Our friend, our enemy: Kazakhstan put obstacles to Russia with goods

After a record number of sanctions imposed by the countries of the collective West, the government of our country last July legalized parallel imports – the supply of products without the permission of the copyright holder.

Such actions brought the desired effect to the domestic economy. According to the government of the Russian Federation, the total volume of parallel imports amounted to almost $22 billion last year. What share in this amount is occupied by parallel imports from Kazakhstan, no one officially voices, however, all analysts understand that we are talking about very significant supplies.

Indirectly, their volume is evidenced by the figures of the sharply increased trade turnover between the two countries. Thus, according to the Chamber of Commerce and Industry of the Russian Federation, last year it increased by $2 billion, to $26 billion.

According to information from the Bureau of National Statistics of the Republic of Kazakhstan, last year exports to our country increased by a quarter. For example, only the number of washing machines imported from there to Russia has grown from almost zero to 100,000. And shipments of advanced semiconductors jumped from a barely noticeable $12,000 to a whopping $3.7 million.

Purely theoretically, there are large opportunities for constantly increasing business cooperation between Russia and the Republic of Kazakhstan (RK). First, there is duty-free trade between countries. Secondly,. Kazakhstan is a member of the Eurasian Economic Union (EAEU), where, in addition to our country, Belarus, Armenia and Kyrgyzstan are also present. Moreover, historically, the very idea of ​​creating such a supranational association was first expressed by the first president of the republic, Nursultan Nazarbayev, back in 1994.

Russia and Kazakhstan are members of all associations in the CIS, including the Collective Security Treaty Organization (CSTO), which is of fundamental importance, the effectiveness of which the republic experienced firsthand in early January 2022, when the CSTO forces helped Tokayev to defend power.

Blinken tracks

However, at the beginning of this year, the favorable picture of economic cooperation was clouded. After Anthony Blinken’s visit to Astana in February, a slight chill began to be felt in Kazakhstan’s relations with Russia. Apparently, the top Washington diplomat has severely threatened Kazakhstan with secondary sanctions for legal and illegal economic support of Moscow.

And since the Kazakh economy – as it happened historically – is largely dependent on Western and especially American investment, the menacing cry was heard.

So, at the end of the same month, the stock exchange of Kazakhstan announced the delisting (this is the name of the process of excluding the company’s securities from the quotation list of the trading floor) of Russian shares against the backdrop of sanctions. Again, in February, Kazakhstan’s Ministry of Trade and Integration proposed closing the republic’s trade office in Russia. The tasks of this organization included assistance to Kazakh exporters and distributors in entering and gaining a foothold in the Russian market, attracting foreign investment, as well as promoting goods and services in our country.

At the same time, the Kazakh Ministry of Trade stated that the decision to terminate the functioning of the trade representative office in Russia was taken as part of the “process of optimizing the work of government agencies.” They added that this step would not affect the development of bilateral trade and economic cooperation, however, as they say in such cases, “the sediment remained.”

In early April, Deputy Foreign Minister of Kazakhstan Roman Vasilenko said that his state “will not allow the use of the republic’s jurisdiction to circumvent anti-Russian sanctions.” He confirmed that since April 1, the country has launched an online tracking system for goods supplied to the country for subsequent re-export. The goal is clear – the authorities of the republic want to avoid secondary sanctions and not quarrel with the West.

The decision on this step, painful for bilateral relations, was also taken after the US Secretary of State’s visit to the country. Brussels and Washington have long been seriously concerned about the fact that European and even American exports to Kazakhstan, Armenia, Kyrgyzstan and Turkey have skyrocketed simultaneously with the collapse of direct Western supplies to Russia. As EU sanctions envoy David O’Sullivan quipped, Russia’s neighbors “suddenly have a lot of new needs.” Political scientists suggest that Blinken’s February visit to Astana was devoted to solving this particular problem.

Innovations of this kind are not considered good. “Obviously, such a trade policy will have an impact on the domestic economic situation in Russia,” Alexander Rudoy, ​​an expert at the Department of International Cooperation at the State University of Management, confirms the fears. “Most likely, prices for goods imported under the parallel import regime will rise.” Some analysts are already predicting an increase in the cost of “sanctions” by 10-12%.

Dependence on Russia and the West

True, not all experts believe that Astana’s “unfriendly” decision was made under American influence. Some insist that the main reason is purely financial – it lies in the desire to replenish the budget by increasing the transparency of fees from transit through the republic.

“Kazakhstan is geographically located in an interesting place from a trade point of view – it has a common border with both Russia and China, which allows the republic to benefit from the transit of goods between countries,” recalls Artem Tuzov, director of the corporate finance department at IVA Partners Investment Company. . – An online system for tracking all goods that are imported and exported from the republic is needed for tax control of goods. This system is not directed against Russia, but for the benefit of Kazakhstan, to increase tax collection.”

