As the U.S. trade dispute with China escalates, Beijing’s involvement in the war against Ukraine and its military collaboration with Russia have been expanding. China does not want Russia to lose: North Korean involvement in the Ukraine war is unlikely without China’s blessing. Ukrainian authorities have claimed that several hundred Chinese nationals are fighting on the Russian side. Moreover, China supplies chemicals for Russian missiles, dual-use goods, and military drones. Beijing is using a clandestine network of shell companies to help funnel arms into Russia and bypass international sanctions. And as China’s invasion of Taiwan, with Moscow’s assistance, could happen as early as 2027, a more effective approach to undermine the Sino-Russian alliance should be an American priority. Breaking the Central Asian “bridge” of supplies and financial transactions is therefore crucial.
Once on the periphery of Western priorities, Central Asia is playing an increasingly important role in the escalating confrontation between the major powers. Moscow has used Central Asia to evade international sanctions for its war against Ukraine. Additionally, both China and Russia are manipulating some of the poorer countries in the region to clandestinely finance their growing military cooperation that facilitates Russia’s war.
In this equation, the small landlocked country of Kyrgyzstan and its banks play a notable role in the expanding China-Russia military-industrial axis. Located between America’s two main geopolitical rivals, the government is well-positioned to facilitate their cooperation and evade Western sanctions. In January 2025, the US Treasury sanctioned Keremet, a Kyrgyz bank with links to the pro-Russian Moldovan oligarch Ilan Shor, who himself has been sanctioned for an alleged plot to overthrow the pro-Western government in Moldova. However, Washington needs to ensure that no new financial institutions promote the anti-Western axis, including the Capital Bank of Central Asia, which the Kyrgyz government designated to replace Keremet.
Kyrgyzstan has nationalized the Capital Bank of Central Asia and appointed it to handle transactions with Russia to replace Keremet bank, which the U.S. sanctioned in January 2025 for operating in the “defense and related materiel and financial services sectors of the Russian Federation economy.”Capital Bank is now supervised by former Keremet board members who took over its assets. It includes a partnership with A7, a Russian payment platform set up to replace the SWIFT payment system. It reportedly finances military and dual-use goods and is co-owned by the central Russian defense sector bank, Promsvyazbank (recently renamed as PSB), and Shor, a Moldovan oligarch and majority shareholder in A7. The A7 Platform was established in October 2024 to facilitate international trade settlements for Russian companies and provides a workaround for cross-border payments to avoid sanctions. PSB transfers funds in rubles via the A7 payment platform into accounts at the Capital Bank of Central Asia, where they are converted into foreign currencies, including dollars and yuan. The money then flows through shell companies to purchase weapons from Chinese firms. The funds could also support the pro-Moscow political campaign to destabilize Moldova.
On March 17, 2025, the Cabinet of Ministers of the Kyrgyz Republic issued an order naming Open Joint-Stock Company “Capital Bank of Central Asia” as the “exclusive settlement bank” for transactions in Russian rubles. The Kyrgyz authorities effectively centralized all cross-border money transfers between Kyrgyzstan and Russia through this single bank.
Such moves should draw the scrutiny of the U.S. Treasury’s Office of Foreign Assets Control (OFAC), leading to sanctions against Capital Bank. Washington has already targeted several banks in third countries for helping Russia circumvent sanctions. The sanctions against Keremet, which served as a channel for Russia-linked payments, took effect on March 1, 2025. According to the U.S. Treasury, Keremet’s officials coordinated with Russian officials and Promsvyazbank (PSB), a central Russian state-owned defense industry bank, to “enable cross-border transfers.”PSB, often described as Russia’s “main military bank,” was designated by OFAC in 2022 to support Russia’s defense sector.
Analysts speculate that with Keremet effectively sidelined by sanctions, Capital Bank’s new role could make it a successor conduit for the same type of Russia-related transactions. Adding to these concerns, investigative reports highlight several controversial figures and entities connected to Capital Bank’s sphere of activity, including individuals and companies already under international sanctions for their role in various illicit networks. Prominent among them is Shor – a politician and businessman sanctioned by the EU and Canada for corruption and pro-Russian interference and designated by the U.S. as working with Moscow to subvert democracy in Moldova. He was engaged in money laundering and embezzlement related to the 2014 theft of $1 billion from Moldovan banks. Shor, currently a fugitive, was implicated by the U.S. Treasury for involvement in discussions about using Kyrgyz banks to evade sanctions. By focusing on the Capital Bank of Central Asia, Washington can more effectively combat the extensive web of international sanctions evasion, money laundering, and financing of the Sino-Russian military axis.