Only one day after a senior US government official warned that companies and banks in Kazakhstan could face sanctions if found to be aiding Russia in circumventing sanctions, a leading finance institution announced it will restrict its dealings with Russian and Belarusian nationals.
Almaty-based Halyk Finance said in a statement on April 26 that it had taken the decision after receiving instructions to that effect from the Kazakhstan Stock Exchange, or KASE.
The financial services company said that it will not, as of April 27, assist Russians and Belarusians in trading on the KASE in non-Kazakh tenge-denominated securities issued by foreign companies.
The KASE diktat appears to be a snap reaction to remarks made at a roundtable in Astana on April 25 by Elizabeth Rosenberg, the assistant secretary for Terrorist Financing and Financial Crimes at the US Treasury Department.
Local media cited Rosenberg as saying that the risk to Kazakh companies from secondary sanctions related to Russia was increasing and that the US government is in close dialogue with Astana to help avoid any fallout from Russian attempts to circumvent those sanctions and export control measures.
Quizzed by reporters about Rosenberg’s remarks, Madina Abylkassymova, the chairwoman of the government’s financial market regulator, insisted that all second-tier banks and financial services companies in Kazakhstan had significantly strengthened compliance procedures.
“All requirements are being upheld. The main issue is that when trading operations are being affected, the banking system should not be exploited to circumvent sanctions,” Abylkassymova said. “We are adopting all the necessary measures to avoid the risk of secondary sanctions on Kazakhstan’s financial sector. All the requirements put forward by European regulators have been applied.”
Rosenberg’s visit to Kazakhstan this week is part of a broader offensive by Washington to press some of Moscow’s closest partners to avoid in any way easing the pressure of Western sanctions on Russia’s economy. She is poised to travel to Kyrgyzstan on April 27.
Another aspect of the agenda is to close Russia’s access to the kind of dual-use technology that could help its military campaign in Ukraine.
Another US official who has travelled to Kazakhstan, Matthew Axelrod, the assistant secretary for export enforcement at the Bureau of Industry and Security, hailed what he described as a successful ongoing effort to blunt Russia’s offensive capabilities. He noted, however, that countries like Kazakhstan are being used as a transshipment point for banned material. US officials have likewise identified Armenia as another important channel for Russia to import banned technology.
“We are prioritising items such as computer chips, as well as elements used in integrated electronic systems needed for Russian missiles and drones,” Axelrod said, in remarks translated into Russian by Kazakh media. “We are not talking about iPhones or washing machines. We are talking about specific items of computer technology used to power and navigate missiles and drones used by the Russian military machine to kill civilians and soldiers on Ukrainian soil. I want to make it very clear that the supply of such items to Russia through Kazakhstan is in direct violation of export controls.”
Axelrod reportedly placed the value of the re-export to Russia of proscribed items through Kazakhstan since the start of the war in Ukraine as ranging into the “millions of dollars.”
That Russia has still been able to source foreign-made high-tech components even since the start of its invasion of Ukraine has now been definitively documented. In a report published earlier this month, Conflict Armament Research, or CAR, a United Kingdom-based investigative organisation, said it had “identified more than 150 non-Russian entities responsible for the manufacture of thousands of components documented in Russian weapons” deployed in Ukraine.
While most of the components studied by CAR were produced between 2014 and 2021, a fact that leaves open the possibility they were purchased prior to February 2022, the organisation’s team has also come across at least three Russian weapons containing parts made by a US-based company in August 2022.
Circumstantial evidence pointing toward Kyrgyzstan’s role in helping Russia avoid technology importation bans likewise looks compelling.
As Seoul-based newspaper The Korea Times has reported, while exports from South Korea, an important global supplier of high-tech, to Russia fell by 37% to $6.3bn in 2022, exports to Kyrgyzstan spiked over that same period by 231.4%, to $373mn. Observers have concluded that this dynamic points to the likelihood that goods are being bought by companies in Kyrgyzstan for re-export to Russia.
Discrepancies in the value of those exports as reported by South Korean and Kyrgyz authorities may further raise questions about potential problems with transparency in all this flow of goods.
Kyrgyzstan’s National Statistics Committee this week estimated the value of Korean exports in 2022 at only $156.5mn – far lower than the $373mn reported by the Korea International Trade Association.
When pressed on this point by Eurasianet, the statistics committee said the discrepancy may be accounted for by a difference in methodology in how the two governments compile trade data.
This article first appeared on Eurasianet here.