As the world approaches the second anniversary of the Russian invasion of Ukraine, followed by sanctions and the banning of exports to Russia by many Western countries, there has been a notable spike in these exports to other countries in the Commonwealth of Independent States (CIS). Even excluding the increased exports to Ukraine, exports from European Union countries to CIS nations rose over 50% year-over-year a few months after the beginning of the war, with Kyrgyzstan emerging as the major beneficiary. By the end of 2022, EU exports to Kyrgyzstan had surged by 953% year-over-year. While these trends are more pronounced among European countries, largely due to geographical proximity, Japan and the United States also experienced elevated trade with the Kyrgyz Republic post-February 2022.

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Indeed, Kyrgyzstan is not the only CIS country to benefit from importing from EU countries. According to the latest available IMF data, as of October 2023, all CIS countries, including Russia, have increased their imports from the EU compared to pre-war 2021 levels. Nonetheless, Kyrgyzstan leads the pack with staggering 1,026% growth versus the end of 2021, followed by Armenia and Kazakhstan with growth rates of just 212% and 162.4%, respectively.

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What makes Kyrgyzstan such an attractive market for EU exports, especially in periods after sanctions were imposed on Russia? While the official foreign trade data draw attention to this curious trend, they don’t tell the whole story. A deep dive into alternative data like freight activity sheds light on what could be behind this unusual trend. In line with the growth in imports from the EU and other regions, the volume of freight carried in Kyrgyzstan surged by 29.7% in 2022 compared to pre-war 2021, and by 51% in 2023 versus 2021. What is more interesting is how this freight activity has been distributed across the country. While most of Kyrgyzstan’s regions recorded double-digit growth consistent with the overall growth for the country, the growth in one particular region, Talas, was more than impressive. In 2022 and 2023, the freight carried in the Talas region was 11.8 million and 14.9 million tonnes, respectively, up from only 2.7 million tonnes in 2021. In relative terms, the volume of freight carried in Talas was 7.9% of the country’s total in 2021, while in 2022 and 2023, this share rose to 26.7% and 29.2%, respectively.

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A sharp increase in imports is not unprecedented, especially for an emerging economy like Kyrgyzstan. It could be a result of rapid economic activity growth or currency appreciation that has made imported goods from trade partners cheaper. However, neither of these factors has taken place in Kyrgyzstan over the past two years. The country’s real GDP growth was 6.3% in 2022, and it decelerated to 4.2% year-over-year in the first three quarters of 2023, while after a sharp appreciation against the euro in the first six months after the beginning of the war in Ukraine, the Kyrgyzstani som has returned to its pre-war levels. On the other hand, the sudden increase, disproportionate with the rest of the country, in freight activity in Talas, a region bordering Kazakhstan, one of Russia's closest allies in the region, maybe a reasonable explanation for this phenomenon, raising concerns of potential sanctions evasion.

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