SMUGGLING IN KYRGYZSTAN

SMUGGLING IN KYRGYZSTAN

Researcher Alexander Kupatadze wrote: Smuggling has been an increasing problem in Kyrgyzstan since the break up of the Soviet Union. The country, situated on the ancient Silk Road is a natural transit point for various legal and illegal goods. Illicit trade has already grown to a point where it threatens the national security of the country since it destroys the internal market for legal goods, promotes bribery, strengthens organized crime groups and various political criminal clans and encourages money laundering. In general corruption, the presence of organized crime and a high level of collusion on the one hand and illicit trade on the other are mutually reinforcing. [Source: Alexander Kupatadze, PhD candidate, School of International Relations St. Andrews University, UK , Visiting Research Fellow, Social Research Center, American University of Central Asia Bishkek, Kyrgyzstan, 2007 ^^^]

“The smuggling of legal and illegal goods in Kyrgyzstan is closely related to bribery and collusion between official and unofficial structures. The geopolitical location of the country, its insecure borders, presence of organized crime groups, corrupt and inefficient law enforcement are the main factors facilitating illicit cross-border trade. ^^^

“The networks of smuggling in legal goods and those engaged in trading illicit goods frequently overlap in Kyrgyzstan. The well-elaborated smuggling channels for Chinese goods for instance can easily be used for drugs trafficking or vice versa. Organized crime groups and political-criminal clans engage in everything that generates high profits. Representatives of law enforcement structures either take bribes and facilitate smuggling or are directly engaged in smuggling. ^^^

“Unlike drug trafficking, the smuggling of legal goods is mainly implemented by petty traders, although white-collar officials and organized crime groups are also involved. High-level interest in sustaining smuggling is clearly shown by corruption in the structures that are supposed to fight smuggling and the ownership of markets by highranking officials.” ^^^

Smuggling Trends in Kyrgyzstan

Researcher Alexander Kupatadze wrote: “Kyrgyzstan is a poor, mountainous country with a gross national income (GNI) per capita of $440 in 2005 (Atlas method). Despite some improvement in the past few years, the country remains one of the poorest in the world with about 40 percent of the population living below the poverty line. The agricultural and industrial production base is small. Cotton, tobacco, wool, and meat are the main agricultural products and these products together with gold and hydro-electricity make up the bulk of the country’s exports. [Source: Alexander Kupatadze, PhD candidate, School of International Relations St. Andrews University, UK, 2007 ^^^]

“The size of the shadow economy is quite high and is estimated to be 53 percent of GDP and is worth 50.5 billion som (around 1.222 billion USD) per annum. Smuggling and corruption are rampant. According to the state customs committee the main items smuggled are fuel, diesel, spirits, wheat and wheat flour. Nutritional products and medicines are also frequently smuggled. The UNDP report of 2006 suggests that a huge quantity of excisable goods is smuggled, especially champagne, wine, cognac and beer.^^^

“However contrary to the official statistics, some Kyrgyz experts argue that smuggling scales are greater. According to them around 40 percent of the fuel sold in the republic is contraband. The situation has significantly improved in recent years: in 2002 over 70 per cent of oil products consumed in Kyrgyzstan was contraband. Fuel smuggling still represents a major problem for the Kyrgyz economy: overall the capacity of the local market in fuel is around 450 thousand tons per year, which means that 180 thousand tons of fuel is smuggled annually resulting in the loss of more than 500 million soms (USD 12 million) annually for the state budget. Kazakh and Russian fuel is mainly smuggled to Kyrgyzstan via the Chui River in the North. ^^^

“Smuggling of tobacco products was also a major problem for the country. For instance in the mid 1990s around 70-90 percent of tobacco products sold in the country was smuggled. However, smuggling cigarettes has gradually died out and in 2003 it amounted to only 5 percent of overall volume. Alcoholic products are also widely smuggled into Kyrgyzstan. For instance, in late 90s the state budget was losing 600 million som (14.5 million USD) annually from the illegal sale of alcohol. The situation has not changed much since then.” ^^^

