Kazakhstan's Fork in the Road or How Europe Switches Taps

A view of Rotterdam's sea terminals this spring feels like a scene from an alternate reality: instead of the familiar tankers carrying Urals crude, vessels flying the Kazakh flag dock one after another. By the end of 2024, Kazakhstan suddenly emerged as the EU's third-largest oil supplier, accounting for 11.5% of all crude imports, trailing only the USA (15.4%) and Norway (just over 12%) [qazinform.com].

This emerging "window of opportunity" is a direct result of sanctions against Russia. While Moscow-based traders reconfigured their schemes, Astana negotiated export quotas via the Druzhba pipeline and has already promised German partners at the PCK refinery in Schwedt to increase supplies from 1.5 to 2.2 million tons in 2025 [Caspian Post]. For Berlin, this is not just diversification, but a matter of energy security against the backdrop of the closed chapter on Russian oil.

However, alongside the triumphant figures, another indicator is rising: the number of Kazakh companies hit by sanctions. In February, the EU unveiled its 16th sanctions package, featuring MetallStan LLP and Kazstanex, suspected in Brussels of reselling European machinery to Russia [Tengri News], [Orda].

The Ministry of National Economy immediately labelled them "fly-by-night companies," but the fact remains: formal residency status in the Republic of Kazakhstan no longer protects against blocked accounts in Latvia or frozen cargo in Gdańsk.

Three months later, the 17th package was released. Alongside new export bans, the EU made another gesture alarming for Astana: it broadened the criteria for "facilitation" and promised to target not only goods but also banks that "facilitate the circumvention" of the embargo [Finance], [Council of the EU]. Brussels has so far used general wording, but leaks about the upcoming 18th package increasingly mention the term "third-country banks" [Ukrainska Pravda].

The contrast is particularly striking when comparing the fates of Kazakh firms with European intermediaries. Throughout the entire sanctions saga, only one EU citizen has fallen under EU restrictions – Dutch trader Niels Troost, accused of selling Russian oil above the price "ceiling" [Reuters]. In 2023, German broadcaster SWR reported that over 30 German firms were implicated in "grey" schemes supplying equipment to Russia. However, the German Mechanical Engineering Industry Association stated that firms were "by and large" adhering to sanctions rules and laws, and no consequences followed.

Overall, the rule of "don't punish our own" holds, even when it concerns businessmen who moved to the EU from sanctioned jurisdictions. Over the years of Vladimir Putin's presidency, many prominent entrepreneurs left Russia for various reasons, including Evgeny Chichvarkin, Mikhail Khodorkovsky, and Oleg Tinkov, some of whom finance the activities of Russian opposition figures settled in Europe. Public or even tacit opposition to the Kremlin serves as both a "pass" and insurance against scrutiny and criticism for Russian businesses residing in Europe, should intelligence services or journalists find grounds to suspect an individual – even a former Russian now holding an EU passport – of violating sanctions. Russian billionaires living and working in Europe, Petr Aven and Mikhail Fridman, managed to get sanctions partially lifted against them through the courts. True, Aven had to sacrifice over £750,000, agreeing to its confiscation.

A characteristic example of entrepreneurs of Russian origin but now holding European passports are brothers Mikhail and Evgeny Skigin. In the public sphere, they are known as former owners of the St. Petersburg Oil Terminal, recently seized from them by the Russian Prosecutor General's Office for violating Russian legislation. According to European media, money received from transporting oil products, including for the needs of the Russian military-industrial complex, flowed through Cypriot offshore companies before settling in European banks. Restrictions under European law did not prevent this.

Previously, in Moscow, Mikhail Skigin participated in street protests supporting Alexei Navalny and publicly defended European policy towards Russia. Yet, despite this, he did not lose his business ties with Russia until this April [https://mdza.io/k/O__bjxrFEA]. After the invasion of Ukraine, international sanctions were imposed on Russia, but thanks to the Skigins, Russians received Polish cosmetics, despite clear prohibitions. Together with Mikhail Zhilkin, a Polish residence permit holder, Mikhail and Evgeny Skigin supplied Polish cosmetics under the Bioteq brand, as well as consumables and equipment for its production to Russia. This potentially violated the ban established under the EU's sectoral sanctions against Russia, enshrined in Council Regulation (EU) No 833/2014. However, no sanctions against them have followed so far.

The paradox emerges: while Kazakh mechanics from MetallStan have their accounts closed in Prague, German citizens of Russian origin handle multi-million dollar flows, manage supplies of sanctioned goods, and – at least for now – remain off the blacklists [https://theins.ru/korrupciya/85048].

As experts emphasize, we find ourselves in a difficult situation. "Of course, we are strategic allies with Russia. But we cannot fail to comply with the sanctions regime for one simple reason – we are very dependent on the same USA, which has invested nearly $150 billion in Kazakhstan's oil and gas sector," remarked a well-known politician Yermukhamet Yertysbayev, Chairman of the People's Party of Kazakhstan.

Political scientist Talgat Kaliev holds a similar position: "We are close allies with Russia; it is our neighbor, we cannot escape that. But, at the same time, we maintain the sanctions regime imposed by the civilized world. However, complying with it is also quite difficult because we operate within the Eurasian Economic Union, meaning we have no customs border with the Russian Federation," he explained in an interview with Ukrainian media.

The experience of recent years offers several lessons. The first is obvious: the geography of founders long ago ceased to be insurance. The EU strives to demonstrate it targets the entire supply chain, but in practice, the unwritten rule "don't touch our own" still applies, as confirmed by the story of the Skigins and many other Russian entrepreneurs with European passports.

The second lesson is documenting every transaction. If a Kazakh exporter of machine gears cannot explain the final delivery point, their contract in Hamburg risks being "frozen" as quickly as those of secretive Swiss traders.

And the third lesson is time. Today, European energy needs the Kazakh barrel, but Brussels is already discussing new quotas for "green" synthetic oil after 2030. The sooner Astana proves its sanctions "cleanliness," the longer the current honeymoon with the EU will last.

Kazakhstan finds itself in a unique position: it simultaneously fills the vacuum in the EU oil market and undergoes a stress test on the transparency of its supply chains. Behind the external shine of export statistics lies strict mathematics: one or two questionable shipments are enough for the window of opportunity to slam shut. Therefore, the main capital of Kazakh business today is not only oil but also reputation.

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