UAE banks begin blocking payments made by Russian companies for electronics bought in China
In August, banks in the United Arab Emirates (UAE) began blocking payments for electronic components and consumer electronics purchased by Russian companies, according to a report published on Wednesday, August 28 by the Russian business daily Kommersant.
The payments are reportedly blocked even in cases where the goods do not enter the UAE.
"Russian organizations have been using UAE-based companies as intermediaries to transfer funds for electronics to China, with the goods directly shipped to Russia," a source told the newspaper.
According to the source, using UAE banks for these transactions resulted in a commission fee of just 1-3%. However, the banks have started refusing such operations due to the threat of secondary US sanctions.
Oleg Osipov, the CEO of the Russian electronics manufacturer "Beshtau," explained that many Russian companies established offices in Dubai following the onset of the war in Ukraine. Kommersant reported that around 1,000 Russian businesses have opened in the UAE in 2023 alone.
"The Chinese side is not very keen on conducting deals through third countries," noted Vitaly Mankevich, Chairman of the "Russian-Asian Union of Industrialists and Entrepreneurs."
According to Osipov, the block is initiated by Chinese banks, which have started requesting information from Dubai organizations about the origin of incoming funds and customs declarations.
During Russian President Vladimir Putin's visit to China in May, both sides discussed delays in payments through Chinese financial institutions. Prior to Putin's trip, US Secretary of State Antony Blinken reiterated warnings to Beijing about the threat of secondary sanctions against Chinese companies if they support Russia's defense industry.
Reuters reports that China has increasingly activated regional banks in the financial sector, making it harder for Washington to monitor their activities. Nonetheless, several challenges remain.
Reuters also notes that barter trade between Russia and China, particularly in agriculture, could become an alternative to bank transactions starting this fall. This exchange method would evade scrutiny from the United States.