In current months, rising tensions between Washington and Moscow in addition to intensified assaults in Ukraine have raised questions over the function of Russia’s neighbors, notably Kazakhstan. In Washington and Europe, leaders are actually contemplating the potential for secondary sanctions on international locations discovered to be serving to Russia get hold of prohibited items.
In seeking to obtain these objectives, EU lawmakers have already handed laws for an eleventh sanctions package deal that might mandate sanctions on corporations and people in third international locations which are discovered to be serving to Russia circumvent sanctions. The international locations of Central Asia, specifically Kazakhstan, have been named by EU officers as doable targets of this package deal.
According to a current report by the European Bank for Reconstruction and Development (EBRD) exports from the EU, U.Okay., and U.S. to Kazakhstan elevated by greater than 80 p.c in 2022 whereas, throughout the identical interval, Kazakhstan elevated its exports to Russia by greater than 22 p.c. A current investigation launched by OCCRP (the Organized Crime and Corruption Reporting Project), along with Important Stories (Russia), Der Spiegel (Germany), and Vlast (Kazakhstan) revealed that Kazakhstan has develop into a transit level for the import of digital elements and different dual-use items to Russia, that are then utilized by the Russian military and protection enterprises.
Tokayev’s Challenges and Promises
Much of Kazakhstan’s means to advertise and strictly observe the West’s sanctions program will rely by itself trajectory. Moscow’s affect on Astana is rooted of their long-standing historical past, vital areas of mutual cooperation, and geography. As such there may be nonetheless a powerful notion in Kazakhstan that sustaining relations with Russia is useful. The significance Kazakhstan locations on Russia’s favor is mirrored by the frequency of excessive profile visits: President Kassym-Jomart Tokayev has made a number of visits to Moscow prior to now yr and in addition attended the Victory Day parade final month.
The Kazakhstan-Russia relationship is formed to a big extent by geography and historical past. A shared Soviet and (partly) Tsarist previous, has created deep social, infrastructural, and enterprise hyperlinks between the 2 international locations. Their lengthy border ensures that Kazakhstan and Russia are tightly interdependent in safety phrases, too. Kazakhstan is one in every of Russia’s most lively buying and selling companions and a member of the Eurasian Economic Union (EAEU), a Moscow-led buying and selling bloc dominated by Russia that additionally consists of Belarus, Armenia, and Kyrgyzstan. Kazakhstan’s main income comes from its oil and gasoline trade, which stays extremely depending on Russia as an exporting and refining route; 80 p.c of Kazakhstan’s crude oil exports is transported to Russia’s Novorossiysk-2 marine terminal on the Black Sea to be refined and processed.
Magzum Mirzagaliyev, chairman of Kazakhstan’s nationwide oil and gasoline firm KazMunayGaz, held talks with David Reed, director for sanctions on the U.Okay. Foreign, Commonwealth and Development Office, in London on June 12. The key level mentioned was the necessity to forestall the financial fallout of Western sanctions from impacting Kazakh oil exports by way of Russia.
Kazakhstan can be a member of the Russian-led Collective Security Treaty Organization (CSTO), from which Tokayev requested assist amid the January 2022 protests. Domestic political points additionally matter for the kind of relations that the 2 international locations take pleasure in. In this respect, two points are particularly related: Kazakhstan’s massive ethnic Russian minority and similarities in regime sort.
For Kazakhstan, the secondary sanctions danger is not only hypothetical. A precedent was set in June 2022, when the United States imposed secondary sanctions on an Uzbek firm concerned in exporting electrical elements to Russia. In gentle of this and contemplating a current enhance in enforcement actions by U.S., EU, and U.Okay. authorities regarding the Russia-related sanctions extra usually, there’s a chance of instances being initiated towards individuals, banks, and corporations based mostly in Kazakhstan.
