Congressional Research Service Report: 'United Arab Emirates – Issues for U.S. Policy' (Part 2 of 2)

WASHINGTON, April 16 -- The Congressional Research Service issued the following report (No. RS21852) on April 15, 2021, entitled "The United Arab Emirates (UAE): Issues for U.S. Policy":

(Continues from Part 1 of 2)

Counter-Terrorism Issues/90

During the mid-1990s, some Al Qaeda activists were able to move through the UAE, and two of the September 11, 2001 hijackers were UAE nationals. The State Department reports on terrorism credit the UAE with thwarting planned terrorist attacks within the UAE as well as assisting with the foiling of some plots in the United States, including an AQAP plot in 2010. In December 2012, the UAE, working with Saudi Arabia, arrested members of an alleged terrorist cell plotting attacks in the United States. On the other hand, UAE authorities failed to prevent a December 1, 2014, killing of an American teacher by an extremist-inspired Emirati woman. In 2016, UAE courts convicted 30 out of 41 individuals (almost all were UAE citizens) belonging to a group called Shabab al Manara for plotting terrorist attacks in the UAE. The UAE has been strengthening the country's bureaucracy and legal framework to combat terrorism. The UAE is part of a Saudi-initiated GCC "Security Pact" that entails increased GCC information-sharing on internal security threats. There were no reported terrorist attacks in the UAE in 2019 or in 2020.

The United States and the UAE sometimes differ on designations of terrorist organizations. The 85 groups that the UAE government designates as terrorist include not only the Muslim Brotherhood but also U.S. and Europe-based groups that are not accused by the United States or any European country of terrorism,/91 including the U.S.-based Muslim American Society and Council on American-Islamic Relations (CAIR).

Antiterrorism Financing and Money Laundering (AML/CFT). The country is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a regional body modeled on the broader Financial Action Task Force (FATF). The UAE is a participant in the Counter-Islamic State Finance Group chaired by Italy, Saudi Arabia, and the United States, and it is a member of the Egmont Group of Financial Intelligence Units. In May 2017, the UAE joined the U.S.-GCC Terrorist Financing Targeting Center based in Riyadh, which has designated several AQAP and Islamic State-Yemen individuals and entities.

The UAE Central Bank's Financial Intelligence Unit is credited in State Department terrorism reports with providing training programs to UAE financial institutions on money laundering and terrorism financing, and making mandatory the registration of informal financial transmittal networks (hawalas). During 2018 and 2019, the government enacted and issued implementing regulations for updated anti-money laundering laws./92

However, in April 2020, the FATF found that the United Arab Emirates is not doing enough to prevent money laundering despite recent progress, and risks being including in the body's watchlist of countries found to have "strategic deficiencies" in AMF/CFT - the so-called "grey list."/93

Since 2012, there has been an FBI Legal Attache office at the U.S. consulate in Dubai to assist with joint efforts against terrorism and terrorism financing. However, some financial networks based in the UAE have been sanctioned by the Department of the Treasury for facilitating transactions for Iran and pro-Iranian regional factions in furtherance of Iran's "malign activities" in the region. These sanctions designations suggest that U.S. officials might consider the enforcement of UAE laws against money laundering to be insufficient.

Countering Violent Extremism. The UAE works with partners and has empowered local organizations to counter violent extremism. The Ministry of Tolerance has been active in promoting messages of tolerance and coexistence. The UAE-based "International Center of Excellence for Countering Violent Extremism," known as Hedayah ("guidance"), was inaugurated in 2012. The United States and the UAE jointly operate the Sawab Center, an online counter-Islamic State messaging hub./94

The center promotes information sharing with international police organizations when family members report on relatives who have become radicalized./95

Several UAE-based think tanks, including the Emirates Center for Strategic Studies and Research (ECSSR), the Emirates Policy Center, the TRENDS Institute, the Tabah Foundation, and the Future Institute for Advanced Research and Statutes, also conduct seminars on confronting terrorism and violent extremism.

Transfers from Guantanamo. The UAE has cooperated with U.S. efforts to reduce the detainee population at the U.S. prison facility in Guantanamo Bay, Cuba. During 2015-17, the Department of Defense transferred 23 detainees (mostly Yemeni nationals) from the facility to the UAE.

