Western threats to impose new sanctions on the UAE due to money laundering operations

The Financial Times revealed Western threats to impose new sanctions on the UAE due to money laundering and terrorist financing operations on its soil, especially from wealthy Russians fleeing international sanctions.

The newspaper stated that officials from the United States, the European Union and the United Kingdom had visited the UAE in recent weeks to pressure it to stop its exports of vital goods to Russia and crack down on suspected violations of sanctions against Moscow.

According to the newspaper, the US government is concerned that the UAE will become a centre for re-exports items such as electronics that can be reused to aid the Russian war effort.

A report by the newspaper stated: Western allies are pushing the UAE to stop its exports of vital commodities to Russia at a time when they are seeking to starve components of Vladimir Putin’s army to continue its war against Ukraine.

Officials from the United States, the European Union and the United Kingdom have recently visited the wealthy Gulf country to point out the broad scope of their trade restrictions and pressure Emirati officials to clamp down on suspected sanctions breaches, according to people involved in the trips.

The US government is concerned that the UAE could become a shipping hub for items such as reusable electronics to aid Russia’s war effort. According to people familiar with the discussions, one particular concern is so-called “re-exports,” in which goods are routed through the UAE to bypass restrictions.

James O’Brien, head of the US Sanctions Coordination Office, joined EU sanctions envoy David O’Sullivan and David Reid, director of the UK’s Sanctions Directorate, on a visit to the UAE last month to press their case.

“Our main demand [of the UAE] is to stop re-exports and recognize that this re-export is problematic,” said a Western official, adding that “talks are continuing.”

Exports of electronic parts from the UAE to Russia jumped more than sevenfold last year to nearly $283 million, making this category the largest type of product shipped in this direction, according to Russian customs data analyzed by Free Russia.

The UAE exported 15 times more microchips to Russia in 2022 than the previous year, with product trade jumping to $24.3m last year from $1.6m in 2021. According to the data, the Gulf state also exported 158 drones to Russia last year, worth nearly $600,000.

O’Sullivan told the Financial Times last month that Western countries had seen “extraordinary spikes” in Russia’s trade with some countries while declining to name specific countries.

The United Arab Emirates, Turkey, and the countries of Central Asia and the Caucasus are watching the allies. The UAE is also seen as a favourite destination for wealthy Russians looking for a place to house their assets.

US officials want to stress the potential consequences for companies involved in facilitating the flow of goods that the Russian military could use.

“Part of the message to the private sector — in any of these countries — is that they are playing roulette,” O’Brien said. Anyone who trades in these goods is now penalized because some of the goods they ship appear on the battlefield.

Dubai has long been the re-export hub of the region. Jebel Ali Port remains one of the largest transhipment areas in the world.

The European Union introduced new measures late last year to tighten enforcement on these export hubs, enabling it to punish individuals who help European companies evade sanctions.

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

Wali Ademo, the US deputy secretary of the Treasury, warned in a speech last week of “worrying patterns in many countries” as the Kremlin “deepens its financial ties and trade flows.”

He added that the United States and its partners would work with “various economic tools” if countries were unwilling to “eliminate sanctions evasion”. Brian Nelson, Undersecretary of the US Treasury Department for Terrorism and Financial Intelligence, visited the UAE last month for the same purpose.