”, adding: “While UK exports to Kyrgyzstan are very small compared to the UK’s overall international trade, UK exports have the telltale signature of trade diversion: a rise in exports that begins with Russia’s invasion of Ukraine and persists”.

Following the imposition of the US sanctions, Kyrgyz officials denied that Bishkek was helping Moscow circumvent goods and services sanctions but did not rule out the possibility that private companies in Kyrgyzstan have become involved in shipping “dual-use” items to Russia.

Kyrgyzstan’s security agency said that “neither the Kyrgyz state itself nor any state structures and companies are involved in the violation of the regime of compliance with sanctions imposed by the United States and Western countries on Russia.” But it admitted the “possible involvement of private companies”.