Crossroads Asia | Economy | Central Asia

2 State-owned Banks in Kyrgyzstan Drop 131 Clients Due to Sanctions Risks

While the companies haven’t been named, what’s clear is that Bishkek wants to be seen making an effort to address the EU’s sanctions circumvention concerns. 

Two state-owned banks in Kyrgyzstan have ended partnerships with more than 130 companies due to sanctions risks, the Kyrgyz government said this week. 

During a working meeting on sanctions policy, chaired by Bakyt Sydykov, minister of economy and commerce – and also recently appointed the Kyrgyz president’s special representative for sanctions policy – the government shared what it termed the “results of ongoing work.” 

Two state-owned banks, Eldik Bank and ABank, have ended relationships with around 131 companies, and between them are in the process of investigating another 80 companies. These figures come mere weeks after Kyrgyzstan’s Ministry of Justice announced that it had ordered 50 companies registered locally in the country to close. 

All of this follows the European Union’s 20th package of sanctions, adopted in late April, which aimed the EU’s “anti-circumvention” tool at Kyrgyzstan. The tool was framed as “an exceptional and last resort measure” to be employed against countries the EU deems to have taken insufficient steps to prevent the circumvention of sanctions on Russia, and Kyrgyzstan became the target of its first deployment. In practical terms, the tool allows the EU to “restrict the sale, supply, transfer or export of specified sanctioned goods and technology to certain third countries.”

Over the past year, several Kyrgyz banks have been individually sanctioned by the EU, the U.S., and the U.K., including state-owned Keremet Bank and Kapital Bank. In addition more than 30 Kyrgyzstan-registered companies have been added to sanctions lists.

In February, Brussels dispatched the EU’s sanctions envoy, David O’Sullivan, to Kyrgyzstan to further talks. As I recounted at the time:

O’Sullivan told reporters that trade flows suggest that some goods “are being imported into Kyrgyzstan with the sole purpose of being re-exported to Russia, in breach of our sanctions.” Specifically, he mentioned radio equipment and machine tools produced in Europe and imported into Kyrgyzstan with the exclusive purpose of re-export to Russia. “What is disturbing for us is the fact that there has been a significant and very noticeable percentage, a big increase in the percentages of your imports and re-export of these products compared to the pre-war period,” O’Sullivan said. “We are not asking Kyrgyzstan not to have trading relations with........

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