Since the beginning of the year, the European Union has intensified sanctions against Russia, placing it on the list of countries with a high risk of money laundering and financing terrorism.
These measures came into effect on January 29 and entail stricter oversight by all EU banks over financial transactions related to Russia.
Kazakhstan's President Kassym-Jomart Tokayev reported at a meeting in the Financial Monitoring Agency that a hidden transit of $14 billion was recorded through one of the banks, although the actual amounts may be significantly higher.
At the same time, the European Parliament is discussing the acceleration of the construction of the Middle Corridor, which involves Central Asia.
These events collectively represent a strategic change of global proportions – Europe and China are building a new order for their mutually beneficial cooperation. Given that maritime logistics have become riskier and more expensive, with the successful implementation of the Middle Corridor, the main flows of financial logistics may bypass countries that were previously used to circumvent sanctions, such as Kazakhstan and Armenia.
The key question remains which Central Asian country will be able to take the place of the financial center of the Middle Corridor. Europe is not interested in spending taxpayers' money to contain Russian aggression while simultaneously fueling the Russian budget through Kazakh or Armenian companies linked to the Russian military machine. Armenia, after Russia's refusal to intervene in the conflict in Karabakh, has begun to distance itself from Moscow, while Kazakhstan, on the contrary, continues to transfer entire sectors to its neighbors.
Against this backdrop, Kyrgyzstan has the opportunity to become a new financial center, although it faces challenges such as gray imports and sanctions against its banks, which distance it from the desired outcome.
The Situation in Kazakhstan
Nuclear Power Plant and "Rosatom"Kazakhstan was initially seen as a key player in Central Asia; however, the decision to build a nuclear power plant with Russian contractors increases the country's dependence on Moscow in energy and technology. This is a long-term choice that ties Kazakhstan to Russian foreign policy for many decades to come. Furthermore, "Rosatom" collaborates with private military companies that are also controlled by the Russian Ministry of Defense.Internet DependencyThe internet in Kazakhstan is completely dependent on Russia, which has led to criticism of the former head of "Kazakhtelecom." He left his position without managing to lay cable to bypass censorship, resulting in dependencies on Russian servers.
Oil TransitKazakhstan has also depended on Russian infrastructure for oil transit, and this dependency has persisted for 35 years. Despite partial changes in ownership in the oil sector, the issue of independent exports remains unresolved.
According to Kazakhstan's Ministry of Energy, in 2025, Kazakhstan plans to import petroleum products from Russia again, including gasoline and diesel fuel.
Inflation in Kazakhstan, which both presidents have mentioned, is non-monetary in nature, and rising fuel prices significantly contribute to the increasing cost of goods, which is also a problem for the government.
Smuggling of Sanctioned Goods
Kazakhstan has become a convenient buffer for Russia, continuing to supply goods that fall under sanctions, such as electronics and components for military needs. The smuggling situation also affects Kyrgyzstan.
Product LabelingProduct labeling allows Russia to control value-added chains in Kazakhstan. Previously, Russian entities charged fees for labeling goods, leading to increased final prices for products.
Financial SystemAfter the imposition of international sanctions against Russia, Kazakh banks pretended to comply with the restrictions. However, the volumes of transactions using Kazakh schemes indicate significant amounts of hidden money. President Tokayev mentioned the figure of $14 billion, which is only part of the actual discrepancy in trade turnover.
Kazakhstan had the opportunity to become a modern financial center, but old habits and paradigms continue to dominate, making the country dependent on Russian oligarchs.
Kyrgyzstan's Chances on the International Stage
Sanctions against Kazakh banks and statements by European officials regarding involvement in schemes for supplying sanctioned goods are distancing Kyrgyzstan from the status of a financial center.Nevertheless, Kyrgyzstan has the chance to become a financial hub similar to Hong Kong or Singapore, connecting two worlds.
Facing similar challenges, Kyrgyzstan demonstrates a different approach to implementing financial structures.
For example, Kyrgyzstan has failed to implement the TsUPIS system, unlike Kazakhstan, where it was adopted despite the opinions of lawmakers.
In Kazakhstan, the system ended up under the control of Russian companies, while in Kyrgyzstan, the nationalization of "Alpha Telecom" was carried out, ensuring state control over an important asset.
Currently, Kyrgyz banks are actively working to tighten compliance and revise internal procedures, which positively affects their reputation.
As a result, the banking system of Kyrgyzstan has been able to demonstrate improved ratings in protocols for combating money laundering and financing terrorism.
Kazakhstan, in turn, faces risks of international sanctions due to servicing companies linked to "Rostec," VTB, and "Gazprombank."
