Trading Company of the Kyrgyz Republic is leading the country to economic collapse

The country has practically built a state mechanism to bypass anti-Russian sanctions in the financial sector. The retaliatory secondary sanctions from the US and EU could...

Western sanctions against Russia, especially in the financial sphere, are showing their effectiveness. This was confirmed by the recent statement of Russian President Vladimir Putin at the Security Council of the Russian Federation, where he called the creation of a new system of international payments a serious challenge for the country.

Indeed, the threats of secondary sanctions from the US and EU have proven to be almost more effective than the supply of Western military equipment to Kyiv. At least the results of the pressure on Russia are quite indicative here. The trade and financial arteries that feed the Kremlin's war machine are being cut off one by one, despite Moscow's "warm" relations with certain countries.

The Shadow of Secondary Sanctions

In December 2023, U.S. President Joe Biden signed an executive order granting the U.S. Treasury the authority to impose secondary sanctions on foreign banks for aiding in the supply of Russia's military-industrial complex and individuals already under sanctions. This significantly reduced financial flows between Russia and the banks of its largest partners: China, the UAE, Turkey, as well as other countries.

Chinese banks, despite Beijing's statements about a "strategic partnership," are blocking or delaying payments from Russia for almost all goods. In the UAE, payments for electronics shipped directly to Russia are being rejected. In Turkey, the number of banks working with Russian money has dwindled to a minimum.

The UAE, Turkey, and even giant China, not to mention the overwhelming majority of other smaller countries, are doing everything to ensure that their state structures are not in any way linked to sanction violations. They emphasize this at every opportunity, convincingly proving that enterprises violating anti-Russian restrictions are entirely private and acting on their own initiative.

Because if the involvement of a state in bypassing restrictions is proven, Western secondary sanctions could be sectoral, potentially collapsing the entire financial system of almost any country. This is precisely what limits most of Russia's silent allies from deeper cooperation with the Kremlin. Here, the potential losses far outweigh the potential gains.

Prime Minister of Kyrgyzstan is Not Afraid of Sanctions

However, there are exceptions. Some states seem to have decided to risk their reputation, and even their economy, for short-term gains from cooperating with Russia. Particularly troubling signals are coming from Kyrgyzstan, which has recently become one of Russia's main trade and financial hubs.

Here, apparently with the active involvement of top government officials, financial flows to and from Russia have nearly been established, bypassing the imposed sanctions.

In April 2024, Kyrgyzstan's Prime Minister Akylbek Japarov, who bears full responsibility for the country’s economic sphere, stated: "We are not afraid of any sanctions. Life goes on even with them…" This was his response to the suspension of service for Russia’s "Mir" card by Kyrgyz banks. "We have started looking for other ways," the prime minister added. What path Akylbek Japarov has chosen for Kyrgyzstan's economy will become clear a little later. This was preceded by a whole series of events involving government structures and semi-criminal bankers.

The First Links: A Bank with a "Crimean" Founder and Criminal Businessmen in the Leadership of the Trading Company of the Kyrgyz Republic

In June 2024, a new private "Asman Bank" was registered, with Erkin Jumabayev, a member of the board of directors of "Bai Tushum" Bank, appointed as its chairman. The founder of the bank was Mikhail Kuzovlev, one of the most prominent figures in the Russian financial market. Among other things, he had served as a top manager in the sanctioned "VTB Bank" and "VEB.RF", and was a beneficiary of "Morskoy Bank" until it also came under restrictions. However, one of Kuzovlev's main "achievements" was establishing the banking system in Crimea after Russia's annexation of the peninsula in 2014.

Despite this, "Asman Bank" is already making payments to the budget and will soon receive a license from the National Bank. Such a rapid passage through bureaucratic procedures without strong governmental support would simply be impossible, especially in Kyrgyzstan. We will return to this anomaly a little later.

On August 23, simultaneously with the introduction of large-scale U.S. sanctions against Russia's international financial flows, the Kyrgyz government issued an order to create the Trading Company of the Kyrgyz Republic . Now, firms that were previously engaged in selling goods without actual deliveries to Kyrgyzstan are required to do so through this new structure. It is important to note that such schemes are used to bypass sanctions. Trading Company of the Kyrgyz Republic was headed by Bakyt Asankulov, the former director of "Terem Pay", a company specializing in payment collection and credit operations.

