Through us—even a torrent. How Central Asia became a nearly sanctions-free zone.

Geopolitical tensions between major and medium-sized powers pose growing risks for various regions around the world that aren’t directly involved in the ongoing conflicts. Central Asia has not been spared from these dangers, as the economic entities of its five republics constantly face the threat of being added to the sanctions lists of different nations. Currently, the primary concern for businesses and entrepreneurs in the region stems from the full-scale conflict between Russia and Ukraine. However, even if hostilities between these nations end in the foreseeable future and there is a thaw in relations between the Russian Federation and the United States, the risk of sanctions affecting Central Asian businesses will likely persist. In fact, these threats seem to be escalating over time, even though they have not yet impacted state institutions and their associated networks.

Precision strikes

In July 2024, the New York community of post-Soviet immigrants was shocked by the arrest of Salimjon Nasriddinov, a Tajik restaurant owner in Brooklyn known among Central Asian migrants. The US Department of Justice issued a press release stating that alongside him, Russian nationals Svetlana Puzyreva and Nikolai Goltsev were also charged with conspiring to illegally supply dual-use electronics worth over $7 million to the Russian Federation through shell companies.

If convicted, they face up to 20 years in prison. The FBI alleges that Nasriddinov, Goltsev, and Puzyreva were part of a global procurement network to evade sanctions and export controls. To implement their scheme, the defendants allegedly utilized two legal entities registered in Brooklyn: SH Brothers and SN Electronics.

These sanctions target individuals and extensive networks involved in evading restrictions across 17 jurisdictions, including India, China, Switzerland, Thailand, and Türkiye. Since the beginning of Russia’s war in Ukraine in February 2022, the US government has repeatedly updated its list of companies subject to sanctions for supporting Russia. Notably, several firms from Uzbekistan, Kazakhstan, Kyrgyzstan, and Tajikistan are included on this list.

Earlier this summer, the US government imposed sanctions on the Kazakh company KBR-Technologies and the Kyrgyz firms Transit Service Bishkek and Nova Proekt due to their collaboration with Russian partners to circumvent restrictions.

The US Treasury Department reported that KBR-Technologies supplied semiconductor manufacturing machines, soldering, and welding equipment to the sanctioned Russian corporation Ostec and its subsidiaries, as well as to the company Fabcenter. Notably, one of the co-founders of KBR-Technologies, Yevgeny Kostyuk, previously owned a Polish supplier that served Ostec’s needs.

In February of this year, sanctions were also placed on Kazakhstan’s Da Group 22 and Elem Group, Kyrgyzstan’s Ukon, and Polarstar Logistics, a transport company from the UAE that operates a branch in Tashkent, all due to their connections with Russia.

Last December, sanctions affected Kyrgyzstan’s Weitmann Handeln Allianz and Tajikistan’s Chamaiyati Doroi Masauliyati Makhdudi Kafolati Komil for supplying computers and aviation spare parts to Russia.

According to the US Treasury Department, Weitmann Handeln Allianz shipped hundreds of batches of automatic data processing machines and disk drives to the Russian Federation, while the Tajik company facilitated the delivery of foreign-made aircraft parts to Russia through the UAE.

To diminish Russia’s military capabilities and address the evasion of international restrictions, the European Union appointed David O’Sullivan as a special envoy for sanctions. He has become a regular visitor to Central Asian capitals, aiming to establish mechanisms that prevent sanctions violations against the Russian Federation.

Simultaneously, at President Joe Biden’s initiative, the US Department of Justice launched a special task force called KleptoCapture in 2022. This unit comprises personnel from various agencies within the department and is dedicated to countering the Kremlin’s strategies for evading sanctions. Their work involves comprehensive information gathering about oligarchs, companies, influential families, and state-owned enterprises worldwide that are connected to sanction evasion.

Notably, mid-level representatives within the US bureaucracy persistently pursue their assignments, remaining focused despite any changes in the administration at the White House. Those familiar with American and British legal practices understand that lawyers usually spend considerable time collecting evidence before presenting a final charge or sentence. Therefore, if gathering data on a specific oligarch or company takes months or even years, it doesn’t mean that the case will be neglected.

