Jan 10, 2022
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How likely are Western sanctions against Kazakhstan?

On the unbalanced movement of capital in favor of import before export

The main target of Western economic sanctions in the post-Soviet space is Russia. The European Union also introduced sanctions against Belarus, the West did not impose sanctions against other post-Soviet states, except for pinpoint judicial (for example, a long dispute between the Republic of Kazakhstan and an entrepreneur from Moldova Anatoly Become).

However, the events of the first days of the new year in Kazakhstan made many people think: would the West follow sanctions against this state for violations of “human rights” and “democracy”? Former head of the Kazakhstan “Bank Turan Alem” (BTA Bank) Mukhtar Ablyazov, who fled the country and declared himself the leader of the opposition, tried to push him to do so. In an interview with an Italian newspaper Corriere della Sera the fugitive banker said that he had already sent appeals to the President of the United States Joe Biden and to all the leaders of European countries, in which he urged them to impose sanctions against the “bloody” regime in Kazakhstan.

To the surprise of many, the West’s response to the events in Kazakhstan was sluggish. January 6 at POLITICS an article appeared “The United States has no real leverage in Kazakhstan” (The US has no real leverage in Kazakhstan)… It has been the second week since the beginning of the riots in Kazakhstan, but the United States is still getting off with verbal statements. The same is the reaction to the events in Kazakhstan from the side of the European Union. Everything was limited to the statement of the head of the European Commission Ursula von der Leyen, made on January 7 at a joint press conference with Emmanuel Macron: “I am following the situation in Kazakhstan with great concern”… The French president was even less decisive. Some action was taken only by Germany, which temporarily suspended the supply of weapons to Kazakhstan, but the price of the issue is ridiculous – 2.2 million euros.

To date, the United Kingdom is the most resolutely in favor of imposing sanctions against Kazakhstan. V Guardian On January 6, the editorial “The Guardian’s View of the Riots in Kazakhstan: The Danger Ahead” appeared (The Guardian’s perspective on unrest in Kazakhstan: danger ahead). It says that the West must urgently use such a tool as the arrest and freezing of the assets of those officials and businessmen who, firstly, are outright corrupt officials and, secondly, at the time of critical events in Kazakhstan, participated in suppressing the insurgents and welcomed the CSTO invasion. …

Conservative MP Tom Tugendhat called on the British government to impose sanctions in connection with the brutal repression ordered by President Kassym-Zhomart Tokayev. According to unofficial data, the British government has already given an order to freeze Kazakhstani assets worth 600 million pounds. The British Parliament called on the UK, the US and the EU to even expropriate assets of Kazakh origin in their territories.

How likely is all this? Let’s take a look at the position of Kazakhstan in terms of assets formed through the export and import of capital.

Tab. one.

International Investment Position of Kazakhstan (billions of dollars)


Foreign assets

Obligations to non-residents

Net international investment position

January 1, 2019




January 1, 2020




January 1, 2021




April 1, 2021




July 1, 2021




October 1, 2021




Source: National Bank of Kazakhstan

How are foreign assets of Kazakhstan formed? At the beginning of the fourth quarter of 2021, their structure looked as follows (assets, billion dollars): direct investments – 31.1; portfolio investments – 62.0; other investments (mainly loans and credits) – 37.3; reserve assets (international reserves) – 35.5.

Liabilities to foreign investors at the beginning of the 4th quarter had the following structure (billion dollars): direct investments – 170.0; portfolio investments – 28.7; others (loans and credits) – 46.6.

We have before us a picture of an unbalanced movement of capital in favor of the import of capital before export. The imbalance in direct investment is especially striking: in Kazakhstan, the volume of accumulated direct investment by non-residents is almost 5.5 times greater than that of Kazakh direct investment abroad. Moreover, the proportion in favor of capital import over export tends to increase.

Suppose the West starts a massive freeze (confiscation) of foreign assets of Kazakhstan. Further, it can be assumed that the latter will take similar measures in relation to foreign investment within the Kazakh economy. Taking into account the above figures, we can conclude that the sanctions war will end in favor of Kazakhstan. The costs of such a war for the West would be very high. After all, investments of foreigners in Kazakhstan are a source of very large incomes. Here are the data on the balance of payments of Kazakhstan on investment income exported by non-residents from the country (billion dollars): 2018 – 23.0; 2019 – 23.7; 2020 – 16.1; nine months of 2021 – 18.3. In total, from 2014 to October 1, 2021, the income of foreign investors in Kazakhstan totaled almost $ 144 billion.In general, over the past ten years, the average return on foreign assets in Kazakhstan was 10%.

Investment income of Kazakh exporters is about an order of magnitude less (billion dollars): 2018 – 2.5; 2019 – 2.4; 2020 – 1.9; nine months of 2021 – 1.6. The surprisingly low volumes of investment income received by Kazakh capital exporters are mainly explained not by the low profitability of foreign assets, but by the fact that a significant part of investment income is not returned to Kazakhstan and is not reflected in the statistics of Kazakhstan’s balance of payments.

Kazakhstan is a cash cow for foreign investors. It is unlikely that the West will risk its “cow”, i.e. assets of foreign investors in Kazakhstan.

Of all the foreign assets of countries that are on the “black lists” of the West, as experience shows (Iraq, Libya, Iran, etc.), international foreign exchange reserves are under attack in the first place. Kazakhstan has all international reserves, according to the latest data from the NBK (as of November 2021), amounted to $ 35.48 billion.However, almost 2/3 of these reserves are in gold located in Kazakhstan. The greatest risk of “freezing” exists only in relation to official foreign exchange reserves in the amount of $ 11.95 billion (approximately 7% of all foreign assets of Kazakhstan).

As for private Kazakh assets abroad, only “point” sanctions (ie freezing of assets of individual citizens of Kazakhstan) can take place. The main direction of capital outflow in the form of direct investments from Kazakhstan is Great Britain. So, in 2020, direct investments of Kazakhstan in the British economy amounted to $ 336.5 million. The Cayman Islands (British) were in second place – $ 333.3 million. These two jurisdictions accounted for almost 47% of all direct foreign the year before last. London controls most of the foreign private assets of Kazakh origin.

PS But Russia’s intervention, its participation in ensuring order on the territory of Kazakhstan gave Western politicians a reason to return to discussions about the possible introduction of “hellish sanctions” against Moscow. As reported CNN citing their sources, the events in Kazakhstan became the impetus for a new round of discussions in the US presidential administration of sanctions against Russia. This includes the blocking of SWIFT, and the freezing of the official foreign exchange reserves of the Russian Federation, and the blocking of the Bank of Russia and Gazprom, and additional bans on operations with Russian debt, etc. However, the United States is once again forced to recall the inevitable boomerang effect.

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