Kyrgyzstan’s High-Wire Act: Sanctions, Compliance, and National Interest
On September 2, the day after the Shanghai Cooperation Organization’s Heads of State Summit in Bishkek, The Times of Central Asia spoke with Bakyt Sydykov, Kyrgyzstan’s Minister of Economy and Commerce and Special Presidential Representative for Sanctions Policy. He outlined the government’s approach to sanctions compliance and protecting Kyrgyz businesses. Sanctions exposure can affect Kyrgyz banks and businesses, as well as their international partners. U.S. secondary sanctions and EU and UK measures affecting foreign entities operate through different legal mechanisms. Some portions of the text have been edited for clarity. TCA: The sanctions against Russia adopted by the U.S., EU, and UK are not UN Security Council-mandated. Is it correct that Kyrgyzstan’s compliance policy addresses these measures rather than UN-mandated sanctions? Sydykov: That's correct. Secondary sanctions can affect non-U.S., non-EU, and non-UK entities or persons who knowingly facilitate transactions involving sanctioned parties. Our focus is on establishing better and better mechanisms and frameworks that address this bilateral dimension, that is, Kyrgyzstan's direct exposure through its relations with the sanctioning jurisdictions, in order to mitigate our exposure to potential secondary sanctions. TCA: Kyrgyz citizens and businesses can face sanctions exposure through dealings with sanctioned parties, including the risk of U.S. secondary sanctions. What are Kyrgyzstan’s main challenges in improving its compliance regime, and how are you addressing them? Sydykov: For technical reasons, our compliance regime is moving toward putting in place mechanisms that can flag or be anticipatory. I think you would agree that free markets are complicated and circumvention often comes to light only after it has occurred. We are largely equipped to manage these occurrences. We are moving to put in place firewall-like frameworks which would allow the country to identify and respond to occurrences before the fact. It is a great challenge — and one that every country operating in a free-market economy faces — to develop such a capacity, namely, to anticipate and prevent circumvention before it happens. Despite our best efforts, this remains a structural limitation. TCA: What concrete actions have you taken, or are you planning to take? Sydykov: We have established working groups, task forces, and interagency committees capable of swiftly halting the operations of any company engaged in sanctions circumvention. We are also working closely with commercial banks on these efforts. The banks, for their part, have introduced internal compliance committees and, in some cases, adjusted the composition of their boards of directors to strengthen governance and decision-making around potential circumvention risks. The banks are also developing a joint interbank blacklist of sanctioned entities, so that these entities are unable to operate through the banking system going forward. Those are steps to develop a working forward-looking, predictive approach — one that flags suspicious activity before it materializes – central to the comprehensive framework we are building. TCA: Some foreign investors may be reluctant to invest in Kyrgyzstan because of sanctions exposure. How could the measures you are taking address those concerns? Sydykov: Let me first say that we understand the rationale behind...
