Sanctions - The Times Of Central Asia

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Sanctions

Kazakhstan Authorities Deliberate Future of Lukoil Assets

Russian oil giant Lukoil has announced plans to divest its international assets, including subsidiaries, amid ongoing Western sanctions. The company stated the sale is being conducted under a license issued by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which allows Lukoil to wind down its foreign operations in an orderly manner by November 21, 2025. An extension of this deadline may be requested. “Review of applications from potential buyers has begun,” the company said in an official statement. According to industry data, Lukoil currently holds stakes in several key Kazakh projects: 5% in Tengizchevroil (TCO), 13.5% in Karachaganak Petroleum Operating B.V., 50% in the Kalamkas-Khazar project (Kalamkas-Khazar Operating joint venture), 49.99% in Al-Farabi Operating (offshore exploration and production), and 12.5% in the Caspian Pipeline Consortium (CPC). While analysts suggest CPC operations are unlikely to be affected by U.S. restrictions, Kazakhstan may witness a significant redistribution of oil sector investments. Despite this, Kazakh authorities remain cautious in making definitive assessments. Nurlan Zhakupov, head of the Samruk-Kazyna sovereign wealth fund, stated that discussions are ongoing with both domestic and international advisors regarding Lukoil’s shares in Kazakh ventures. “A great deal of complex work is being carried out with relevant consultants, including international ones, on how KazMunayGas can navigate the current situation. Lukoil has major projects in Kazakhstan, so this is a complex and multifaceted issue,” Zhakupov said. Deputy Minister of Energy Sanzhar Zharkeshov emphasized that any decisions regarding the acquisition of Lukoil’s shares fall under the purview of the national oil company KazMunayGas. “Lukoil is KazMunayGas’s partner. They are jointly involved in Kalamkas, Khazar, and other projects. At this stage, the Ministry of Energy is not addressing the buyout or shareholder restructuring, this is a matter for KazMunayGas as an economic entity,” Zharkeshov said at a press conference. Energy Minister Yerlan Akkenzhenov added that decisions on potential buyouts have not yet been made. “This discussion has not yet taken place. The sanctions are still being analyzed, and their full impact on companies and the economy remains to be assessed. I believe a decision will be made soon, within the next few days, before the end of this week,” Akkenzhenov stated. The Times of Central Asia has previously reported on the broader effects of U.S. and EU sanctions on economies across Central Asia.

Sanctions

How U.S. and EU Sanctions Are Rippling Through Central Asia

Russia’s economy has faced renewed pressure following a fresh round of sanctions imposed this past week by both the European Union and the United States. After abruptly canceling a planned meeting with Vladimir Putin in Budapest, President Donald Trump shifted to a more hardline stance, announcing new sanctions. While these sanctions may not cripple Moscow, they are already having secondary effects on Central Asia, particularly on Kazakhstan’s banking and energy sectors. The EU's 19th sanctions package, adopted on October 22, introduces a phased ban on Russian liquefied natural gas (LNG). According to Reuters, short-term contracts will be terminated within six months, while long-term contracts are to expire by January 1, 2027. The package also includes a total ban on transactions with Russian oil giants Rosneft and Gazprom Neft, an expanded blacklist of so-called "shadow fleet" vessels, and sanctions against 45 companies in Russia and third countries supplying military-related technologies. Of growing concern in Central Asia is the inclusion of several regional financial institutions in the EU's sanctions list. These include the Kazakh branch of Russia’s VTB Bank, Kyrgyz banks Tolubai and Eurasian Savings Bank, and Tajik banks Dushanbe City Bank, Kommertsbank of Tajikistan, and Spitamen. These restrictions are scheduled to take effect between November and December 2025. Both Kyrgyzstan’s President Sadyr Japarov and the nation's Foreign Ministry have publicly expressed dismay over the sanctions, with Japarov urging Western leaders to stop “politicizing the economy.” In his speech at the UN General Assembly in New York in September, Japarov criticized the impact of unilateral sanctions, while the Foreign Ministry has stated that the country adheres to its international obligations and maintains an open dialogue with the EU to prevent risks associated with possible sanctions circumvention. The ministry has proposed launching an independent, internationally recognized audit and forming a joint “Kyrgyzstan-European Union” technical working group to facilitate data exchange, transaction monitoring, and risk assessments. In Kazakhstan, the National Bank downplayed the impact of sanctions against VTB. Deputy Chairman Yerulan Zhamaubayev noted that the bank had already been under nominal restrictions, and handles few transactions. “VTB does not affect the country’s financial stability, and we do not expect serious risks for the economy,” Zhamaubayev stated. However, the latest U.S. sanctions may prove more consequential for Kazakhstan, particularly amid efforts to strengthen bilateral trade with the United States, including through the repeal of the Jackson-Vanik amendment. The U.S. Treasury Department has sanctioned Russian oil majors Rosneft and Lukoil. The latter has deep economic ties with Kazakhstan. Just days before the announcement, on October 14, President Kassym-Jomart Tokayev personally attended the 30th anniversary of Lukoil’s operations in Kazakhstan, awarding CEO Vagit Alekperov the Order of Barys, first class. Oil and gas journalist Oleg Chervinsky reported that the joint venture Kalamkas-Khazar Operating LLP, co-owned by Lukoil and KazMunayGas, is directly affected. “Only the Tengiz and CPC projects, which Lukoil operates with American partners, have been exempted from the sanctions,” Chervinsky noted. A final investment decision for Kalamkas-Khazar was expected in December 2025. Yerkanat Abeni, a member of...

