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Kyrgyzstan|opinion & analysis|March 9, 2024 / 05:01 PM
Foreign agents law, sanctions, banks. Interview with U.S. Ambassador Lesslie Viguerie

AKIPRESS.COM - U.S. Ambassador Lesslie Viguerie talked about possible implications of adoption of the foreign agents bill, sanctions against Kyrgyz companies, export of IT products to the United States and possible establishment of corresnpondent relations between the banks of two countries in an interview with Tazabek.

- President of Kyrgyzstan Sadyr Japarov asked U.S. Secretary Antony Blinken not to interfere in the internal affairs of the country. What are your comments?

- Well, it's standard diplomatic practice to consider correspondence between two governments as confidential. So I'm not going to comment on the specific contents of any diplomatic correspondence between our governments.

But what I can say is that the U.S. government will continue to be committed to having an open dialogue with the Kyrgyz Republic on a full range of issues including our belief that having a free press and vibrant civil society are critical parts of maintaining a democracy.

- If The Kyrgyz Parliament passes Foreign Agents Law, how much it will limit US assistance through local non-governmental organizations?

- Let me be clear first that the U.S. remains committed to providing assistance that benefits the Kyrgyz people. That's our bottom line. But I'd also be remiss if I didn't note that our ability to do this really could be hampered by the law. In the end, it depends on what version of the law gets passed. It's still in parliament.

The majority of assistance that the United States provides in Kyrgyzstan goes through NGOs. Those are implementing partners. And if NGOs are unable to operate then our assistance will not be able to be delivered to Kyrgyzstanis.

That means, our ability to provide hot meals and textbooks to school kids, provide critical medical support to treat dangerous diseases, or work with Kyrgyz farmers to boost agricultural exports, and support the transition to a new, more environmentally sustainable economy — all those are going to be limited potentially by this legislation.

I think sometimes we get lost in the old discussion among loose accusations about so-called ‘grant eaters.’ The NGOs we support provide assistance to real Kyrgyz people. That happens not only here, in Bishkek, but all over in the regions.

- Could you tell us about the trade turnover between our countries in 2023? How has it changed and why? What are the main factors of changes?

- I'd say it's actually a bright in our bilateral relationship because trade between the U.S. and the Kyrgyz Republic is steadily increasing. In 2023, U.S. exports in Kyrgyzstan were $141 million, which is up by 56%. Imports to the United States from the Kyrgyz Republic were $12.7 million, which is up 35%. So we are see a growing trade relationship.

I think it reflects the fact there is a lot of potential in the U.S.-Kyrgyz trade relationship. I'd say in particular areas like the IT sector and digital industries.

We are far away from the United States when we are sitting here. But that sort of physical distance isn't significant when you're talking about things like software exports or back-office processing, which allows someone sitting here in Kyrgyzstan to export to the United States or to provide services.

I was at High Tech Park two weeks ago. I found there that the U.S. is the largest and fastest growing market for High Tech Park member companies, accounting for about 40% of their exports. I think it's pretty impressive and what is really impressive is that High Tech Park is projecting now that in 2024, total exports of software and intellectual property could reach $200 million a year. A large part would be going to the U.S.

$200 million means that it's right up there with textile and agricultural product exports. That is something that I do not think gets enough attention in the Kyrgyz press or with the public– the fact that Kyrgyzstan is becoming an IT power in Central Asia. It allows Kyrgyz to tap their skills and expertise in a growing industry. That benefits both countries.

- What actions does the U.S. take to support businesses and entrepreneurs in Kyrgyzstan? Could you name American companies or institutions that are interested in large investment projects in Kyrgyzstan?

- There is already a number of U.S. companies that operate in the Kyrgyz Republic. Some of them are well-known service industries as KFC or the Hyatt. Those are franchises.

And there’s others that are not as well known. For instance, Coca-Cola, provides a lot of services, which are valuable to other companies; it’s not just the drink. It's also how they make Coke and those processes that are significant. John Deere (Deere & Company), which is a big tractor manufacturer. They provide a lot of maintenance contracts for agricultural equipment.

I do think that it's important for the U.S. and Kyrgyzstan to identify the areas where there is a need here in Kyrgyzstan and identify what U.S. companies would be able to meet those needs. I spend a lot of time working with U.S. firms and trade associations to demonstrate that there are opportunities in the Kyrgyz market. We help facilitate those communications.

Two nights ago, I did a virtual call with my colleagues, U.S. ambassadors in Uzbekistan and Tajikistan, with 91 companies and universities in the United States that are very interested in exploring critical minerals. They had a lot of questions about what the business environment was like, as well as some specific questions about what Kyrgyzstani mining laws look like, and what the potential opportunities are here. I think they are significant. I'm hoping that this will lead to more U.S. companies interested in providing services here, as Kyrgyzstan looks to develop all the critical minerals.

