how the United Arab Emirates make money from sanctions

(This material was created in Gdansk for the Reuters news service in Russia, where regulations limit coverage of the Russian special military operation in Ukraine)

May 25 (Reuters) – The United Arab Emirates has become a key hub for Russian gold trading after Western sanctions against Moscow cut off more traditional Russian export routes, Russian customs records show.

Documents detailing nearly 1,000 shipments of gold sent in the year since the start of Russia’s “special operation” in Ukraine show that the UAE imported 75.7 tons of Russian gold worth $4.3 billion, compared to just 1.3 tons in 2021 r.

The next largest sales destinations were China and Turkey, which bought around 20 tons from February 24, 2022 to March 3, 2023. According to customs data for this period, these three countries together with the UAE accounted for 99.8% of Russia’s gold exports.

In the first days after the outbreak of the conflict in Ukraine, many international banks, transport companies and precious metal processors stopped trading Russian gold, which was usually sent to London – the center of trade and storage of this precious metal.

The London Bullion Market Association banned trading in Russian gold produced after March 7, 2022, and by the end of August, the UK, European Union, Switzerland, US, Canada and Japan completely banned imports of bars from Russia.

However, the data shows that Russian gold producers quickly found new markets in countries that did not impose sanctions on Moscow, such as the United Arab Emirates, Turkey and China.

According to Louis Marechal from the Organization for Economic Co-operation and Development, there is a risk that Russian gold will be melted down and processed in order to hide its origin, and then it will go back to the US and European markets.

“If Russian gold goes into the country, is melted down by a local refinery, purchased by a local bank or trader and then sold on the market, there are risks,” Marechal said. “Therefore, due diligence is important for end-buyers who want to ensure compliance with sanction regimes.”

The UAE Government Gold Committee stated that the Emirates have clear and robust procedures to combat illicit goods, money laundering and sanctioned entities.

“The UAE will continue to trade openly and fairly with foreign partners in accordance with all applicable international standards set by the United Nations,” the statement reads.

A PROSPEROUS GOLD CENTER

In an attempt to further isolate Russia, Washington has warned countries including the United Arab Emirates and Turkey that they could lose access to G7 markets if they do business with US-sanctioned entities.

Data examined by Reuters does not indicate violations of US sanctions by these countries.

According to customs reports obtained by Reuters, between February 24, 2022 and March 3. In 2020, gold exports amounted to 116.3 tons, although the consultant Metals Focus estimates that in 2022 Russia produced 325 tons of this precious metal.

The rest of the extracted probably either remained on the territory of the Russian Federation or were exported, but not included in the report. Reuters was unable to determine how much of Russia’s total gold exports were included in the data.

Most of the shipments of Russian gold to China went to Hong Kong. The Chinese Foreign Ministry said that cooperation with Russia should not be subject to interference or pressure from third parties.

The Turkish Ministry of Finance did not respond to a request for comment. The Russian government, customs authorities and the central bank did not respond to requests for comment on the gold exports.

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(Peter Hobson with Lily Forudi in Paris and Reuters in Beijing, translated by Tomasz Kanik)