UAE banks block payments of Russian companies due to the risk of secondary sanctions

Banks in the United Arab Emirates have begun blocking payments by Russian companies for the supply of electronic components and equipment from China due to the threat of secondary sanctions, UNN reports citing the Russian media.

According to a representative of a large electronics distributor, banks refuse to make payments unless the electronics paid for from other countries remain in the UAE. Russian companies used firms in the UAE as intermediaries to transfer funds for Chinese electronics, which were then sent directly to Russia. Under this scheme, Russia received about 10-20% of all laptops, and in other categories of goods the share could reach 30%. The reason for choosing the UAE was the low bank commission - from 1 to 3%.

About a month ago, banks in Dubai began blocking payments for goods coming from Russia. According to Kommersant's source, the blocking was initiated by the Chinese side: Chinese banks demanded information from Dubai-based organizations about the origin of funds and customs declarations for exported goods.

Russian companies have found an alternative way to make payments for the supply of Chinese equipment, but with higher commissions, which, according to Kommersant's sources, could lead to a 5% increase in prices for electronic components in Russia by December.

Problems with payments through banks of "friendly countries" began in 2023, but in 2024 they intensified due to the threat of secondary sanctions. Those who violate the sanctions against Russia risk being placed on the SDN blocking list or having their correspondent accounts with US banks restricted.

After the U.S. expanded the scope for secondary sanctions in June, payments between China and Russia, even in yuan, became virtually impossible.

In July 2024, the percentage of refused payments from Russia through banks in Central Asia increased by 30%.

Recall 

The US sanctions against Russia have been particularly noticeable for the financial sector, with a number of banks in Georgia and Kazakhstan suspending transfers through the Russian payment system Zolotaya Korona.