West urges UAE to crack down on alleged Russian sanctions violations

Western allies are urging the United Arab Emirates to halt key exports to Russia as they try to starve Vladimir Putin’s army of spare parts to sustain the war on Ukraine.

Officials from the United States, the European Union and Britain have visited the wealthy Gulf state in recent weeks to shed light on the broad scope of its trade restrictions and urged Emirati officials to crack down on alleged sanctions violations, according to people involved in the visit.

The U.S. government is concerned that the UAE is becoming a hub for shipping items such as electronics that could be repurposed to aid Russia’s war effort. A particularly worrisome issue, according to people familiar with the discussions, is so-called “re-exports,” in which goods are transported through the UAE to circumvent restrictions.

James O’Brien, head of the U.S. Sanctions Coordination Office, visited the UAE last month along with EU sanctions envoy David O’Sullivan and U.K. sanctions chief David Reed to push their case. “Our main requirement [to the UAE] it was they who stopped re-exporting [and] Acknowledging these re-exports is problematic,” a Western official said, adding that “dialogues continue”.

According to Russian customs data analyzed by the Free Russia Foundation, UAE exports of electronic components to Russia rose more than sevenfold to nearly $283 million last year, making the category the largest type of product exported in that direction.

The UAE will export 15 times more microchips to Russia in 2022 than a year ago, with the value of the product trade jumping from $1.6 million in 2021 to $24.3 million last year. The Gulf state also exported 158 drones worth nearly $600,000 to Russia last year. to the data.

The discussions with the UAE come as Western allies shift their focus from imposing new rounds of sanctions to strengthening enforcement and encouraging private sector compliance.

O’Sullivan told the Financial Times Last month, Western countries saw an “exceptional spike” in Russia’s trade with some countries, but declined to name them. Allies are eyeing the United Arab Emirates, Turkey and countries in Central Asia and the Caucasus. The UAE is also seen as a favored destination for wealthy Russians looking for a place to protect their assets.

U.S. officials want to highlight the potential consequences for companies involved in facilitating the flow of goods that the Russian military can use.

“Part of the message to the private sector — in any of these countries — is that they’re playing roulette,” O’Brien said. “Anyone who trades in those cargoes, they’re sanctioned now because some of the cargo they’re shipping is showing up on the battlefield.”

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

Dubai has long been a re-export hub for the region. Its Jebel Ali Port remains one of the largest transshipment areas in the world. In an effort to step up enforcement against such export hubs, the European Union late last year introduced new measures that would enable it to sanction individuals who help European companies evade sanctions.

Among complaints about the lack of visibility, one of Europe’s demands was to improve information on the UAE’s actual exports to Russia.

“The UAE recognizes its critical role in maintaining the integrity of the global financial system,” an Emirati official said. “The UAE takes this responsibility very seriously and has clear and robust processes in place to deal with sanctioned entities.”

U.S. Treasury Undersecretary Wally Adeyemo warned in a speech last week that the Kremlin had “deepened financial ties and trade flows,” with “disturbing patterns emerging in several countries.” . He added that if countries were unwilling to “put an end to evasion of sanctions,” the U.S. and its partners would use “a variety of economic tools” to act. Brian Nelson, the U.S. Treasury Undersecretary for Terrorism and Financial Intelligence, also visited the UAE last month.

Tens of thousands of Russians have emigrated to the UAE, opening companies and buying property in the business and tourist hub of the Gulf. The influx has raised concerns in Western countries that some may have concealed the involvement of sanctioned oligarchs.

The United Arab Emirates, which has granted Russian bank MTS a license, said it was studying options after the bank came under sanctions from the United States and Britain last month.