The official narrative in Astana might give the impression that Kazakhstan is taking the West’s sanctions considerations critically and taking accountability for the way items transported by way of its territory are used. As a part of this broader framing effort, Kazakhstan launched a new monitoring system that supposedly would enable real-time monitoring of the complete chain of motion of products from border to frame. Tokayev and his diplomats have additionally spoken of Kazakhstan’s neutrality with higher urgency in current months. In feedback throughout the EAEU discussion board in Moscow, Tokayev made a degree of stressing that the “EAEU is an exclusively economic and not a political vehicle.” Afterward, Tokayev’s press secretary, Ruslan Zheldibay, acknowledged that “Kazakhstan does not intend to or plan to join any allied state.”
Yet this tells solely half the story. The larger image exhibits that Tokayev’s private ensures, irrespective of how honest, haven’t helped absolutely cease the re-sale of dual-use items to Russia. This commerce continues to accentuate and in actuality, there seems to be a scarcity of devoted effort by the Kazakh authorities to fight the difficulty of parallel commerce by way of its territory. A living proof is that Kazakh banks proceed to concern Kazakh particular person identification numbers (IIN) to Russian nationals with out them truly needing to be within the nation in individual. This IIN provides its holder the chance to do enterprise and interact in commerce within the nation. According to the Kazakh authorities, the entire variety of Russian taxpayers registered in Kazakhstan final yr was round 70,000; right now it’s estimated between 300,000 to 1 million. However given the dearth of transparency of information, this statistic may very well be a lot larger. Many small companies in Kazakhstan have additionally made robust earnings off the sanctions on Russia by sourcing items that Russian corporations are unable to acquire instantly.
Secondary Sanctions: Closing the Loophole
Secondary sanctions are a reasonably new mechanism established by the United States within the final 5 years or so, notably regarding Iran. These kinds of sanctions as Jack Lew, the previous U.S. treasury secretary, mentioned in 2016, “generally [are directed] towards foreign persons. These measures threaten to cut off foreign individuals or companies from the U.S. financial system if they engage in certain conduct with a sanctioned entity, even if none of that activity touches the U.S. directly.” As famous in Bloomberg, “the imposition of secondary sanctions is meant to force companies, banks, and individuals to make a tough choice: continue doing business with the sanctioned entity or with the U.S., but not both.” Because of the dominance of the U.S. greenback as a retailer of worth within the world financial system, most corporations prioritize holding good relations with the United States.
The objective of a spherical of secondary sanctions can be to try to strain Kazakh officers to push internally for a change in coverage. The U.S. and till lately, the EU, are the 2 fundamental actors which have a secondary sanctions coverage in place. In June, the EU’s eleventh sanctions package deal was handed with a deal with combating the circumvention of pre-existing commerce sanctions slightly than introducing new bans. It is vital to notice that the U.S. and EU secondary sanctions intention to focus on corporations, banks, and people (slightly than international locations) which are suspected of undermining the effectiveness of sanctions. Still, it stays unclear whether or not secondary sanctions on Kazakhstan’s companies, banks, and people suspected of serving to Russia would compel a change in coverage. Business leaders arguably have probably the most to lose, since disruptions in commerce and funding with Western companions will have an effect on companies initially.
Conclusion
Given the depth of financial ties between Astana and Moscow, secondary sanctions towards companies, people, and banks in Kazakhstan may very well be extremely expensive for his or her financial system. With solely combined Kazakh assist, closing the loopholes may very well be troublesome to attain. Western policymakers have to deal with areas the place Russia is asymmetrically depending on overseas items, expertise, and finance that come by way of Kazakhstan. If secondary sanctions have been to be applied, Western leaders would wish to make sure that credible threats are matched with credible assurances. With the U.S. and the EU saying a shift of their gaze to Kazakhstan and Central Asia extra broadly, these developments can even be intently noticed by Russia.
Against this backdrop, Astana doesn’t see the selection in entrance of it as a binary one, and desires to keep away from turning into a chunk on the proverbial geopolitical chessboard pushed round by bigger powers. Instead, Kazakhstan seeks to keep up constructive relationships with two behemoths — a balancing act, for positive, however a manageable and essential one from their perspective.
Source web site: thediplomat.com
