Why has the UAE been Included in the EU Sanctions list?
Under the third paragraph of the press release of the new sanctions package recently approved by the European Commission it is written that “[...] In addition to the Russian and Iranian entities already listed, this now also covers entities registered in China, Uzbekistan, the United Arab Emirates, Syria and Armenia”. But why are UAE entities targeted for “tighter export restrictions for dual-use and technology items”?
Already in March 2022 the Financial Action Task Force, the global money laundering (AML) and terrorist financing (CFT) watchdog, listed the UAE in the list of jurisdictions with strategic deficiencies in terms of AML/CFT. One year after that report, officials from the EU, US and UK visited the country to pressure UAE authorities over compliance with Western sanctions against Russia. Western officials rightly feared that the UAE had become a market for “re-exporting”, a way of sidestepping western sanctions against Moscow. In fact, since the start of the war, bilateral trade between the UAE and Russia skyrocketed in critical and strategic sectors. For example, UAE exports of electronics (including drones) increased by more than seven fold compared to last year. Additionally, the UAE since the start of the war imported from Russia 75,1 tonnes of gold (taken from Sudan) up from the 1.3 tonnes in 2021.
What does all this mean for the future of EU sanctions and relations with the UAE? As mentioned above, EU officials will maintain pressure on UAE authorities so that they will tackle the issue of re-exporting. Moreover, it is foreseeable that the UAE will try to effectively tackle the problem, as the country is more dependent on Western powers than Russia or Asia. For example, in its recent history it is not the first time that the UAE has been pressured on such issues. In fact, at the beginning of the 2010s something similar happened with Iran as its bilateral ties were growing at 30% per year with a big Iranian community based in Dubai investing in real estate. Following the wave of sanctions against Iran imposed by the US, EU and UN, the UAE was forced to take draconian measures to appease Western powers. Thus, it is likely this scenario will repeat itself. While the UAE benefits from the re-export market, it will seek to avoid the political consequences of non-compliance.