Once a ceasefire is established between Ukraine and Russia, it is anticipated that all parties will engage in a comprehensive review of human and financial impacts, focusing on facilitating necessary exchanges of information regarding losses incurred. Sanctions are expected to remain in place to apply pressure on Moscow until an agreement is reached between Russia and the United States regarding the use of Russia’s seized currency reserves held in European banks. This is intended to support Ukraine and help settle its debts to international creditors. Financial compensation will undoubtedly emerge as a significant topic in ensuing discussions following any potential truce between Ukraine and Russia.

Asia’s Yugoslavia

The actions of Central Asian states in the current geopolitical landscape resemble those of Yugoslavia under Josip Broz Tito, Romania during Nicolae Ceausescu’s rule, Hungary led by Janos Kadar, and Finland under President Urho Kekkonen.

Historically, the leadership in these nations, while not entirely subservient, clearly operated within Moscow’s sphere of influence, balancing this by obtaining external loans and credits from Western financial institutions, including the World Bank and the IMF.

Throughout the Cold War, these countries acted as vital conduits for the Soviet Union, providing access to essential goods, services, and technologies. They adeptly navigated the tensions between Moscow and Washington, leveraging the situation to secure needed resources: affordable energy from the USSR along with capital and technology from the United States and Western Europe.

This strategic maneuvering allowed leaders like Josip Broz Tito in Yugoslavia to flourish and contributed to the development of ‘goulash socialism’ in Hungary under Janos Kadar. In Romania, Western loans and access to inexpensive Soviet energy helped bolster the cult of personality surrounding Ceausescu and his wife.

Until the 1980s, Nicolae Ceausescu and Josip Broz Tito were welcomed as guests in the capitals of the USA, France, West Germany, and Great Britain. Romania and Yugoslavia were encouraged to maintain a distance from Moscow, and their domestic policies faced little criticism.

However, as the economic landscape transformed in the waning years of the Cold War, countries like Romania, Poland, Bulgaria, those within former Yugoslavia, and the USSR found themselves losing their relevance to both Moscow and the Western capitals. This shift caused their economic models to struggle, exposing their inadequacies in the face of new realities. Interestingly, after the Cold War, there was no significant political change in these regions; the former elites, primarily from the socialist nomenklatura, continued to hold power. They adjusted their strategies and made nominal sacrifices while adopting a new facade to fit the evolving environment.

Today, Central Asian countries are receiving essential support for their economies through loans, financial injections, grants, and technology from the EU, the US, Japan, South Korea, China, and Russia. Since the start of the war in Ukraine, investments and the movement of goods and services have significantly increased in the region. Additionally, capital—both financial and human—that flowed out of Russia after February 24, 2022, has found some stability in Central Asian capitals. Furthermore, large brands that exited the Russian market have begun to relocate their headquarters there. Western diplomats in Tashkent have even developed a habit of informally comparing Uzbek President Shavkat Mirziyoyev to Josip Broz Tito, noting how he maneuvers and benefits similarly to the former Yugoslav leader.

It would not be an exaggeration to say that the region’s elites are presently in a fortunate position from a geopolitical standpoint. Despite the tensions between major powers, the West and Russia want to maintain stability in Central Asia. In Washington and Brussels, there has been a growing consensus over the past five years that the West should not relinquish influence in Central Asia to China and Russia. Instead, efforts should focus on diversifying the region’s transport corridors, logistics, and economic partners. This strategy aims to prevent Central Asia from becoming overly reliant on Russia and China.

During a series of joint summits between the EU and Central Asia and through the C5+1 diplomatic platform, Western partners have clearly communicated that both Washington and Brussels do not intend to sever the region’s historical ties with Russia. Instead, they aim to block channels that enhance the Kremlin’s military capabilities.

Thus, the West’s unofficial message to Central Asian elites is that they do not necessarily need to align with the United States and the European Union; however, joining the Russian camp is strongly discouraged. This is illustrated by the fact that the secondary sanctions imposed by the US and its allies have not targeted the elites of Kazakhstan, Uzbekistan, Tajikistan, and Kyrgyzstan, allowing their economies and social stability to remain intact. Additionally, the West has chosen not to jeopardize the key industries of the regional republics and local oligarchs.

The only exception is the case of billionaire Alisher Usmanov. The Uzbek government tried unsuccessfully to remove him from the EU sanctions list through diplomatic efforts. For many years, people have viewed him as a Russian businessman, which makes his situation a bit unusual. However, from secondary sanctions, Tashkent’s diplomatic and political actions to protect local oligarchs—who run vital industries in the country—have been mostly effective. For instance, despite his known connections to the Kremlin, Bakhtiyor Fazylov, the owner of Eriell and manager of key gas energy facilities in Uzbekistan, avoided being added to American and European sanctions lists.

