West presses UAE to clamp down on suspected Russia sanctions busting

Western allies are pushing the United Arab Emirates to halt exports of critical goods to Russia as they seek to starve Vladimir Putin’s military of components to sustain its war against Ukraine.

Officials from the US, EU and UK have in recent weeks visited the wealthy Gulf state to spell out the wide-ranging scope of their trade restrictions, and to press UAE officials to clamp down on suspected sanctions busting, according to people involved in the trips.

The US government is worried the UAE is becoming a hub for the shipment of items such as electronics that can be repurposed to help Russia’s war effort. One particular concern, according to people familiar with the discussions, is so-called “re-exporting”, where goods are routed through the UAE to sidestep restrictions.

James O’Brien, head of the US office of sanctions co-ordination, joined EU sanctions envoy David O’Sullivan, and David Reed, director of the UK’s sanctions directorate, on a visit to the UAE last month to press their case. “Our main request [to the UAE] is that they stop the re-exports [and] acknowledge these re-exports are problematic,” said a western official, adding that “conversations are continuing”.

Exports of electronic parts from the UAE to Russia jumped more than seven-fold last year to almost $283mn, making the category the largest type of product shipped in that direction, according to Russian customs data analysed by the Free Russia Foundation.

The UAE exported 15 times more microchips to Russia in 2022 than a year previously, with trade in the products jumping to $24.3mn last year from $1.6mn in 2021. The Gulf country also exported 158 drones to Russia last year, worth almost $600,000, according to the data.

The discussions with the UAE come as western allies shift their focus from unleashing fresh rounds of sanctions to tightening enforcement and encouraging private sector compliance.

O’Sullivan told the Financial Times last month that western countries had picked up “unusual spikes” in Russia’s trade with some states, while declining to name specific countries. The allies are watching the UAE, Turkey and countries in Central Asia and the Caucasus. The UAE is also seen as a favoured destination for wealthy Russians seeking a place to shelter their assets.

US officials want to underline the potential consequences for businesses involved in facilitating the flow of goods that can be used by the Russian military.

“Part of the message for the private sector — in any of these countries — is that they’re playing roulette,” O’Brien said. “Anyone who’s trading in these goods, they now are subject to sanctions because some of the goods they ship are showing up on the battlefield.” 

The UAE positions itself as a neutral regional power, balancing its close security and historical relations with western partners with increasingly close ties with military and economic powers such as Russia and China.

Dubai has long been the region’s re-export hub; its Jebel Ali port remains one of the world’s largest transshipment zones. In an attempt to tighten enforcement on such export hubs, the EU introduced new measures late last year enabling it to sanction individuals who help European companies evade sanctions.

Among Europe’s requests is for improved information on what the UAE actually exports to Russia, amid complaints about a lack of visibility.

“The UAE recognises its critical role in safeguarding the integrity of the global financial system,” a UAE official said. “The UAE takes this responsibility extremely seriously, and has clear and robust processes in place to deal with sanctioned entities.”

Wally Adeyemo, deputy US Treasury secretary, warned in a speech last week of “troubling patterns in several countries” where the Kremlin had “deepened its financial ties and trade flows”. He added that the US and its partners would act with “various economic tools” if countries were unwilling to “stamp out sanctions evasion”. Brian Nelson, the US Treasury’s under-secretary for terrorism and financial intelligence, also visited the UAE last month.

Tens of thousands of Russians have moved to the UAE, opening companies and buying properties in the Gulf’s commercial and tourist hub. The influx has raised concerns in western countries that some could be masking the involvement of sanctioned oligarchs.

The UAE, which has approved a licence for Russian bank MTS, said it was studying options after the lender was hit with sanctions by the US and UK last month.

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