UAE banks block Russian payments for China tech over sanctions fears

A representative from one of the leading electronics distributors revealed that since the beginning of August, banks in the UAE, especially those in Dubai, have started refusing to process payments for electronics by Russian companies. He noted that through supply channels in the UAE, between 10 and 20 percent of all laptops going to Russia are shipped, and in other categories, this share may reach even 30 percent, according to kommersant.ru.

The problem arose when payments were made for electronics that did not physically go to the UAE but directly to Russia. Russian companies used firms registered in the UAE to transfer funds to China, taking advantage of low commissions of 1 to 3 percent. The report states that UAE banks rejected payments due to fears of secondary sanctions from the US, which had already affected Chinese banks.

In the spring, Chinese banks began blocking payments for electronic components from Russian companies due to fears of sanctions. As a result, Russian electronics manufacturers had to start making payments through companies in other Asian countries.

Oleg Osipov, CEO of Beshtau, confirmed in an interview with the portal that problems with bank payments in Dubai began around July. He noted that the Chinese side initiates the blocking of transactions. As an intermediary point, Dubai does not produce electronics but imports them from China. After the Ukraine conflict outbreak, many Russian companies established their own firms in Dubai to process payments for electronic components imported from China. In 2023, around a thousand new Russian companies were established in the UAE.

Gusein Imanov, the founder of Jacky’s brand, also pointed out problems with payments for consumer electronics and components by banks in Dubai. He noted that Russian companies found a way to process financial transactions; however, the costs of these operations increased due to higher commissions. He predicts that by the end of the year, there might be a shortage of electronic equipment and components, which could contribute to an 8-10 percent increase in prices.

Additionally, Osipov reported that Chinese banks began requiring Dubai firms to provide information on the origin of funds and customs documentation related to exported goods. In his view, due to prolonged logistical and financial chains, the prices of electronic components in Russia may increase by 5 percent by December.

Vitaly Mankiewicz, chairman of the all-Russian organization Russian-Asian Union of Industrialists and Entrepreneurs, emphasized that the Chinese side is reluctant to conduct transactions through third countries. He also noted that the latest US sanctions, announced at the end of August, have increased pressure on countries cooperating with Russia. As a result, entities trading with Russia and China via Dubai may take preventive measures in the face of the threat of sanctions.