Sanctions - The Times Of Central Asia

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EU Sanctions Envoy’s Kazakh Visit Signals Rising Stakes

On January 30, David O’Sullivan, the European Union’s Special Envoy for Sanctions, made his fourth visit to Kazakhstan. Following the visit, he gave a briefing in Astana, where he discussed the new sanctions package, which could theoretically include Kazakh companies that assist Russia in circumventing restrictions. What O’Sullivan Said According to O'Sullivan, only companies with indisputable evidence against them of involvement in violations will added to the sanctions list. “We are currently working on preparing a new, 16th package of sanctions. It is possible that Kazakh companies may be added to the list, but no decision has been made yet. We conduct a detailed analysis of companies, examine their trade relations, and review the goods they have previously traded. Of course, we prefer to work with governments to find a systematic solution rather than simply adding individual companies to the list. However, when there is no other option, we do add them,” O’Sullivan explained. The EU Sanctions Envoy reiterated that the EU remains one of Kazakhstan’s key economic partners, with mutual trade turnover reaching nearly 40 billion euros per annum. The EU accounts for 38% of Kazakhstan’s exports and 55 billion euros in direct foreign investments. Highlighting the importance of economic ties, O’Sullivan stated that the EU fully respects Kazakhstan’s position on sanctions, but urged authorities to take strict measures against third-party entities using the country’s trade channels. “We have concerns that unscrupulous actors may try to use Kazakhstan as a platform to circumvent our sanctions,” O’Sullivan warned, pointing to the import of high-tech goods such as microchips, sensors, and circuits, which have been found in Russian drones, missiles, and artillery shells. O'Sullivan noted that these goods, listed in an open “common high-priority list” of 50 codes, are not produced in Kazakhstan but are allegedly being re-exported from EU and G7 countries through Kazakh intermediaries. While they make up less than 1% of Kazakhstan’s total trade volume, O’Sullivan emphasized that these are “lethal products that kill innocent Ukrainian civilians.” The special envoy recalled that in 2024, the EU blacklisted two Kazakh companies and issued a warning that this list could be expanded. He noted that particular attention is being given to companies that emerged immediately after the invasion of Ukraine and the start of the new sanctions regime. “These are usually not well-established, well-known companies with a long history of trading. The fact that a company was created right after the invasion and the imposition of sanctions suggests that its sole purpose may be to evade sanctions,” he stated while stressing that merely registering after 2022 is not sufficient grounds for inclusion on the sanctions list. Strategically Important Central Asia Given the statistics cited by O’Sullivan, there was no pressing need for his fourth personal visit to Kazakhstan. The blacklisting of two Kazakh companies last year went largely unnoticed by the country’s general public. However, his visit highlights the mechanisms of international politics set in motion following Donald Trump’s return to the White House and the opening gambits of his administration,...

U.S. Sanctions Banking Politics Sanctions

Kyrgyz Bank Hit by U.S. Treasury Department Sanctions

The U.S. Treasury Department has uncovered a secret channel allegedly used to re-export dual-use goods and imposed sanctions on Kyrgyz commercial bank Keremet for its involvement in circumventing economic restrictions against Russia, according to a statement on the department’s website. U.S. officials allege that since the summer of 2024, Keremet Bank facilitated cross-border transactions for Russian financial institutions, including Promsvyazbank, which has been under U.S. sanctions since early 2022. Promsvyazbank, nationalized by Russian authorities in 2018, was sanctioned for its role in financing Russia's defense sector and supporting major defense contracts. The U.S. Treasury reports that the bank has provided billions of dollars in financial support to Russia’s military-industrial complex. The Treasury Department’s report also claims that the Kyrgyz Ministry of Finance sold a controlling stake in Keremet Bank in 2024 to a firm closely linked to a Russian oligarch with ties to the Kremlin. According to the U.S., the acquisition aimed to create a financial hub to evade sanctions, enabling payments for imports and exports. Further allegations suggest that Moldovan opposition politician Ilan Shor, who is himself under U.S. sanctions, discussed a sanctions evasion scheme involving Keremet Bank with Russian representatives. Keremet Bank has denied these claims, stating that it has already appealed to the U.S. Treasury’s Office of Foreign Assets Control (OFAC) to have the sanctions lifted. “The bank operates in accordance with national legislation and international law, adhering to the principles of transparency and responsibility,” the bank said in its response, published on its official website. Keremet further emphasized that the sanctions will not impact its operations and expressed readiness to undergo an international audit to clarify the situation.