Smuggling Between China Kyrgyzstan

Researcher Alexander Kupatadze wrote: “The main problem is illicit trade on the Kyrgyz-Chinese border. In 2005 the Minister of Finance emphasized that the main sources of illegal income from customs are trade from China and Turkey. Smuggling from China has been on the rise in recent years. Several Kyrgyz experts reported that when President Bakiev went to China in 2006 and had a meeting with his Chinese counterpart, he allegedly expressed a desire to increase trade with China up to 1 billion USD. However the former mentioned that trade had already reached that level and this put the Kyrgyz president in an embarrassing situation. [Source: Alexander Kupatadze, PhD candidate, School of International Relations St. Andrews University, UK, 2007 ^^^]

“Thus, the discrepancies in the official figures reported by the Chinese and Kyrgyz authorities raise particular concerns. The Kyrgyz statistics committee reports that imports from China in 2005 amounted to approx. 103 million US dollars, while official sources of China say that Chinese exports to Kyrgyzstan amounted to 972 million USD.^^^

“There are “huge volumes of unrecorded imports from China to Kyrgyzstan. Many of the smuggled Chinese goods do not stay in Kyrgyzstan. Most are re-exported, for the most part illegally, to Kazakhstan and then onwards to Russia and a smaller proportion goes to Uzbekistan. It should be noted here that Kyrgyzstan, alone of its Central Asian neighbours, belongs to the World Trade Organisation (WTO) and imposes customs duties of just five per cent – three times less than Kazakhstan. Thus traders prefer to bring Chinese foodstuffs and consumer goods first to Kyrgyzstan and then take it onwards to Kazakhstan. The increasing problem of illicit trade on the Kyrgyz-Kazakh border has obliged Nazarbayev’s government to take strict measures. Just recently, in June 2007, the Kazakh authorities decided to tighten control over the border with Kyrgyzstan. ^^^

“According to a UNDP study, the main moving forces behind re-exports are shuttle traders through two large centres of the shuttle trade: Dordoi market in Bishkek and Karasuu market near Osh. Commodities imported from China, Turkey and some other countries are sold there to shuttle traders from neighbouring countries or Kyrgyz traders serving these countries. Uzbek cotton destined for Europe is dealt with in a similar way: the existing government system of low-priced mandatory supplies of cotton by Uzbek agricultural enterprises creates an economic rationale to import it illegally to Kyrgyzstan and sell the cotton through Kyrgyz traders. Interestingly petty smuggling/shuttle trading is largely tolerated, because it provides hundreds of jobs for impoverished people.^^^

“Nevertheless, apart from petty smuggling by shuttle traders, some of the illegal trade in legal goods is organized. It is very difficult to give any estimates of the proportion of organized smuggling in the overall smuggling of legal goods, which is certainly less compared to drugs trafficking, which is almost one hundred percent organized. However anecdotal evidence suggests that the illegal flows of goods are protected, and sometimes directly controlled, by high-ranking officials, organized crime groups with political connections and representatives of law enforcement structures. The following sections concentrate on the complicity of the aforementioned groups in illicit trade.” ^^^

Smuggling and Corruption in Kyrgyzstan

Researcher Alexander Kupatadze wrote: “Due to pressure from influential groups and bribery, legal provisions in the country are vague and often arbitrarily and inconsistently enforced. Bureaucracy is inefficient and by the government's own admission corruption is widespread. Bribes as a proportion of the annual sales of the companies are greater in Kyrgyzstan than the CIS (Commonwealth of Independent States) average and fifty one percent of companies, an unusually high number, almost double the CIS average, indicate that unofficial payments are frequent. The average bribe paid to officials by businesses is 5 thousand som (120 USD). Corruption is pervasive in every branch of the government, especially the police, security service (SNB, successor of the Soviet KGB), tax department, customs and courts. [Source: Alexander Kupatadze, PhD candidate, School of International Relations St. Andrews University, UK, 2007 ^^^]

