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EU Says UAE to Curb Key Exports to Russia Used in War in Ukraine

(Bloomberg) -- The European Union’s executive told member states that the United Arab Emirates has agreed to restrict the re-export to Russia of sensitive goods used for military purposes in Ukraine.

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The European Commission briefed EU ambassadors on the development this week, according to people familiar with the matter. Turkey is considering a similar measure, the people said.

The moves would cover direct re-exports and would signify a win for Ukraine’s allies, which are trying to cut off the flow of military goods to Russia. Bloomberg reported previously that the UAE had been considering introducing the controls.

The EU has in recent months ramped up efforts to enforce its trade sanctions, focusing especially on clamping down on the Kremlin’s ability to get its hands on a high priority list of goods covering dozens of technologies and components used in weapons found in Ukraine or needed to produce them.

A UAE official said in an emailed statement that it restricts the export and re-export of identified dual-use products to conflict zones and has a legal export control framework in place through which it continuously monitors the export of dual-use products. The official added that the UAE remains in close dialog with international partners on the war in Ukraine and its implications for the global economy.

The European Commission and the Turkish trade ministry declined to comment.

After the EU and its Group of Seven allies banned the export of those goods to Russia, Moscow has managed to get around the restrictions by importing the items through third countries in central Asia as well as Turkey, the UAE and others.

Ukraine’s allies have been touring many of these countries in an attempt to convince them to curb the trade flows. EU states were told that recent data shows that direct exports to Russia from many of those countries has now started to fall but it remains above pre-war levels, the people said.

China and Hong Kong have become the jurisdiction of main concern, accounting for more than 80% of Russia’s purchases of the high priority items, said the people, who spoke on the condition of anonymity.

New Supply Routes

The Kremlin has also likely been able to develop new supply routes, with trade of the high priority goods from Turkey and Serbia to Kazakhstan and Kyrgyzstan showing an unprecedented and anomalous surge, as companies seek more convoluted routes even as direct ones are curtailed, the people said.

Still, one aim of the trade sanctions and the bloc’s diplomatic outreach to these so-called middle countries is to make it as costly as possible for Russia to import.

The EU’s most recent restrictive measures included various tools to tackle sanctions enforcement, such as a mechanism that would prohibit exports of certain goods to third country companies and nations, as well as listing firms. The US and UK have also sanctioned several third country companies.

A sanctions package the EU is set to propose in coming days is expected to include further measures and listings. The bloc is also expected to extend trade restrictions to more goods, including welding machines.

Challenge

One difficulty the EU faces is that many of these countries are slow in providing timely trade data or don’t provide information at all, making it difficult to fully assess the matter.

Underscoring the extent of the challenge, member states were told this week that between January and July more than 20,000 firms exported some €7 billion ($7.5 billion) worth of high priority goods to Russia, according to the people.

The vast majority of those companies were located in China and Hong Kong, followed by Turkey, the UAE — accounting for 6% and 4% of the trades respectively — Thailand, Malaysia, Taiwan, Singapore and Vietnam. The bulk of trades are carried out by a small number of firms.

Several nations, including Kazakhstan and Kyrgyzstan, apply export controls on the most sensitive goods but those assurances are often hard to verify, the people said.

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