UAE Considers Export Controls That May Hurt Russia’s War Machine

(Bloomberg) -- The United Arab Emirates is considering introducing export licenses for a list of items including chips and other components that are sanctioned by the US and European Union and used by Russia’s military in Ukraine, according to people familiar with the matter.

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If implemented as envisaged, the system could see permits withheld for dual-use goods destined for the battlefield, potentially hurting the Kremlin’s ability to feed its war machine. The people, who spoke on condition of anonymity to discuss private matters, cautioned that the Persian Gulf nation has yet to make a final decision.

Asked about the plan, a UAE official said the country takes its responsibilities as a business hub seriously: “The UAE has a legal export control framework in place and is continuously monitoring the export of dual-use products.”

Russia has so far been able to get around some of the trade restrictions imposed on it by the US, UK and Europe by routing banned goods via third countries such as the UAE, Turkey and some Central Asian nations that have not introduced sanctions themselves.

Already a global logistics and trade hub, the UAE has seen a surge in imports of technology such as semi-conductors and advanced electronics from Europe and the US over the past 18 months. Many of these items have been found in Russian weapons in Ukraine or are needed by Moscow to produce them.

Western officials have ramped up demands in recent months that the UAE stops acting as a gateway for Russia to get around the restrictions. Earlier this month, sanctions envoys from the US, UK and EU visited the UAE to raise their concerns, including that Dubai remains a key transshipment point for components supporting Moscow’s war effort, some of the people said.

Though so-called dual-use items account for a fraction of Russia’s trade with the UAE, any action that hinders its ability to use a specific trade route is significant because it would make efforts to source essential parts more costly and complicated, they added.

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The UAE is one of several traditional Western allies, including Turkey, that surprised the world last year by refusing to take sides or impose sanctions on Russia. Both have since become magnets for Russian money and business fleeing increasingly hostile jurisdictions elsewhere.

The EU and US are seeking to persuade so-called intermediary countries to curb the flow of about 45 categories of “high-priority battlefield items,” including certain advanced technologies, electronics and other components used in cruise missiles, drones and Ka-52 helicopters deployed by Russia against Ukraine.

The UAE has its own import and export control list, which includes hundreds of chemical and non-chemical items. It would expand that and broadly look to mirror the 45 US and EU categories with its mooted export license program, according to the people. The program would likely require companies re-exporting those items to provide evidence that they’re destined for civilian use.

Gray List

Adopting the permit system could bolster the UAE’s push to be removed early next year from the Paris-based Financial Action Task Force’s gray-list of countries that don’t do enough to uncover illicit fund flows, according to some of the people.

The EU has already sanctioned several entities registered in the UAE, accusing them of directly supporting Russia’s war machine. The bloc also adopted a new tool in June that would allow member states to ban the export of key goods to companies, and eventually countries, seen as helping Russia get around sanctions.

That tool, which could ultimately prevent sensitive items from reaching intermediary countries, is expected to be implemented if diplomatic efforts fail.

The UAE official said the country monitors compliance with sanctions and remains “in close dialog with our international partners, including the United States and European Union, concerning the ongoing conflict in Ukraine.”

(Updates with UAE comments in third and final paragraphs.)

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