Inflation

Inflation in Kazakhstan “Eating Away” at Incomes: Authorities Struggle for Answers

Inflation in Kazakhstan is continuing to erode household incomes, driven by the country’s dependence on imports, rising utility tariffs, and increasing tax burdens. While living costs soar, wages remain sluggish, forcing many families to allocate most of their earnings to essentials such as food, medicine, and utilities. Rising Prices, Stagnant Wages As of August, annual inflation had reached 12.2%, and experts warn it could climb even higher by year’s end. The National Bank’s original 2025 inflation target of 5% has proven to be overly optimistic. “This is a negative, sad trend. It shows that not enough measures have been taken. That it was necessary to tighten monetary policy earlier. It was necessary to contain inflation risks,” said Ramazan Dosov, chief analyst at the Association of Financiers of Kazakhstan. The National Bank’s base rate, its primary instrument for controlling inflation, currently stands at 16.5%. Financier Rasul Rysmambetov notes that the rate is unlikely to be lowered in the near future. However, high interest rates also reduce access to loans for businesses, curbing investment. Despite frequent government statements about inflation-control measures, experts argue that artificial price regulation offers only temporary relief. In his September 8 address to the nation, President Kassym-Jomart Tokayev acknowledged the severity of the issue, stating, “Today, the main problem is high inflation, which is eating away at economic indicators and household incomes. There is no ready-made solution to this problem.” Tokayev called for coordinated efforts across government agencies. At the beginning of 2025, Kazakhstan’s average monthly salary was reported at 424,200 KZT (about $800), reflecting a 24% increase over the previous year. However, this figure obscures wide regional disparities. In many areas, typical monthly salaries range between 180,000 and 230,000 KZT ($330-430). Per capita income reached 194,000 KZT ($362), up 17% from early 2023, but not enough to keep pace with inflation. According to kazkredit.kz, average families now spend up to 95% of their income on day-to-day expenses. In 2023, 52% of income went toward food; that figure has risen to more than 54% in 2025. Halyk Finance, cited by inbusiness.kz, reports that more than half of Kazakhstan’s workers earn below the national average. Salary data reveals stark income inequalities across sectors, with higher wages in mining, finance, and telecommunications, and significantly lower wages in agriculture, healthcare, and public administration. Analyst Arslan Aronov notes that although nominal wages increased by 11.3% in the second quarter of 2025 compared to the same period in 2024, real wage growth was effectively zero due to inflation. Public sentiment reflects the strain. Economists at KZTnomika reported a slight easing of inflation expectations in August 2025, but overall confidence in price stability remains low. Eighty-two percent of survey respondents reported rising food costs, with meat and dairy products leading the list. Among non-food items, medicines, clothing, and cleaning products were most frequently cited. For paid services, rising costs for housing, internet, mobile communication, and healthcare were prominent concerns. Background and Analysis Kazakhstan’s struggle with inflation is rooted in both external shocks and structural...

