Banks of Kazakhstan refuse citizens of the Russian Federation to make payments: what awaits Russia

Some financial organizations of the Republic of Kazakhstan stopped accepting payments in rubles. According to market participants, an American “financial assault” recently landed in the neighboring country, as well as in Armenia, the purpose of which was precisely to limit the circulation of rubles in the republic. At the same time, the local Ministry of Finance stated that they had not given any official instructions to banks to limit payments in Russian currency. What is really happening in trade relations between long-standing partners, MK understood.

After a record number of sanctions were imposed against our country last spring, the people and the government hoped for help in overcoming them from the CIS neighbors. And she was justified. Most of the “sanctions” to Russia are imported through Kazakhstan, Armenia, Belarus and other friendly neighboring republics. But this trick was quickly noticed in unfriendly countries and attempts were made to cut off their neighbors’ profitable trade with Russia by any means. The most aggressive position was taken by the United States. Not only did they threaten all intermediaries with secondary sanctions, but during their official visits, they actually directly began to give “valuable instructions” on blocking Russian payments.

This was especially evident after US Secretary of State Anthony Blinken’s visit to Astana in February this year. In relations between Russia and Kazakhstan, immediately after that, a slight chill began to be felt, which risks turning into frost over time. In particular, since April 1, Kazakhstan has introduced an online tracking system for goods supplied to the country for subsequent re-export, which will greatly complicate the import of sanctioned goods for Russia. And in June, information appeared that some Kazakh banks began to refuse to accept ruble payments. True, at the same time, the Kazakh Ministry of Finance is reassuring, stating that they did not give any instructions to banks on how to build relationships with Russian clients, and everything they do is an independent decision of business entities. “In general, there is such a thing as KYC (from the English“ Know your customer ”- N.T.) -“ know your client ”, – reminded the head of the financial department Yerulan Zhamaubaev. “If the banking sector filters certain points related to sanctions issues or others, this is directly the work of the banks themselves.”

Well, since the regulator allowed such issues to be resolved “on the ground”, then the financial organizations themselves, simply within the framework of “risk management”, can continue to play it safe and move further and further away from the Russian market.

How important for Kazakh banks their Russian companies and relations with our country in general is an ambiguous question. The experts interviewed by MK did not come to a consensus on this matter. So, according to the associate professor of the Department of State and Municipal Finance of the Russian University of Economics. Plekhanov Meri Valishvili, over the past year, Kazakhstan has become the most important trading partner of Russia. At the end of 2022, the value of export-import operations exceeded $26 billion. However, now the US and the EU are strengthening control over compliance with the sanctions regime by countries friendly to Russia. Kazakhstan, Kyrgyzstan, Uzbekistan and Armenia may fall under the new EU mechanism in the fight against parallel imports.

So far, we are not talking about a total ban and individual payment transactions are carried out by Kazakh banks. Although they are trying to minimize their own risks of falling under sanctions. “Under special control are payments from Russian companies that supply from Kazakhstan through parallel imports computer chips and elements of integrated electronic systems that can be used for the production of equipment and technology for the needs of Russia’s defense and security,” the expert noted.

There is no reason to believe that there is no pressure on the private sector, including the banking sector of Kazakhstan, from the United States: the relevant statements have already been made by representatives of the American authorities. The question is the scale of such pressure, but it can only be answered by assessing the immanent effect, that is, in terms of imports and exports after a certain time. Chairman of the All-Russian Trade Union of Mediators Vladimir Kuznetsov recalls that, according to official data from the Bureau of National Statistics of Kazakhstan, Russia occupies as much as 92.4% of the total foreign trade turnover of the republic (data as of January-March 2023). Thus, according to the dynamics of this indicator, it will be possible to assess the scale of the impact of sanctions pressure on Kazakh banks.

Speaking about the long-term consequences of such a policy for the Kazakh economy, it can be noted that, according to the statements of the official representatives of the republic, Kazakhstan as a whole is trying to master the course of “decoupling” from Russia, that is, the republic willy-nilly will have to look for other ways to export and extract arrived. For Russia, in turn, this also means the need to look for new partners, since the “unbinding” of Kazakhstan can hit, first of all, parallel imports, the expert believes.

More difficult is the fate of individual Kazakh bank customers, because the sanctions pressure is aimed at slowing down the economy – causing collateral damage to citizens does not fit into this plan. Thus, a possible increase in Western pressure on Kazakhstan may lead to an increase in the delivery time of goods (due to the lengthening of logistics chains) and an increase in prices for them, Kuznetsov believes.

As the head of the analytical department of the BKF bank Maxim Osadchiy noted, in the first quarter of 2023, Russia remained the largest trading partner of Kazakhstan, the trade turnover amounted to $6.1 billion – 18.7% of Astana’s total trade turnover. China is in second place: $5.9 billion (18.1%). However, already in the second quarter, China may overtake Russia: trade with Russia increased by 10.1% over the year, and with China by 28.3%.

In addition, European countries in aggregate are significantly ahead of Russia in terms of trade with Kazakhstan: in the first quarter of 2023, trade with them amounted to $10.9 billion (33.4%).

Therefore, Kazakhstan has freedom of maneuver: trade with Russia may be crowded out by trade with China and the EU. For Kazakhstan, trade relations with Europe are more significant than with Russia, and therefore our eastern partner is forced to respond sensitively to the “exhortations” of the United States and the West as a whole. An example of the manifestation of such “sensitivity” was Kazakhstan’s refusal to violate financial sanctions, which resulted in the departure of Russia’s largest state-owned bank from Kazakhstan, the expert recalled.