During a recent visit to Germany, President of Kazakhstan Kassym-Jomart Tokayev made several conflicting statements. Tokayev stated that, on the one hand, Kazakhstan will pursue comprehensive cooperation with Russia, while on the other hand, it will adhere to the sanctions imposed against Russia.
Why do these these promises contradict each other? Because it is technically impossible to strictly adhere to a sanctions regime and simultaneously support comprehensive economic cooperation with the sanctioned country. In this case, there is both a customs union and free currency conversion between Kazakhstan and Russia which smooths trade between the two and complicates sanctions enforcement.
Despite Tokayev’s assurances of Kazakhstan’s compliance with the sanctions regime, the country remains an important source of “parallel imports” for Russia.
The table below reflects an anomalous growth in Kazakhstan’s external trade turnover in 2022, which is worth considering closely.
It’s notable that Kazakhstan’s exports had not exceeded $60 billion annually over the last seven years, until 2022. In a longer-term view, the highest historical export figure – $80.3 billion – was reached in 2013, when Brent crude oil prices hit a historical high at $108.5 per barrel.
On average, in 2022, considering discounts, Kazakh oil was trading at around $70 per barrel. The exponential and uncharacteristic growth of exports to $84.4 billion in 2022 is quite challenging to explain solely by an increase in oil exports, Kazakhstan’s main commodity. Oil exports in 2022 increased by $15 billion compared to 2021.
This is significant and explains a lot. However, total exports in 2022 increased by $24.4 billion compared to 2021, with a positive difference of $10 billion that stands out from the usual export structure. Oil alone does not explain the total increase in exports.Interestingly, this difference coincides with the increase in imports over the same period.
Interestingly, this difference coincides with the increase in imports over the same period.
If we look at the volume of imports in 2022 and compare them to the average annual import level over the past seven years, we can see that, on average, since 2015, Kazakhstan’s imports have hovered around $34 billion. The sharp increase in imports from $40 billion in 2021 to $50 billion in 2022 is unprecedented in the country’s modern history and is difficult to explain in terms of domestic consumption growth.
In 2022, there were no significant changes in the incomes of citizens in Kazakhstan. This is important because if household incomes had increased, the $10 billion year-on-year increase could have been explained by consumption rising, meaning greater demand from businesses for foreign goods and semi-finished products. But that didn’t happen.
The most reasonable explanation for what the data shows is a phenomenon called “parallel imports.” The $10 billion increase in both imports and exports indicates that Kazakhstan imported goods and services worth $10 billion and then rapidly “exported” them somewhere else.