The other thing we do is support English language training in this country. I see English as a real door-opener for a lot of Kyrgyz who want to participate in the global economy. 60% of the internet is in English. Getting people feeling comfortable with English helps them work not just with American firms, but a lot of firms in a lot of ways. The international language of business is English.

Our efforts to promote English language instruction are just one way of encouraging the growth of the Kyrgyz economy. It also means jobs and investments.

- What kind of work does the U.S. government conduct with Kyrgyz state bodies and the private sector to prevent circumvention of sanctions?

- February 24th marks the second anniversary of the full-scale invasion in Ukraine. What the sanctions are designed to do is focus on a narrow category of about 45 harmonized tariff codes. These sanctions aren't designed to prevent Kyrgyzstan from having economic relations with Russia. That's not the intent at all. It's focused on these 45 items – such as aviation parts and circuit boards and other items – that we identify with our friends and partners, including Europe, Japan, and South Korea, are going to weapons. These are dual-use items that have been found in Russian weapons, found on the battlefield.

We look very carefully at whether countries are permitting parallel exports to take place. I want to emphasize, it's just 45 items. It's not the huge range of trade which is probably been diverted because of the sanctions in Europe. That, we do not care about. We do care about preventing potential parallel exports to Russia that fuel the Russian military. That's something we share with our partners.

On February 23rd, the U.S. Treasury sanctioned a Kyrgyz company called Ukon LLC. That company was sending aircraft components and parts to Russia in violation of U.S. export control legislation. That is why they got put on a sanctions list.

Treasury has also sanctioned Russia's national payment card system joint stock company, which is «MIR». Russia used it to build out its financial infrastructure to avoid other sanctions. That's why we sanctioned «MIR».

I should mention two other Kyrgyz companies that were added to the [Department of Commerce Entity List] list:

• Muller Markt LLC
• ProffLab LLC

Those companies were also found to be shipping items to Russia.

To give an idea of how this works: these companies often order items from suppliers in the United States, Europe, South Korea, or Japan and are misleading about who the ultimate customer is.

Our law enforcement authorities are going after companies that aren't paying enough attention to the sort of orders they get on these items if they're going to Kyrgyzstan.

So, the company orders some part, it comes here and then it is re-shipped to Russia immediately. These parts, such as aviation parts — they aren't going to any aircraft here in Kyrgyzstan. They're going to Russian aircraft. It is a lucrative area because the Russians are willing to pay more than average in order to get these goods.

- What do we do with the Kyrgyz government? How do we engage?

- We talk to the Kyrgyz government pretty frequently when we have information. We do it proactively. So that if we get indications that there is a Kyrgyz company involved in this trade, we go to the government and alert them, asking them to take action against these companies.

Today, I saw in the news that two companies that we identified back in July have now been liquidated. And that's what we would like to see — that these companies be put out of business. Because their sole purpose is to act as middlemen.

Not all, but most of them often are set up by Russians, and they were set up after February 2022. People are making money.

We expect the Kyrgyz government to address these concerns. We understand that the government has instituted an interagency body to take a hard look at some of these transactions.

The other thing we do is provide education. We would rather educate people in the government, the financial sector in particular, and other economic sectors about what we are looking at. Why do we care and what transactions should trigger concerns for them?

The goal here is not to punish Kyrgyz companies. It's to prevent the re-export of a very narrow category of goods. Sometimes that gets lost in the discussion; that people think the U.S. wants Kyrgyzstan not to have economic relations with Russia. That's not true. That would be a ridiculous thing to ask of Kyrgyzstan.

- Do you have plans to conduct education programs for financial sector workers and banks?

- Yes, we do. It's more specific, technical training for banks in particular. They have a concept called «Know your customer». They need to know who they are dealing with in order not to run in problems with sanctions.

It’s technical, and there is education about how you do that within various electronic banking systems. But what Kyrgyzstan would like and what I'm frequently asked about by the Kyrgyz government is a correspondent banking relationship with a U.S. bank, which I also think would be positive in the relationship because that allows banks to essentially use transactions that facilitate trade.

It would allow them to engage in transactions with the U.S. financial system in an easy way rather than jumping through a lot of hoops.

I think this is great and something we have encouraged. But, if banks are engaged in transactions, which we think run afoul of the sanctions regime, then no U.S. bank will be interested in having that relationship with a Kyrgyz bank. This is an ongoing discussion, but it is an important indication of both how much we want to support Kyrgyzstan’s' economic development and growth, but at the same time have concerns about what engagement looks like with Russian banks.

There is probably at least one U.S. bank that is interested in pursuing this and certainly, this is something we encourage. In the end, it's a private company. They make their own decision. They look at the size of the market, and the Kyrgyz market is relatively small. They look at how Kyrgyz banks act consistently with international financial standards. They have these “Know your customer” concerns as well. So that all factors into how the bank makes a decision. The bank wants to make money too.

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