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New U.S. Anti-Russian Sanctions Could Spell Trouble for Central Asian Economies

On January 10, 2025, the U.S. Treasury Department announced a new package of sanctions targeting Russia’s energy sector. The measures, which affect a wide range of organizations and individuals, are set to take effect on February 27. While ostensibly aimed at undermining Russia’s economic interests amid the ongoing conflict in Ukraine, the sanctions are likely to have significant repercussions for Central Asian countries given their close economic ties with Russian energy giants. The sanctions package, viewed by some analysts as a final move by the outgoing Biden administration, could become a potent tool for the incoming administration to exert influence over Russian interests in Central Asia. Sanctions on Gazpromneft Subsidiaries The new sanctions include restrictions on Gazpromneft's subsidiaries operating in Central Asia. Affected entities include Gazpromneft Tajikistan, Gazpromneft Kazakhstan, Gazpromneft Asia (Kyrgyzstan), and Munai Myrza (Kyrgyzstan). According to the U.S. Treasury Department, Gazpromneft and its regional subsidiaries are considered critical sources of revenue that support Russia’s military efforts in Ukraine. In response, Gazpromneft characterized the sanctions as "unfounded, illegitimate and contrary to the principles of free competition." The impact of these sanctions, however, could prove severe for the economies of Central Asia, where Gazpromneft plays a key role in the energy sector. Gazpromneft Asia, for example, is a major supplier of petroleum products in Kyrgyzstan, making it a critical player in the domestic market. Sanctions on the company could disrupt fuel supplies and drive up energy prices in the country. Gazpromneft Kazakhstan LLP, based in Almaty, operates a network of Gazpromneft-branded gas stations in Kazakhstan. While disruptions to fuel supplies in this network might not critically affect Kazakhstan’s economy - the largest in Central Asia - the sanctions carry broader implications. Threats to Joint Projects Beyond direct sanctions on companies, several executives of Russian oil firms actively operating in Kazakhstan have been added to the U.S. sanctions list. Key figures include Vadim Vorobyev, President of Lukoil PJSC and a member of Kazakhstan’s Foreign Investors Council. Lukoil is a strategic partner of KazMunaiGas (KMG) in production and exploration projects; Nail Maganov, CEO of Tatneft, which collaborates with KMG on projects such as Karaton Podsolovaya, Butadiene, and the Saran Tire Plant; Alexander Dyukov, the Chairman of Gazpromneft, and Sergei Kudryashov, CEO of Zarubezhneft, which has signed letters of intent for joint projects with KMG. These sanctions could complicate existing partnerships and delay key projects, undermining Kazakhstan’s energy sector and its broader economic growth. Sanctions on Rosatom and Nuclear Energy Another significant element of the sanctions package is the inclusion of Rosatom executives on the U.S. sanctions list. This development poses challenges to Kazakhstan’s plans to establish an international consortium - including representatives from France, South Korea, China, and Russia - to build a nuclear power plant. With Rosatom facing restrictions, the consortium is now likely to exclude Russia, potentially straining relations between Astana and Moscow. A global leader in nuclear energy, Rosatom was expected to play a central role in the project. Kazakhstan may now explore alternative arrangements, balancing its energy ambitions with the...

Russia Sanctions EU Sanctions Infrastructure Development US sanctions International Finance

U.S. Sanctions on Gazprombank Put Uzbekistan’s $4.8 Billion Copper Ambitions at Risk

Uzbekistan faces a significant economic challenge as U.S. sanctions on Russia’s Gazprombank disrupt the $4.8 billion Yoshlik mine expansion project. The project, managed by state-owned Almalyk Mining and Metallurgical Combine (MMC), is critical to Uzbekistan’s plan to nearly double its copper production by 2026, according to The Diplomat. However, with Gazprombank now excluded from the international payments system, the project’s financing is at risk. The Russian Government directly owns 36.44% of Gazprombank's capital. Financing Challenges The Yoshlik mine expansion aims to increase copper output by 78% and gold production by 50%, making it a cornerstone of Uzbekistan’s economic development strategy. However, Almalyk MMC’s reliance on Gazprombank leaves it vulnerable to delays and potential secondary sanctions. This situation exacerbated earlier difficulties after U.S. and EU sanctions in 2022 suspended an $800 million tranche from Russian development bank VEB.RF, another key financial backer. Almalyk MMC must now urgently secure alternative financing to keep the project on track. Russia’s Role in Uzbekistan’s Economy Russia remains Uzbekistan’s largest trading partner, and remittances from Uzbek workers in Russia account for 18% of Uzbekistan’s GDP. Russia’s involvement in the Yoshlik project began in 2021 when Gazprombank and VEB.RF pledged $2 billion to finance mining equipment purchases. Impact on European and British Partners The Yoshlik project also involves significant participation from European and British firms: Germany: Engineering firms such as Thyssenkrupp have supplied critical equipment. Germany’s KfW IPEX-Bank recently arranged $2.55 billion in financing for the project. However, U.S. sanctions on Gazprombank could create legal and logistical hurdles, putting pressure on Germany’s government to reassess its support for exports to Uzbekistan. United Kingdom: The UK has taken a complex position. While it sanctioned Gazprombank in 2014, British firms, including Weir Group, remain involved in the project. In 2024, the U.K.’s export credit agency guaranteed a refinancing deal through Spain’s Santander Bank, reflecting the mine’s importance to British exporters. As reported by TCA, earlier this week, the UK Export Finance (UKEF) guaranteed a €12.6 million ($13.25 million) loan to the Almalyk Mining and Metallurgical Complex to refinance the purchase of fully automated vehicles. Urgency for Alternative Financing For Uzbekistan, securing alternative sources of funding is critical. Almalyk MMC must navigate a challenging sanctions landscape while keeping the Yoshlik project on schedule. Failure to do so could not only isolate the company but also hinder Uzbekistan’s broader economic goals, particularly its ambitions to expand its mining sector and boost foreign investment.

