UAE banks limit ties with Russia fearing secondary sanctions

Leading UAE banks are abandoning links with Russian clients in light of mounting concerns about secondary Western sanctions over Russia’s war. The impact on Russian firms is massive, prompting them to seek new financing options. This trend demonstrates the growing interconnection of global finance and foreign relations.

Following threats of secondary sanctions from the United States, major financial institutions in the United Arab Emirates have begun closing bank accounts owned by Russian nationals and restricting settlements with Moscow, as the Vedomosti reported, citing anonymous Russian government and business sources.

Several of the UAE’s largest banks have begun to dissociate themselves from Russian clients, signaling growing concern among multinational financial institutions about the long-term impact of Western sanctions.

This development, which has emerged from the financial hub of the Middle East, highlights the complicated web of international ties and the far-reaching effects of US-led sanctions against Moscow.

Reports have emerged describing how top-tier UAE banks, including First Abu Dhabi Bank, Emirates NBD, and Abu Dhabi Commercial Bank, have practically terminated commercial relationships with Russia.

Western powers, particularly the United States, are imposing secondary sanctions due to their tough stance against companies that enable Russia’s military-industrial complex. The shutdown of Russian accounts and restrictions on transactions are part of a larger campaign to economically isolate Russia in response to its war against Ukraine.

In December, the US threatened to cut off access to its financial system for foreign banks that conduct business with firms that support Russia’s defense industry.

Washington’s concerns have already caused several Chinese and Turkish banks to limit transactions and terminate Russian citizens’ accounts.

Faced with the threat of secondary penalties, UAE banks have halted the processing of payments to and from Russia and have started to close Russian citizens’ accounts. Three Russian entrepreneurs operating in the UAE told the daily that they began having issues processing payments in September 2023.

Elvira Nabiullina, the head of Russia’s Central Bank, acknowledged last week that international trade transactions were “deteriorating” and claimed the national bank she oversees was “thinking about solutions.”

Despite extraordinary Western sanctions imposed in reaction to Russia’s invasion of Ukraine, Moscow and the UAE have worked closely together as OPEC+ oil cartel partners.

Abu Dhabi is one of the few foreign capitals still offering direct flights to and from Moscow, and President Vladimir Putin paid a visit to the UAE in December. There were also several Emirati firms caught on helping Russia circumvent Western sanctions and penalized by secondary restrictions.