ASTANA, KAZAKHSTAN - Kazakhstan sits between Russia, China, and the West, and it trades with all three. So it built a financial centre in its capital where firms from all sides can do business under one set of rules - English common law, applied by its own court, separate from the rest of the country's legal system. The concept was straightforward: create a neutral space and allow capital to develop trust in it. Eight years later, Western sanctions are affecting Kazakhstan, raising the question of whether a neutral space can endure amid an increasingly polarised world.
A Court of Its Own, Modelled on the Gulf
The Astana International Financial Centre (AIFC) opened on 05 July 2018, based on a model first used in Dubai, Abu Dhabi, and Qatar: a small zone inside a country that runs on familiar English-style law to assure foreign investors of the safety and security of their financial services. The centre has its own regulator and its own judges, hired from England and Wales. The President of Kazakhstan chairs the council that sets its direction, and past members of that council include a former chairman of JPMorgan Chase International and a senior banker from Citigroup. Financial firms based there pay no corporate income tax until 2066.[TH1]
By mid-2023, firms from 75 countries had registered, according to the International Monetary Fund (IMF): 190 from China, 104 from Russia, 53 from the United Kingdom, and 44 from the United States. China Construction Bank opened the first foreign bank branch in AIFC, and the Big Four audit firms - Deloitte, EY, KPMG, and PwC - followed. This combination of rivals under one roof is exactly what the centre was built for; however, since 2022, it has also become a problem owing to a directed sanctions regime.
The Centre Is Smaller Than It Sounds
The IMF's own review shows the limits. About 85% of the roughly 2,000 firms registered by mid-2023 were not financial firms at all - they were IT companies, crypto miners, and holding companies. In fact, all of the assets held by financial firms in the centre added up to only 0.6% of Kazakhstan's GDP at the end of March 2023. Banks based in the AIFC may not take deposits from ordinary Kazakhs or deal in the local currency. Even the centre's own court spends most of its time on domestic disputes. Kazakhstani firms often choose it for its independent judges and English-style procedure, while still letting ordinary Kazakh law decide the substance of the case, which is why Kazakh law governed 97.5% of the court's finished cases. One thing has grown quickly, though: according to the US State Department, the number of cases the court completed each year rose from five in 2019 to 1,000 in 2024.
While small size provides some protection, it is not permanent. The centre aims to offer more services to Kazakh residents and connect with the country's main stock exchange by 2030. The IMF has warned against this in recent years - in 2024 and again in a review published in January 2026 - that running two sets of financial rules side by side tempts firms to shop between them, a problem it calls “regulatory arbitrage”. The bigger the centre grows, the more it will matter, and the more attention it draws.
Sanctions Have Been Rising Since 2022
The pressure on the AIFC has been increasing over time. In February 2022, the United States sanctioned Russia's largest banks - including VTB, Sberbank, and Alfa-Bank - to cut Russia off from the international financial system after its full-scale invasion of Ukraine. Sanctioning a bank's headquarters does little good if its foreign branches can still move money on its behalf, so Washington extended the designation to these banks' subsidiaries abroad, including their operations in Kazakhstan. Kazakh authorities found new owners for the other two banks and had them removed from Washington's sanctions list. However VTB Bank JSC did not change hands and remained the only Kazakhstan-based bank still under US sanctions years later.
On 23 October 2025, the European Union sanctioned a Kazakhstan-based bank for the first time, extending the pressure being applied by the United States. It targeted VTB Bank JSC, the local arm of Russia's second-largest lender, over its use of the System for Transfer of Financial Messages (SPFS), a payments network Russia built after Western countries cut it off from SWIFT. Banks in Kyrgyzstan and Tajikistan were listed in the same round, and the United States and the United Kingdom had punished similar firms elsewhere in the region two months earlier.
In April 2026, the EU went further. It sanctioned a Kazakh trading company, United Trading Group, for sending a chemical used in making computer chips towards Russia's weapons industry through a German middleman. In the same round, the EU used a new kind of tool for the first time. Until then, its sanctions worked on a company-by-company basis: name a firm, then cut it off. The tool used instead, formally Article 12f of the EU's Russia sanctions regulation, targets a whole country instead. It lets the EU ban exports of specific goods to an entire country, provided it judges that the country is failing to prevent goods from reaching Russia. The EU used it for the first time against Kyrgyzstan, Kazakhstan's neighbour and fellow member of the same trade bloc, banning exports of machine tools and telecommunications equipment after trade data showed a sharp rise in re-exports of these goods to Russia. It is a sign that enforcement is shifting from chasing individual firms to treating whole regional economies as a risk.
Behind these developments lies a bigger American threat. Since December 2023, the US Treasury's Office of Foreign Assets Control (OFAC) has had the power to cut off any bank in the world that helps pay for Russia's war industry, even if the deal never directly affects America. Losing access to American banking is fatal for most lenders, so most obey. This is the pressure that made Turkish banks drop Russia's payment cards. It also impacted Dubai’s International Financial Centre when the United Arab Emirates spent two years, from 2022 to 2024, on the grey list of the Financial Action Task Force (FATF) for weak money controls. Kazakhstan is not on that list, and staying off it now matters a great deal to Astana.
Why Kazakhstan Cannot Simply Pick a Side
Market commentators have long held that global finance runs through a small number of hubs, and whoever controls a hub can watch the money passing through it, or block it. A centre built to sit between rival powers stands exactly where that power is felt. This fits Kazakhstan's entire approach to foreign policy, which scholars call 'multi-vector': the country works with Russia, China, and the West all at once, rather than choosing one. The AIFC is that approach reflected through financial means.
Geography sets hard limits on that policy. Russia sold Kazakhstan $18.25bn of goods in 2024 - about 30% of everything the country imported, and more than any other supplier - according to Kazakhstan's own statistics bureau. At the same time, the European Union is Kazakhstan's biggest trade and investment partner, with two-way trade of $45.1bn in 2025, on figures cited by the centre's governor.
Kazakhstan is also a member of the Eurasian Economic Union (EAEU), a trade bloc with Russia that removes customs checks at the border. Researchers who studied the region find no sign that the Kazakh state helps Russia dodge sanctions on purpose, but they conclude that the open border creates “structural vulnerabilities that can be exploited by sanctions-evasion networks”. The IMF notes that Kazakhstan has already tightened some rules on moving money abroad, partly to lower its own sanctions risk.
So far, the centre itself has not been affected. No firm licensed inside it appears on any Western sanctions list, and the banks and traders sanctioned so far all operate in Kazakhstan's ordinary economy, outside the centre's separate legal system. This distinction may not hold indefinitely, since it depends on how far sanctioning authorities choose to extend their reach. Two developments would mark a real change: a Western sanction reaching a firm licensed inside the centre, or Kazakhstan being placed on the FATF watchlist. Neither has occurred so far. The outcome will determine whether a country can still maintain financial ties with rival powers at a time when the global financial system is becoming more divided.