“The level of collusion between the ‘upperworld’ and ‘underworld’ is extremely high and sometimes the representatives of official structures are directly involved in criminal activities, such as smuggling. The arrest of high-level officials is rare and if they occur, it indicates a clash between groups of larger influence. At the middle level, the chances of a corrupt bureaucrat going to prison largely depends on the power of his/her krysha - protector in the upper level of bureaucracy. ^^^

“Thus, the high level of collusion between official and unofficial structures and widespread bribery has made the law enforcers primary criminals. The representatives of law enforcement structures are frequently involved in smuggling, especially in drugs trafficking. According to one local observer in Osh “the police are getting more involved in drugs and now primarily it’s the police and local authorities that are engaged in drug trafficking”. However the drugs trade is protected and controlled from the highest level of bureaucracy in Kyrgyzstan. Now an MP, a former racketeer and criminal, gained a share in the drugs business after Bayman Erkinbaev, also a member of the Jogorku Kenesh and drug baron of the South was killed in September 2005. Interestingly the brother of this MP is on the state customs committee. Nevertheless, this person is not a key player according to several observers and journalists and he is controlled from an even higher level that goes as far as the very top of the Kyrgyz bureaucracy. Moreover, several allegations that have some plausibility as they are corroborated by numerous sources, suggest that two brothers of President Bakiev are heavily involved in drugs smuggling.^^^

Smuggling and White-Collar Corruption in Kyrgyzstan

Researcher Alexander Kupatadze wrote: “White-collar complicity also concerns the smuggling of legal goods, which is less organized than drugs trafficking though. However several high-ranking officials are involved here as well. After the “revolution”, the Minister of Finance stated that the people who had come to power in the key positions are interested in maintaining the flows of illegal incomes from the customs. One well-informed Kyrgyz expert argued that the main kryshas of smuggling in legal goods are mostly regional government administrations, for instance an activist in the ‘tulip revolution’ who was subsequently appointed to a high-level position in the Osh regional administration. Other well-known examples of white-collar involvement are: an MP from the South is involved in smuggling cotton and other goods on the Uzbek-Kyrgyz border; The family of a former high-ranking official and close ally of President Bakiev, dubbed the ‘power broker’, who allegedly controls various contraband operations from China. [Source: Alexander Kupatadze, PhD candidate, School of International Relations St. Andrews University, UK, 2007 ^^^]

“Overall four structures are responsible for combatting smuggling: SNB, MIA (Ministry of Interior), Customs committee and Finance police. There is no formal division of functions between the agencies and no collaboration between them at an official level. Informally these organizations are frequently involved in fighting with each other for control of lucrative contraband flows and sometimes they collaborate in levying illegal payments from the smugglers. However, generally the customs department is considered to be most corrupt among these four organizations.^^^

“Interestingly the high-ranking officials of the customs committee are always considered to be the main illegal financiers of the ruling families, dubbed as ‘kashilioks’ (purse). Thus Muratbek Malabaev, a high-ranking official in the customs department from 1998-2003, was one of the closest people to Akaev’s family and according to Kyrgyz experts, monthly payments, a share of the illegal revenue from illicit trade (around 20 percent) was paid to the family by him. Malabaev was a businessman as well and managed to win a seat in the Jogorku Kenesh in 2000. He was re-elected in 2005, although he was obliged to flee after the ‘tulip revolution’ and was subsequently expelled from the legislative body in 2006. Malabaev was linked to a number of former and current officials, including a former General Prosecutor, former Minister of Interior, Bayman Erkinbaev, the assassinated drug baron in the South and others. He used his contacts to avoid prosecution and create problems for competitors even after the ‘tulip revolution,’ despite his pro-Akaev stance. He also managed to keep some of his property, including a casino in Bishkek.^^^