Russia's War

Central Asians in Putin’s War: Fighting for Ukraine, Forced for Russia

As the war in Ukraine continues to drag on, fighters from across Central Asia have found themselves on both sides of the frontlines. In Kyiv, Kazakh national Zhasulan Duysembin has traded his past life as a sales agent for a rifle, sporting a tattoo of Kazakhstan’s flag on his back as he battles to defend his adopted home. He now fights, he says, to protect his children and believes that “Russia will not stop in Ukraine, it will go further. We must make every effort to ensure that our Kazakhstan does not suffer.” Alan Zhangozha, an ethnic Kazakh who grew up in Kyiv and now serves as a public relations officer in the Ukrainian Army, echoes this sentiment. “Ukraine’s victory will also be a victory for my Motherland,” he told The Diplomat. But as the war drags on, in Kazakhstan, families mourn men like 22-year-old Kiril Nysanbaev - a labor migrant in Russia coerced into signing up for the war who only came home in a coffin. His sister recalls how her brother told her that Russian officers beat and forced him to enlist while he was detained on dubious charges in Chelyabinsk. Nysanbaev was killed in Ukraine’s Donetsk region in March 2024, news that only reached his family three months later. Citizens of all five Central Asian countries have been pulled into the conflict since Russia’s invasion in 2022. Some have volunteered to fight for Ukraine, driven by personal ties or ideals, while others, mostly labor migrants, have been recruited, enticed, or pressured into fighting for Russia. These parallel currents reflect the complex impact of the war on a region that remains officially neutral but was historically deeply entwined with Moscow. While a handful of Central Asians now wear the blue-and-yellow insignia in Ukraine’s defense, far more have ended up in Russia's ranks, often as expendable foot soldiers. From Bishkek to Bucha In November 2022, a Kyrgyz former labor migrant, Almaz Kudabek uulu, announced the creation of the Turan Battalion, a volunteer unit of Turkic-speaking fighters formed to assist Ukraine. “Kyrgyzstan is my homeland; I will always love it. But Ukraine is my home now; I am fighting for Ukraine,” he told reporters. The battalion, joined by volunteers from Kyrgyzstan, Kazakhstan, Azerbaijan, and elsewhere, operates as a semi-autonomous unit supported by private donations and allied Ukrainian brigades. Back in Kyrgyzstan, however, the authorities opened a criminal case against Kudabek, punishable by up to eight years in prison, and local media that covered his story faced pressure. Others have supported Ukraine in tangible, humanitarian ways. Early in the war, members of Ukraine’s Kazakh diaspora erected traditional yurts in cities like Bucha and Kyiv as heated shelters dubbed “Yurts of Invincibility.” These spaces provided food, tea, and electricity during blackouts, a gesture of solidarity that irritated Moscow but drew only a muted response from Kazakhstan’s government. Moscow’s Migrant Recruits: Coercion and Casualties Far greater numbers of Central Asians have ended up fighting for Russia, which hosts millions of migrant workers from...