Moreover, last year, during the EU-Central Asia summit, Charles Michel, the head of the European Council, made it clear that the European Union would not impose sanctions on the Central Asian states if they chose to flout the restrictions placed on Russia.

“We do not apply the principle of extraterritoriality and, most importantly, we want to engage with all our partners globally through dialogue,” Michel stated.

In essence, his message was that the sanctions primarily concern those who bolster the Russian military effort, specifically targeting individual businesses and entrepreneurs. According to David O’Sullivan, the EU’s special envoy for sanctions compliance, the dual-use goods re-exported from Central Asia to Russia mainly consist of high-tech items such as integrated circuits, random access memory, and equipment featuring optical sights.

Thus far, the mechanisms designed to prevent the circumvention of imposed restrictions have shown effectiveness in the financial sector; almost all major banks in Central Asian states enforce bans on transactions with Russian banks. However, completely halting the flow of dual-use goods through the vast borders between Kazakhstan and Russia is a daunting and unlikely endeavor. Consequently, Central Asian elites must tread carefully, remaining mindful of the “red lines” in their dealings with various global powers.

Lacking specialists, but stuck with sanctions for the long haul

When it comes to sanctions against Russia and its economic entities, the measures are not limited to those imposed by the US and the EU. In addition to these players, countries like the United Kingdom, New Zealand, Australia, Switzerland, South Korea, Japan, Taiwan, and international organizations, federations, conglomerates, and investment institutions have also introduced restrictions against Russia.

In this landscape, the risks for companies and entrepreneurs to be subject to these restrictions are at an all-time high. A company that successfully navigates sanctions from one nation may still face new constraints from another, meaning it could soon end up on additional blocklists.

Countries like the US, EU, China, Türkiye, South Korea, Japan, and Iran each maintain their own sanctions lists and can actively work to diminish the financial gains of companies they target. As geopolitical tensions continue to intensify among these power centers, economic entities in Central Asia are finding their situations increasingly challenging.

In this context, Central Asian nations and other post-Soviet states are grappling with a pressing shortage of personnel who can effectively address and counteract the sanctions landscape.

Following the annexation of Crimea in 2014, Russia began cultivating sanctions specialists as the EU and US imposed restrictions on various sectors, including finance, defense, and energy. This realization sparked an effort within Russian business and government circles to develop a broad pool of sanctions experts, leading to enhanced training at local universities. Unfortunately, similar trends have yet to emerge in Central Asia, where business and political elites often rely on mistaken perceptions regarding the impact of international sanctions.

However, Central Asian universities tend to focus more on training generalists instead of molding specialized legal, economic, or political experts. As a result, these countries will ultimately need to prioritize the development of risk management specialists sooner rather than later.

For instance, recent investigations by the OCCPR team into Uzbekistan’s cotton industry shed light on how the Kremlin has secured steady supplies of Uzbek cotton essential for gunpowder production. Consequently, the Uzbek cotton sector and related companies in Turkmenistan and Kazakhstan now face the risk of being subjected to secondary sanctions.  

High-stakes outlook

Meanwhile, Donald Trump’s victory in the US presidential election has sparked some optimism among business people about the potential end of hostilities in Ukraine and the Middle East. Entrepreneurs hope that a ceasefire will reduce the West’s sanctions pressure.

However, such expectations may prove futile, as today’s geopolitical tensions are not confined to these two major conflicts. A closer look at Trump’s preferred candidates for key national defense and security roles—ranging from Marco Rubio as Secretary of State and Pete Hegseth as Secretary of Defense to Michael Waltz as National Security Advisor—reveals a common, hardline stance against the mullahs’ regime in Iran.

The incoming Trump administration will likely develop a strategy aimed at undermining the Islamic Republic’s financial capabilities. Consequently, the United States and its allies will probably make every diplomatic effort to prevent Central Asian states from becoming a sanctuary or hub for Iran as it attempts to bypass future economic restrictions. Under Trump, Washington and its allies will almost certainly intensify secondary sanctions against Central Asian companies and business people who try to assist Iran in evading these restrictive measures. At the same time, sanctions against Russia could be eased if Washington and Moscow achieve détente and Trump convinces Vladimir Putin to refrain from bolstering Iran’s financial and military

Rafael Sattarov

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