According to the investigation by Kyrgyz journalists, Alexey Shirshov is also involved in the activities of the Kyrgyz Republic's Trading Company. He has been known in the country since the time of its first president, Askar Akayev. Since then, his name has been associated with schemes for siphoning money out of Kyrgyzstan's energy system. Currently, officials use the term "Shirshov schemes" to once again highlight the need to eradicate corruption.

Under another president, Kurmanbek Bakiyev, Shirshov, together with the president's son, Maxim, was also involved in several corruption schemes and later became connected to the activities of the "Eurasian Savings Bank", for which a criminal case was initiated. Shirshov remains very close to the government, particularly to Prime Minister Akylbek Japarov, whom he accompanies at rather difficult meetings and is said to be his unofficial advisor on delicate financial matters.

According to investigative journalists, Russian citizen Andrey Goykhman, previously sentenced to 9 years for money laundering through "Rosinbank", is also involved in the management of the Trading Company of the Kyrgyz Republic.

The National Bank Remains Silent Under Government Pressure and Submits to the Prime Minister

It is clear that such ambiguous events in the financial world should have drawn a response from the National Bank. However, its activities have recently been under heavy pressure from the authorities. Melis Turgunbayev, a former top manager of Gazprom Kyrgyzstan, who was appointed head of the regulator in June, was reprimanded by August for "improper coordination of the leadership team", and two of his deputies, Manas Jakypov and Kaiyp Kulenbekov, were dismissed with harsh wording.

According to authoritative experts, this sharp reaction from the authorities was triggered by the decisions of local private banks to literally comply with anti-Russian sanctions and limit cooperation with Moscow, as well as by delays in issuing a license to Asman Bank.

Later, still under the same pressure, the National Bank issued a decree prohibiting financial organizations from accepting payments and making settlements on contracts for goods, works, and services that do not enter the territory of Kyrgyzstan. Everyone, except for the Trading Company of the Kyrgyz Republic and authorized state companies designated by the government of the Republic.

Local parliament members are already criticizing the Trading Company of the Kyrgyz Republic for hiding the true size of the commission for its services. According to official information, it is only 2%. However, MP Baktybek Sydykov claims that people are complaining that the charges reach up to 6%. The "Trading Company of the Kyrgyz Republic does not account for tax losses from the budget, customs payments, or other commission incomes.

Who Will Handle Sanctioned Financial Flows

There are few state banks that will operate in the sanctioned zone, and identifying them is fairly simple. These include "RSC Bank" — also known as "Eldik Bank", which is 100% owned by the government of Kyrgyzstan. The second is "Aiyl Bank", whose main and sole shareholder is the State Property Management Agency under the Government of the Republic.

Political analyst Jumabek Tursunbekov is confident that these banks will cooperate with the Trading Company of the Kyrgyz Republic on the terms set by the government.

"But only until "Asman Bank" receives its license. Then, the main toxic flows will go through this "private" bank. It seems that, if necessary, any violations of the sanctions regime will be pinned on this institution", commented Tursunbekov.

Personal Profit in Exchange for Sanctions on the Country?

It is evident that, with the participation or under the patronage of Prime Minister Akylbek Japarov, a special tool is being built in Kyrgyzstan to circumvent sanctions against Russia. A tool that helps the aggressor country wage war against Ukraine.

This raises the question: what are the government and top bank managers, who decided to outsmart OFAC and the EU, counting on? Do they think that in the few months the chain will manage to operate, they can earn huge profits and disappear into the shadows? Perhaps the individuals involved in this story will succeed. They have enough experience in semi-criminal affairs. Most likely, Akylbek Japarov will also avoid punishment, as his administrative resources and, we hope, "short-sightedness" are now being exploited for profit by his questionable entourage.

But what will happen to the country? The signs of government involvement in organizing the circumvention of sanctions are evident in the example of the Trading Company of the Kyrgyz Republic. This is precisely why the EU and the US may consider imposing strict sanctions not only against Kyrgyzstan's state banks involved in the sanction evasion scheme but also against the country's banking system as a whole. Such measures would be devastating for the economy and would affect private banks not involved in sanction evasion. And along with them — every single resident of Kyrgyzstan.