An international plan to escalate sanctions against the UAE because of its relations with Russia

Western experts expect Western pressure on the UAE to intensify and escalate sanctions against it because of its relations with Russia and its help in overcoming international positions against it.

According to experts, Western pressure will intensify on Abu Dhabi in the coming months to limit its cooperation with Russia, and Emirati companies are now not ruling out the occurrence of these pressures.

But the question they ask is when will it happen and to what extent will the Western pressures or sanctions that will be imposed on the Gulf state reach?

Some Western countries are concerned about the significant role played by the UAE in weakening Western sanctions against Moscow through trade in re-exporting banned Western goods to Russia and playing a mediating role in exporting oil and its derivatives to other countries.

Through the inducements it offers to Russian merchants, the UAE contributes to compensating Russia for the Western markets it lost in energy and lifting the blockade on some spare parts and technical goods prohibited from being sold to Russian companies.

An analysis at the Carnegie Institute for Studies believes the UAE seeks to make the most of Western sanctions against Russia. However, in the end, it may face great pressure and possibly sanctions from Washington, which has been monitoring Emirati financial institutions since last year, and anti-money laundering institutions put them on the grey list.

The Financial Times recently reported that the United States, Britain and the countries of the European Community sought to persuade officials in the UAE to reduce their trade dealings with Russia, but they failed in that.

It is not known what the next steps these countries will use against the UAE, which has not yet joined Western sanctions against Russia.

According to unofficial figures, the Russian invasion of Ukraine and the subsequent Western sanctions have led to an unprecedented trade boom in the UAE.

The UAE is witnessing an increase in the number of wealthy Russians and their companies operating in the UAE, which has led to a record increase in bilateral trade volume.

Tens of thousands of Russians have settled in the Emirates, especially in the Emirate of Dubai, after the Kremlin forces invaded Ukraine more than a year ago.

According to a report by the American Carnegie Institute, more than a million Russians visited the UAE in 2022, an increase of 60 per cent from the previous year, and these visitors are not just tourists. Many have moved to the Emirates with their businesses and financial assets.

Western reports also indicate that Russian businessmen have shifted from being a small group in the UAE market to a significant driving force reviving the UAE’s real estate, stock and re-export markets.

Since the application of Western sanctions on Moscow, the UAE has become one of the best destinations for Russian companies fleeing Western sanctions.

The report believes that the increase in the popularity of the Emirates as an alternative destination for wealthy Russians and their companies has become amazing, as everyone who wants to leave Russia is considering moving directly to the Emirates, where he finds a group of Russian friends who pave the way for him to build new business relations.

The emigration of Russians automatically led to a rise in real estate prices and the cost of living in the Emirates to levels much higher than in Europe.

Wealthier Russians and top managers of companies tend to move to the Emirates, while the high cost of living forces small and medium-ranking employees of the same companies to move to countries such as Georgia, Armenia, Kazakhstan or Turkey.

The Russians are looking for trading partners to compensate for their severed relations with the West, and they find that in the Emirates.

According to the Carnegie Institute, trade exchange between Russia and the UAE grew by 68% in 2022 to a record level of $9 billion, of which Russian exports accounted for $8.5 billion, an increase of 71%.

The UAE market is also receiving large quantities of precious metals, which Russia can no longer sell in the West.

According to Western companies’ calculations, gold and precious stones accounted for nearly 40 per cent of Russian exports to the UAE last year.

This is in addition to the expansion of Russian agricultural exports, representing many of the goods destined for the UAE.

In the wake of the severe sanctions imposed on Russian oil and its derivatives, Russian companies began using the UAE as one of the storage stations and re-exports to other markets.

Emirati companies obtain Russian petroleum raw materials and fuel derivatives at low prices and sell them abroad.

Although the UAE is one of the largest oil producers in the world, in the first ten months of the last year, it bought about 3.2 million barrels of Russian oil with the aim of re-export and about 1.5 million tons of oil products for its own needs.

Western countries may not object to purchases of Russian oil and its derivatives at present because of their need for cheap energy to reduce inflation. Still, they may use this later as a black point against the UAE.

In terms of trade in goods and electronic goods, Russian imports of banned goods are now taking place through the Emirates.

The Carnegie Institute notes that deliveries of electronic components and spare parts from the UAE to Russia have grown seven times in size since the Russian invasion of Ukraine to become one of the most significant UAE exports to Russia. For example, shipments of microchips have increased 15 times, and UAE companies sold 158 drones to Russia in 2022.

Despite the prosperity of trade and the profits generated by the “sanctions trade” on Emirati companies, pressure is increasing on Emirati companies and banks.

In the past, many Emirati banks stopped allowing Russians to open bank accounts due to US pressure exerted by the Treasury Department on those banks. In addition, Emirati financial institutions now apply more stringent requirements to Russian businessmen than their counterparts from other countries.

Obstacles are increasing for Russian companies seeking to rent real estate space for storage in the UAE.

Western sanctions forced Russia’s largest bank, Sberbank, to close its representative office in the UAE last year, which was seen as a commercial springboard in the region.

The UAE has not yet imposed any sanctions on Russia, but US financial authorities closely watch much of the country’s banking and advisory sectors. Emirati companies fear that they will be subjected to severe US sanctions because of their dealings with Russia.

But last February, the Financial Times reported that the UAE had granted a Russian bank a rare license.

According to the newspaper, the UAE’s agreement to grant a work license to the Russian MTC bank may exacerbate fears in the West that this wealthy Gulf country will become a potential financial haven for Moscow. MTC Bank is the first foreign bank to obtain a license in the UAE several years ago.

The US Treasury Undersecretary for Terrorism and Financial Intelligence, Brian Nelson, raised the issue of licensing the Russian bank on a visit to Abu Dhabi a few weeks ago.

In contrast, officials in Abu Dhabi dismissed these concerns, saying that the UAE seeks to stem financial flows from sanctioned Russian entities while refusing to discriminate against non-sanctioned companies and individuals.

The development comes at a sensitive time for the UAE, which last year was placed under enhanced oversight by the Financial Action Task Force, a global anti-money laundering watchdog.

The Global Financial Action Task Force to combat money laundering and terrorist financing, which is based in Paris, included the UAE in its “grey list” last March 2022, which prompted the state authorities to accelerate the intensification of control over cash flows within the banking sector and put difficulties in front of transferring The financial assets of wealthy Russian companies and companies to Emirati banks.

“This is not the first time that the UAE has been exposed to pressure from the United States, as it has previously been exposed to these American pressures because of its trade with Iran.”

The UAE was considered the financial centre of Iran throughout the years of US sanctions, as Iranians accounted for about 30 per cent of all real estate investments in Dubai. In 2009, the total volume of Iranian investment in the UAE was estimated at $300 billion.

Bilateral trade between Tehran and Abu Dhabi has also grown 30 per cent annually, from $2.2 billion in 2001 to $24 billion in 2010.

This volume of trade exchange between the UAE and Iran exceeds the volume of its trade exchange with China, which is less than $16 billion in 2021, despite China being Iran’s largest trading partner.