Russians Overwhelm Kazakhstan With Sanction-Busting Requests – Sources

Summary

• Russia seeks circuitous routes to import banned items
• Kazakhstan sees surge in Russian requests – sources
• Turkish crackdown boosts Kazakhstan’s allure – sources
• Russia, Kazakhstan share a very long land border
• ‘The boom is just beginning,’ says one

Russian firms have swamped their Kazakh partners in recent weeks with new requests to help them bypass Western sanctions and import badly needed goods, seven sources with first-hand knowledge of the matter told Reuters.

After Russian troops invaded Ukraine on Feb. 24, 2022, the West placed sweeping sanctions on Russia’s $2.1 trillion economy, causing Moscow to seek circuitous routes for importing goods and technology.

With the sale of thousands of items sanctioned by the West, traders established an elaborate network of supply chains through third countries to circumvent the restrictions. Many goods come in via Turkey and former Soviet republics, economists say.

The seven sources, who all spoke on condition of anonymity because of the sensitivity of the matter, said they had seen a surge in Russian requests to help obtain everything from rare earth metals to bearings and aircraft parts across Kazakhstan’s 7,591-kilometre (4,717-mile) land border with Russia.

Two of the sources related the heightened Russian interest directly with reported Turkish plans to stop the transit of sanctioned goods.

“This means the boom is just beginning,” said one businessman involved in foreign trade who spoke to Reuters on condition of anonymity because of the sensitivity of the matter.

Rare Earth Metals

Another Kazakh entrepreneur said he had been offered $1 million to help transport a truckload of rare earth metals originally from Australia.

“From phones and bearings to airplane parts and rare earth metals,” the entrepreneur said, giving examples of requests, all of which he said he had declined. The Kazakh government failed to respond to a request for comment.

Russians have a very long shopping list which includes railway bearings, industrial equipment, radio equipment, advanced electronics, turbines, raw materials, airplane parts, and even bank card materials, the sources said.

Some Russian companies have sought to create long-term sanction-busting partnerships, the sources said. Under Russian law, it is an offence to conform to the Western sanctions and sanctions-busting has become a lucrative boom industry for some entrepreneurs.

President Vladimir Putin has jested that Western luxuries are still available in Moscow, though they are more costly. U.S. Secretary of State Anthony Blinken encouraged Central Asian countries during a visit to the region this month to uphold the sanctions and vowed to help them manage collateral damage.

But a Central Asian official, talking to reporters on the sidelines of Blinken’s visit, said governments could do little to prevent traders from re-exporting goods to Russia.

“I walk into a European company’s office and inquire about certain equipment, and they say they cannot sell it because it might end up in Russia,” said one Kazakh businessman dealing in industrial equipment.

“As I walk out, I get a call from a Turkish company offering me that same equipment.”

Turkey, a NATO ally, said in February it did not export products that could be used in Russia’s war effort, after U.S. caution about exports of microchips, chemicals, and other items. Ankara also said it would not allow Western sanctions to be breached in or via Turkey and was taking measures to prevent this.

Booming Trade

Russia remains Kazakhstan’s greatest trading partner. Kazakh exports to Russia increased by a quarter to $8.8 billion in 2022 and sales of some items rose. For example, exports of bearings doubled to $111 million, according to official statistics.

Exports of plastic pipes, certain kinds of which Russia has had problems producing or sourcing, more than tripled in 2022 to $12 million. Concurrently, Kazakhstan dramatically increased imports of computers from Taiwan and European nations, although it is indefinite how many of them were then re-exported to Russia.

Sometimes no law is even violated, the sources said. Often complex items contain sanctioned components but are not explicitly banned themselves. So sharp is the surge in trade that Kazakh customs are overloaded, they added.

A different source said Russian banks were importing plastics and equipment needed to make bank cards via Kazakhstan.

Still, such business comes with extra costs. Kazakh businessmen reselling goods to Russia normally qualify for a 12% VAT refund but those who transport “suspicious items” do not file for it so as not to expose the entire supply chain, the businessman said.

One source, though, used a Russian proverb to explain why he had opted to get involved in the illicit trade:

“For some, war is grief and misery, but for others, it is a way to flourish.”