UAE banks halt transactions for Russian companies amid U.S. pressure
Russian businesses face increased payment scrutiny as UAE banks are now blocking and delaying transactions linked to Russian companies amidst a fresh wave of U.S. sanctions. These new restrictions add to the immense challenges the Russian economy faces due to Western-imposed sanctions, tightening the financial noose as overseas anti-sanction "hubs" fall apart under the threat of secondary sanctions.
The UAE had emerged as a crucial financial "hub" for Russian entities, facilitating their trade operations. However, this key channel has encountered severe disruptions amid the latest U.S. sanctions, impacting over fifty banks, including the state-owned Gazprombank. UAE banks have significantly toughened their payment verification processes, stalling transactions for Russian companies. Reports from the Russian news agency RBC indicate that this deteriorating situation sharply escalated in November. Initially, transactions through Dubai banks took merely 1-3 days, now they can take up to two weeks or even a month in some cases.
Several companies report funds being held or returned, with some transactions disappearing altogether. Instances abound where funds deducted from Emirates accounts have yet to be reflected in Russian bank accounts or returned. Most Russian businesses operating through the Emirates highlight the drastic decline in transaction conditions. The latest U.S. restrictions force banks to reevaluate cooperation terms, subjecting payments to more stringent scrutiny. Consequently, for certain commodities like electronics and industrial equipment, UAE banks have ceased transaction activities altogether.
Russian businesses warn of a potential scenario where only one or two UAE banks remain willing to process transactions at all. This development threatens their capacity to conduct payments via this trade route. Earlier, Reuters reported a 10.5% decline in yuan-denominated exports from China to Russia in November amid payment issues. Earlier this year, Russian businesses also broadly complained about heightened scrutiny and transaction refusals from Kyrgyz banks.