UAE cancels Russia's MTS Bank licence, citing 'sanctions risk'

The UAE has cancelled the licence of Russia’s MTS Bank, giving the lender six months to wind down operations in the country, as it cites “sanctions risks” associated with the bank.

The decision comes as the UAE has faced pressure over US concerns the Gulf country is providing an economic lifeline to Russia amid its invasion of Ukraine.

In a statement on Friday, the Central Bank of the UAE announced that it had “decided to cancel MTS Bank’s Abu Dhabi license, wind down its operations within six months from the date of the decision…. and close the branch”.

During the six-month period to "wind down its operations", the bank would be barred from opening new accounts and carrying out any transactions apart from clearing prior obligations, the central bank said.

MTS Bank, which has branches in Moscow and Abu Dhabi, was included in a list of sanctions rolled out by the US Treasury in February as part of a US crackdown on Russian sanctions evasion.

Friday’s announcement marks a step back by the UAE, which initially defended its decision to grant MTS a licence after the US designation, saying that the bank “contributed to supporting legitimate trade between the two countries and servicing the Russian community in the UAE”.

Economic ties between the UAE and Russia have expanded since the invasion of Ukraine. Russians were the top buyers of real estate in Dubai last year. The flashy Emirate has attracted everyone from Russian oligarchs to tech workers looking to protect their assets from sanctions and escape Russia’s military draft.

Meanwhile, non-oil trade between the two grew by 57 percent in the first nine months of 2022, breaking all records.

In a sign of Washington’s frustration, US officials have expressed unusually blunt public concerns that Russia has been able to sidestep sanctions and export controls as a result of its economic ties to its ally, the UAE.

Earlier in March, a senior US Treasury official labelled the UAE a "country of focus" for the US, as it looks to choke Russia's ties to the global economy.

“We are specifically concerned about increases in trade with Russia in the kind of goods that can be used on the battlefield and those who are aiding designated Russian entities," Elizabeth Rosenberg, the assistant Treasury secretary for terrorist financing and financial crimes, said.

The UAE has sought to defend its position as the region's premier business and trade hub amid concerns over financial regulations. In March 2022, it was placed on a money laundering "grey list" by the Paris-based Financial Action Task Force, making it subject to greater scrutiny.

Like its larger neighbour, Saudi Arabia, the UAE has moved closer to Russia and China in recent years as part of a more independent foreign policy streak.

Emirati companies have been sanctioned by Washington for helping Iran evade sanctions. Abu Dhabi's talks with Washington to acquire the F-35 fighter jet broke down out of concerns Bejing would gain access to sensitive US technologies.