“In the “post-revolutionary” period, new ‘kashilioks’ were born according to the Kyrgyz press. Salai Aidarov, brother of Nurgazi Aidarov, an alleged drug trafficker and son-in-law of the very influential Usen Sydykov, former head of the Presidential administration, was appointed in 2006. Several journalists and experts referred to him as ‘Kashiliok 2’ and alleged that he is providing illegal monthly payments to President Bakiev’s family.^^^

Smuggling, Bribes and the Police in Kyrgyzstan

Researcher Alexander Kupatadze wrote: “At a lower level, representatives of law enforcement structures take bribes to turn a blind eye to contraband activities. A member of the Jogorku Kenesh stated in December 2006: I have evidence that representatives of the SNB take bribes from the head of customs checkpoints and the latter, for their part, let the contraband goods enter Kyrgyzstan. Sometimes, representatives of law enforcement structures escort illegal goods to their destination themselves, for instance an officer in the financial police was arrested in Osh in April 2007 for escorting a truck loaded with contraband metal pipes. Allegedly officers of the same organisation escort trucks of contraband goods from Dordoy market in Bishkek. [Source: Alexander Kupatadze, PhD candidate, School of International Relations St. Andrews University, UK, 2007 ^^^]

“Thus corruption pyramids can be seen in every structure fighting smuggling. The bribes collected from personnel (for appointments, promotion, ranks), individuals and businesses (for letting illegal goods pass, escort services, etc) are distributed from the bottom up, reaching the highest levels of the ruling regime. As a result, influential political-criminal clans maintain an interest in keeping contraband goods flowing and this also makes the fight against smuggling meaningless. Therefore only petty smuggling is fought and highly organized contraband frequently goes unimpeded. ^^^

“It also should be noted here that many influential politicians own shares in various markets/bazaars in Bishkek as well as in the regions. Frequently they co-own these markets together with criminals. All these bazaars are supplied with contraband goods to a large extent and this also adds to the argument of high-level interest in sustaining smuggling.” ^^^

Organized Crime Groups and Smuggling in Kyrgyzstan

Researcher Alexander Kupatadze wrote: “There are about 22 criminal groups operating in Kyrgyzstan. Most of these are concentrated around the capital city, Bishkek, and the Osh area in southern Kyrgyzstan. These gangs are either directly involved in legal and illicit businesses or provide protection for wealthy businessmen. [Source: Alexander Kupatadze, PhD candidate, School of International Relations St. Andrews University, UK, 2007 ^^^]

Organized crime groups are more involved in the smuggling of illegal goods, such as drugs. For instance the group of Jenish Rahimov in Osh, South Kyrgyzstan and the family of Chechen criminal leader Aziz Batukaev in the Chui reigion of the North both control part of the drugs trafficking routes in their respective regions. However empirical evidence shows that organized crime groups engage in anything that generates high profits. For instance, the Karabaltinskaia group in the North controls the smuggling of wheat, alcoholic beverages and fuel from Kazakhstan.The head of the group is Almaz Bokushev, a former freestyle wrestler having links with several former and serving officials, among them a former Minister of Internal Affairs. ^^^

“In the South, an Uzbek organized criminal group is involved in smuggling legal goods to and from Uzbekistan. The group is linked to and protected by an MP of Uzbek origin from the South and the mayor of Karasuu, site of Karasuu market. A. Jumabaev, an influential criminal from the town of Jalalabad in the South is involved in the smuggling of burr walnut to Uzbekistan.^^^

“Organized crime groups not only protect or directly engage in smuggling activities, but they frequently control local markets/bazaars and moreover, dominate economic activity in certain regions. For instance, in Talas region the organized crime group having links to the regional and district administration controls the prices of haricot beans, the main agricultural product grown in the region. The normal buyers are Turkish businessmen, who are obliged to buy the product through this crime group since they are prevented from talking directly to local producers. The same applies to cotton production in the South, according to Kyrgyz experts. Despite the significant involvement of organized crime groups in smuggling legal goods the main contributor to the criminal economy of Kyrgyzstan is the drugs trade.” ^^^

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Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated April 2016

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