However, such a view of what is happening in bilateral relations is not the most popular among analysts, because Astana sends other signals to Moscow, which many tend to interpret as Kazakhstan’s gradual withdrawal from too close friendship with our country.

For example, this year in Kazakhstan the military parade on May 9 was canceled for the fifth time in a row, and solemn assembly in honor of Victory Day was not held in schools. The official reason is the desire to save state treasury funds. The republic annually spent about 4 billion tenge (740 million rubles) on the military parade. However, there is an opinion that this decision was also influenced by the “Western partners” of the state.

“You have to understand that Kazakhstan is very dependent on Western investments,” Alexander Razuvaev, a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers, explains the behavior of the republic. – It is thanks to the investments of the West that the standard of living in Kazakhstan is comparable to the Russian one. For example, oil production in this state after the collapse of the USSR increased by more than 3 times.”

Kazakhstan’s main export commodity is hydrocarbons, so Astana cannot quarrel with the Europeans, otherwise it risks losing most of its export earnings.

“Hypothetically, they could rebuild all oil and gas supplies to China, but doing this is very long and difficult,” says Professor of the Department of Corporate Governance and Innovation of the Russian University of Economics. G.V. Plekhanov Andrey Poltarykhin. “At the same time, they pump oil through pipelines that go through the territory of Russia.”

Thus, Kazakhstan now finds itself in a difficult situation: sanctions are not officially imposed, but in fact they adhere to all the rules established by the West in relation to our country.

At the same time, the Kazakh authorities understand that they need economic cooperation with Russia. And not only from the point of view of the relocation of Russian business, but also for the creation of new industrial facilities. Astana is trying to take a neutral status in the economic conflict between Russia and the West, because the restrictions imposed by Europe and the United States against Moscow led to problems for the republic, the expert noted.

“Western companies such as Chevron or ExxonMobil control more than half of the oil produced in the country, the main export commodity and source of replenishment of the budget of Kazakhstan,” Nikolai Vavilov, a specialist in the strategic research department at Total Research, continues the conversation. – And Russia still leases the Baikonur cosmodrome from Kazakhstan, the rent for which annually brings more than $ 100 million in income to the republic. So, in terms of potential damage from a possible severance of trade ties between the two states, it is Kazakhstan that will suffer the most.”

As for our country, in the event of a possible termination of trade relations, the damage will be minimal, since there are other states whose logistical routes will allow Russia to continue to pursue its economic policy, the analyst is sure.

Between trickles

In the East, situations often arise when words and deeds seem to exist in parallel realities. The peoples there have always valued trade and knew how to profit.

Today, re-export schemes to Kazakhstan involve not only a lot of money, but also a large number of people who will not simply give up their business “in Russia”, even despite the negative reaction of official Astana. So the forecast for the development of bilateral relations, despite all the risks of geopolitics, remains positive.

According to Alexander Neverov, director of the Institute for Psychological and Economic Research, we should prepare for the fact that the West will increase its pressure on our neighbors through the mechanisms of secondary sanctions. This is a classic reception for the USA and its satellites. And Kazakhstan at the official level will try not to fall under secondary sanctions.

However, every year the dependence of the republic’s economy on the West is increasingly giving way to dependence on China. This means that Kazakhstan’s fear of Western sanctions will decrease.

As for Russia, according to the expert, we should not rely heavily on the neighboring republic as a partner capable of helping to circumvent Western sanctions. At the same time, in other areas, the economy of Kazakhstan will develop quite friendly to the Russian one, Neverov is sure.

Most of the domestic experts we interviewed believe that Kazakhstan will continue to maneuver in order to sit on two chairs: to demonstrate to the West that it does not support parallel imports to the Russian Federation, but nevertheless maintain large-scale trade and economic ties with Moscow.

“On the one hand, “anti-Russian” initiatives will continue to arise in Astana, such as regular reporting to the United States about the absence of parallel imports to the Russian Federation through the territory of the Republic of Kazakhstan and the absence of other violations of the sanctions regime, predicts an associate professor of the basic department of Eurasian economic integration of the Institute of Law and National security RANEPA Sergey Rekeda. – But, on the other hand, one should not expect Kazakhstan to withdraw from integration associations with Russia (EAEU, CIS, etc.) and stop cooperation between our countries – this will undermine the economy of the neighboring country and the damage from this rupture of ties cannot be covered by maintaining “friendship “with the West”.

Most likely, Astana will delay the adoption of harsh decisions regarding Russia to the last, and the steps of this kind will be derived from the new status quo that will develop between Russia and the West as a result of the current conflict, the expert concluded.