It has been almost two months since the 11th package of EU sanctions against Russia has been announced but still not adopted. What does it make so difficult?
The 11th package compared to the previous iterations, aims to prevent the circumvention of earlier adopted sanctions, and thus targets third countries and companies detected of exporting sanctioned goods to Russia.
The aim to make sanctions work more effectively is clear. At the same time, it is necessary to address the encountered dilemma of not alienating those affected in Central Asia and South Caucasus and pushing them toward the embrace of Russia, which will certainly use this situation to its own advantage. The risk of secondary sanctions becoming counterproductive for Europe is also high in view of China, which is now pursuing a more active foreign policy in Central Asia.
One should remember that the mere fact of increased trade in 2022 between the EU and some countries that were recently accused of sanctions evasion does not prove anything as such. There could be at least several other factors in play, unrelated to the sanctions against Moscow.
Firstly, the volumes of trade would naturally grow compared to the worst phases of the COVID-19 pandemic in 2021. This generated a low base effect, which may lead to the multiple increase in some supplies even though the volumes are insignificant, while the majority of them could be coming from China, the United Arab Emirates, Türkiye and other external markets.
Secondly, countries in Central Asia and South Caucasus used to receive most of the Western commodities via the distribution networks of Russia. As many foreign companies withdrew from the sanctioned market, these supplies are now being transported directly to these countries.
Lastly, the global rise in costs of energy resources and other essential commodities has led to the increased cost of trade involving any commercial partners, not only Western ones.
Ultimately, one has to assess the situation from all angles before pointing fingers.
Nevertheless, during the recent visits by U.S. Assistant Secretary of Trade Elizabeth Rosenberg and EU Special Envoy David O’Sullivan to Kazakhstan, Kyrgyzstan, Uzbekistan and some other countries in Asia, they were warned of possible secondary sanctions. The Western delegates received strong official assurances that the governments would take measures to prevent the circumvention of the sanctions against Russia through their territories.
On April 1, Kazakhstan introduced a new electronic system to control transiting goods and has put under strict compliance controls Russian and Belarusian entities listed on its stock exchange. Last May, over 200 drones were confiscated by the Kazakh customs, which were sent by a Kyrgyz firm to Russia. According to the Kommersant newspaper, transactions of Russian companies via Kazakh, Armenian and Hong Kong banks are blocked when payments are related to certain types of electronics, which will lead to serious problems for Russian businesses in upgrading servers.
Controlling transiting goods to Russia by its neighboring countries is complicated due to the Eurasian Economic Union (EAEU), which includes Russia, Kyrgyzstan, Kazakhstan, Belarus and Armenia as its members. During his recent visit to Moscow in May, the President of Kazakhstan, Kassym-Jomart Tokayev, explicitly criticized the relations within the EAEU in front of Putin. This was not the first and likely not the last time when the Kazakh leader takes a very independent stance.
Kazakhstan’s independent position is particularly of note when considering that the country shares with Russia the world’s longest uninterrupted border of 7,000 kilometers and is currently highly dependent on Moscow for exporting two-thirds of its oil to Europe via the Novorossiysk port in the Black Sea.
Kazakhstan and China are aiming to expand the capacities of the main alternative exporting route – the Trans-Caspian International Transport Route, which bypasses Russia. However, its full development might take years.
The introduction of secondary sanctions would certainly impact the investment climate in Central Asia and may significantly undermine the EAEU. The dilemma of counterproductive consequences of secondary sanctions is looming in the face of China’s geopolitical ambitions in Central Asia, as it seeks a back-up land corridor to Iran and other oil-rich regions. China is interested in expanding trade with the West, but it is also now forming new alliance with the Central Asian countries, to which it recently committed $50 billion of investments ($23 billion to Kazakhstan alone).
Beijing seems to be pushing Moscow out of Central Asia and Chinese President Xi Jinping delivered an open video address at the EAEU Summit in Moscow on May 24, where he proposed “coordination” between the EAEU projects and China’s Belt and Road Initiative “in the spirit of openness and understanding”. In other words, there is little to no place for Russia in the cooperation between China and Central Asian states, which effectively means an end to the two-century long Russian dominion in the region by restoring “two-thousand-year-old” Silk Road to Europe.
In regard to Chinese companies, which have also been accused of helping the circumvention of the export to Russia of banned chips, following Chinese foreign minister Qin Gang’s visit to Germany, France and Norway last May, a likely solution was found not to introduce punitive measures against these companies in return for their promise to reinforce controls.
A future stand-off between the West and China is just starting to evolve with both sides establishing new alliances – China with Central Asia and the U.S. with India, as illustrated by President Biden’s announced visit to New Delhi in September.
For the EU, the clash of interests is taking place not only in Central Asia. Yet, according to media reports, the EU has also named Kazakhstan, along with Brazil, Chile, and Nigeria, as a priority country for European trade. Yet, China has already become or will soon become the largest trading partner for all these countries.
New evolving scenarios do not affect the European stance on Russia and despite delays to the 11th package of sanctions, it will likely be finally implemented in the coming weeks. Those affected will have to brace for impact that this may have on them, but it is important to look out for unintended consequences, with China becoming a more pro-active player in Eurasia.
[Photo by Thijs ter Haar, via Wikimedia Commons]
The views and opinions expressed in this article are those of the author.
The author is the Director at the Center for Central Asia Studies “C5+” and a former career diplomat at the Ministry of Foreign Affairs, Kazakhstan. His diplomatic postings included Kazakh embassies in Seoul, New Delhi and London.