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U.S. Sanctions Former Uzbek Officials in Orphan Abuse Case

The United States has imposed sanctions on three former officials in Uzbekistan’s government who were involved in human trafficking as well as physical and sexual violence toward orphan children. The three people, who carried out the crimes during their tenure as government employees, are now ineligible for entry into the United States and any property or entities in the U.S. that they own are “blocked” in line with the sanctions, the U.S. Department of the Treasury said Monday. American citizens are also barred from doing any transactions related to the blocked assets, it said. The sanctioned individuals were identified as Yulduz Khudaiberganova, who was director of a state-run orphanage in Urgench, in Khorezm region, at the time of the abuses; Anvar Kuryazov, who was head of the Khorezm regional justice department; and Aybek Masharipov, who was head of the district emergency department. “For at least 10 months, Khudaiberganova forced at least three underage girls to engage in sexual acts with at least six different men in exchange for funds and goods,” said the Treasury statement, which was released on the International Day for the Abolition of Slavery. “Khudaiberganova used various coercive tactics to ensure the girls’ compliance, including physical beatings, threats, starvation, and isolation from their peers. Both Masharipov and Kuryazov demanded sexual access to orphans in compensation for ‘gifts’ they provided to the orphanage. Kuryazov and Masharipov repeatedly visited the orphanage in order to prey upon the young girls,” it said. Uzbek media have previously reported on the case, saying a district court in Khorezm sentenced Khudaiberganova to five and a half years in prison, while the two men were given one and a half years of partial house arrest that barred them from leaving their homes from 10 p.m. to 6 a.m. The sentences were handed down in 2022 but an appeals court took up the case in 2023 after Nemolchi.uz, a non-governmental group that campaigns against gender-based violence, publicized the light sentences, causing a public outcry. Kuryazov and Masharipov were subsequently sentenced to three years in prison. “This was the most severe punishment given the legislation in force at the time of the crime,” Nemolchi.uz said on Telegram after the U.S. sanctions announcement. The group has pushed for tougher laws in Uzbekistan to shield children from sexual abuse, and the government has taken steps to strengthen protections.

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Russian MP Blames Central Asians for Ruble Depreciation

Mikhail Matveyev, a member of Russia’s State Duma, has attributed the depreciation of the Russian ruble in part to remittances by labor migrants from Central Asia and the Caucasus. In a statement on his Telegram channel, Matveyev argued that millions of migrants working in Russia transfer their earnings abroad, removing significant sums from the Russian economy. According to him, these remittances fuel demand for foreign currencies, such as the dollar, thereby weakening the ruble. Citing statistics, Matveyev claimed that in 2023, labor migrants sent $5.7 billion from Russia to Tajikistan - nearly half of Tajikistan’s GDP. Kyrgyzstan received remittances equal to about one-third of its GDP, while Uzbekistan received over $14.5 billion, accounting for 12-15% of its GDP. Other significant recipients included Georgia (over $2 billion), Armenia (over $3 billion), and Kazakhstan. Matveyev also criticized some of these countries for their stance on Western sanctions against Russia. He noted that several countries in the Eurasia region have joined sanctions targeting Russian banks and refuse to process transactions using the Russian Mir payment system. This, he said, forces migrants to withdraw cash dollars from Russia to transfer home, exacerbating the pressure on the ruble exchange rate. The MP’s remarks came amid a sharp drop in the ruble’s value against the dollar last week. For more than 30 years, millions of Central Asian citizens have migrated to Russia for work. However, recent trends indicate an increase in return migration, driven by Russia’s deteriorating economic conditions, stricter immigration rules, worsening attitudes toward Central Asian workers, and attempts by Russian authorities to recruit immigrants - both with and without Russian citizenship - for military service in Ukraine.