Sanctions

Kyrgyz President Denounces “Politicized” Sanctions on Banks

President Sadyr Japarov has sharply criticized the United States and United Kingdom for imposing what he has called unfounded sanctions on Kyrgyz financial institutions, urging Western leaders to stop “politicizing the economy.” In an interview with state news agency Kabar, Japarov defended two state-owned banks – Keremet Bank and Capital Bank – against allegations that they helped Russia skirt international sanctions, insisting that no evidence of violations has been presented. Neither the UK nor the U.S. has provided a single fact of violation… such facts simply do not exist,” Japarov said, dismissing the sanctions as politically motivated. UK and U.S. Target Kyrgyz Banks for Russia Sanctions Evasion Japarov’s comments come after a new wave of Western measures targeting Kyrgyzstan’s banking and crypto sectors for purported links to Russian sanctions evasion. On August 20, London sanctioned Kyrgyzstan-based Capital Bank – along with its director, Kantemir Chalbayev – alleging the bank was being used by Moscow to pay for military goods as part of a “convoluted scheme” to evade sanctions. The British authorities also blacklisted two Kyrgyz cryptocurrency exchanges - Grinex and Meer - that ran the infrastructure for a new rouble-backed crypto coin called A7A5, which moved an estimated $9.3 billion in just four months and was “intentionally created to evade sanctions.” The UK’s sanctions minister, Stephen Doughty, warned that “laundering transactions through dodgy crypto networks” would not soften the blow of Western sanctions. These steps followed a U.S. Treasury designation in January 2025 against Keremet Bank, a mid-sized Kyrgyz lender, for creating a hub for trade payments that helped Moscow evade restrictions. U.S. officials allege that Keremet Bank facilitated cross-border transactions for Russia’s sanctioned Promsvyazbank and even sold a controlling stake to a firm linked to a pro-Kremlin oligarch – moves Washington viewed as part of a secret channel to re-export dual-use goods and finance Russia’s defense sector. Those actions marked one of the first instances of Western “secondary sanctions” against Central Asian entities – penalties on third-country institutions accused of abetting a sanctioned nation’s activities. Kyrgyz Government’s Defensive Measures President Japarov contends that Kyrgyzstan has been proactive in compliance and that the West’s suspicions are misplaced. He noted that 21 banks operate in Kyrgyzstan, and authorities deliberately limited all Russian rouble transactions to just two state-controlled banks to shield the rest of the financial sector from any inadvertent sanctions breach. “To prevent any of them from falling under sanctions, we decided that only the state-owned Keremet Bank would work with the Russian rouble… All operations are under state control, and the income goes directly to the state treasury,” Japarov stated. Earlier this year, the government expanded this approach by channeling rouble remittances and payments through Capital Bank, which was brought under 100% state ownership in April. The National Bank of Kyrgyzstan ordered that all cross-border transfers in roubles – including the billions of roubles sent home by Kyrgyz migrant workers each day – be processed exclusively via Capital Bank. Kyrgyz officials argued this centralization was meant to “ensure transparency of...

Sanctions

Britain Imposes Sanctions on Kyrgyzstan’s Capital Bank, Other Entities

Britain has announced sanctions against Kyrgyzstan-based Capital Bank and its director, Kantemir Chalbayev, as part of a growing crackdown on financial networks allegedly being used by Russia to get around international restrictions and fund the war in Ukraine. The bank has previously denied circumventing such restrictions. “With sanctions continuing to bite, Russia has turned to the Kyrgyz financial sector to channel money through opaque financial networks, including through the use of cryptocurrencies. These networks have created a convoluted scheme to evade sanctions imposed by the UK and its partners,” the Foreign Office said on Wednesday. So-called secondary sanctions also targeted the Grinex and Meer cryptocurrency exchanges, as well as the infrastructure behind the new rouble-backed cryptocurrency token A7A5, which has moved $9.3 billion on a dedicated crypto exchange in just four months, according to the British government. The new round of British sanctions was also applied to the Kyrgyzstani firm Old Vector. The firm collaborated with Garantex, which had created Grinex to evade sanctions, and others in the development of the A7A5 token, according to an Aug. 14 statement by the U.S. Treasury Department that imposed similar measures. In May, state-owned Capital Bank said it was complying with international sanctions regulations. “Since 2023, as part of its risk management policy, Capital Bank has ceased all forms of financial interaction with individuals and legal entities subject to sanctions imposed by the United States, the European Union, and the United Kingdom,” the bank said. “This decision was made to protect the financial system of the Kyrgyz Republic from the potential impact of secondary sanctions and to ensure the security of operations for both resident and non-resident clients.” The Foreign Office statement comes as U.S. President Trump tries to end the war in Ukraine through dialogue, meeting last week with Russian President Vladimir Putin and this week with Ukrainian President Volodymyr Zelenskyy and European leaders.