Estonia's trade with Central Asian countries explodes
Trade between Estonia and countries in Central Asia, such as Kazakhstan, Uzbekistan and Kyrgyzstan, grew abruptly last year. For example, goods export to Kyrgyzstan grew by more than 50 times. The government does not know to what extent this constitutes bypassing Russian sanctions.
Estonian exports to Kazakhstan amounted to €11 million before the Russia-Ukraine war in 2021 but grew six times during the first war year, to €78 million. The tendency can be observed regarding other countries close to Russia. The value of goods exported to Kyrgyzstan grew by 55 times, which was 19 times for Armenia and 1.3 times for Uzbekistan.
Exports to Kazakhstan included agricultural machinery and vehicle spare parts, which cannot be exported to Russian due to Western sanctions. Cars also topped the list of exports to Kyrgyzstan. Goods move from Estonia to Central Asian countries largely through Russia, either by truck or train.
This spike in export volumes can also be observed in Finland. The value of goods exported from Finland to Kyrgyzstan grew eight times, the Finnish public broadcaster Yle reported in early March (link in Finnish).
The European Bank for Reconstruction and Development (EBRD) published a report in late February according to which the export volume of goods EU countries and the U.K. export to Kazakhstan, Kyrgyzstan and Armenia and that are subject to Russia sanctions grew by 30 percent more compared to unsanctioned goods.
The report also points out that the export growth doesn't come close to offsetting the drop in the trade between Russia and the West.
Toomas Tirs, Estonia's ambassador to Central Asia, said that the West has no idea how much of goods sent to Central Asia end up in Russia as it is very difficult to ascertain.
"These are massive countries. The border between Kazakhstan and Russia runs for over 7,500 kilometers. We have no way to monitor it, while the EU and USA are engaged in constant dialogue with the authorities in Kazakhstan, Uzbekistan and Kyrgyzstan. Official data is exchanged and analyzed. Specific concerns are voiced, concerning computer chips, for example, and transparency sought to make sure these do not end up in Russia. We might see a reaction at some point. For example, that the U.S. will sanction certain Central Asian companies for reselling certain technologies, while this is, again, a matter of speculation," Tirs said.
Kazakhstan, Kyrgyzstan, Russia, Belarus and Armenia all belong to the Eurasian Economic Union and goods move easily between them.
Central Asian countries clear about not supporting shirking sanctions
Tirs remarked that Kazakhstan and Uzbekistan have both clearly stated that they are not facilitating the bypassing of sanctions and are working with Western countries.
"Central Asia has been clear in terms of not supporting efforts to circumvent sanctions. What might happen is that individuals or SMEs go to a wholesaler, buy ten washing machines or iPhones, put them in their van and drive to Russia. There is nothing stopping them from doing that as the goods have been legally declared in Kazakhstan and taken to a sales point. Or a family comes over from Russia, discovers new iPhones on sale, buys several of them, including for friends for which they then collect a small cut," Tirs explained.
Ambassador Tirs said that a part of increased trade is also down to the fact that while some brand goods, for example, clothing by Zara, were taken to Central Asia from central warehouses in Russia before the war, countries have been looking for ways to deliver goods straight from Estonia, also by using Estonian carriers, since then.
"We have an Estonian company that carries Swedish technology. Russia was its main market before the war. That business ended, while the company knew its Central Asian customers were buying from Russian warehouses. The firm is now active in Kazakhstan and Uzbekistan, selling its Swedish goods directly. It is not easy, of course, as the parent company, Estonian customs and tax authorities all work to make sure the goods actually end up in Kazakhstan," he said.
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Editor: Marcus Turovski