Port and Border Controls

The UAE has participated in a number of projects with the United States which are related to nonproliferation and nuclear security. For example, the government has received assistance from the State Department's Export Control and Related Border Security Program, which aims to build "national strategic trade control systems in countries that possess, produce, or supply strategic items, as well as in countries through which such items are most likely to transit." /96

The UAE has also participated in the U.S. Customs and Border Protection (CBP)-run Container Security Initiative. Under this program, CBP personnel work with foreign governments to screen U.S.-bound containers posing a "potential risk for terrorism."/97

As a GCC member, the UAE participates in the U.S.-GCC Counter-proliferation Workshop.

UAE participation in U.S. programs to improve UAE export control enforcement suggests that the country wants to avoid the disputes with the United States that occurred in the past on the issue. In 2004, two Dubai-based companies, SMB Computers and Gulf Technical Industries, were identified as conducting illicit sales of nuclear technology to Iran, Libya, and North Korea by Pakistan's nuclear scientist A.Q. Khan, and the Mayrow General Trading Company was sanctioned in 2006, after the company transshipped devices used to make improvised explosive devices (IED) in Iraq and Afghanistan./98

In February 2007 the George W. Bush Administration threatened to restrict U.S. exports of certain technologies to the UAE for the illicit exports. UAE authorities cited a September 2007 UAE law to shut down 40 foreign and UAE firms allegedly involved in dual use exports to Iran and other countries, and no U.S. sanctions were imposed on the country.

The UAE government supports the Department of Homeland Security's programs to collect U.S.-bound passenger information and operating a "preclearance facility" at the Abu Dhabi International Airport. In February 2006, the Committee on Foreign Investment in the United States--a body that reviews proposed foreign investments to ensure that the investment does not threaten U.S. national security--approved the takeover by the Dubai-owned Dubai Ports World company of a British firm that manages six U.S. port facilities. Congress expressed concern that the takeover might weaken U.S. port security in P.L. 109-234.

U.S. Funding Issues

The United States has provided small amounts of counterterrorism assistance to help the UAE build its capacity to enforce its border and financial controls. The Department of Defense provided $300,000 to the UAE to assist its counter-narcotics capability in FY2016 and $531,000 in FY2017. In FY2019, about $1.35 million in State Department funds were provided to the UAE to build its capacity to counter terrorism financing. In FY2020, the United States spent about $130,000 to train and build capacity for the UAE government to enforce its export control laws./99

Nuclear Agreement and Space Program/100

The UAE announced in 2008 that it would acquire its first nuclear power reactors to satisfy projected increases in domestic electricity demand. The United States and the UAE concluded a peaceful nuclear cooperation agreement pursuant to Section 123 of the Atomic Energy Act of 1954 (AEA; 42 U.S.C. 2153(b))./101 This agreement, which entered into force on December 17, 2009, included a UAE commitment to refrain from producing enriched uranium or reprocessing spent nuclear reactor fuel; both processes could produce fissile material for nuclear weapons. This provision is typically not included in peaceful nuclear cooperation agreements.

A number of U.S. and European firms have secured administrative and financial advisory contracts with the UAE's nuclear program. The Korea Electric Power Corporation of South Korea received the prime contract "to design, build and help operate the Barakah Nuclear Energy Plant," which is to contain four nuclear power reactors./102 The Emirates Nuclear Energy Corporation (ENEC), the institution administering the nuclear program, announced on August 1, 2020, that the first reactor has "successfully started up."/103 The "overall construction" of the four reactors is 94% complete, according to the ENEC announcement./104

In July 2014, the UAE formed a "UAE Space Agency." In September 2019, the country sent its first astronaut to the International Space Station. In July 2020, the country launched an unmanned spaceship that is to probe Mars.

Economic Issues

The UAE, a member of the World Trade Organization (WTO), has developed a free market economy, but its financial institutions are weakly regulated. The UAE has announced plans and policies ("Vision 2021") to try to further diversify its economy and reduce its dependence on exports of hydrocarbons, as have the other GCC states. Dubai emirate, in particular, has long sought to attract investors and develop initiatives, such as the clean energy and autonomous vehicle showcase project "Masdar City," that provide jobs and attract tourism and publicity.

The country is also accepting investment from China under that country's "Belt and Road Initiative" (BRI), intended to better connect China economically to other parts of Asia, Central Asia, the Middle East, and Africa. In April 2019, the UAE and China signed deals worth $3.4 billion to store and ship Chinese products from the UAE port of Jebel Ali./105

To help it weather the effect of lower oil prices since 2014, the government has cut some subsidies and sold government bonds, including $5 billion in bonds in 2016 and $10 billion in 2017. The government budget has been able to avoid drawing down its $600 billion in various sovereign wealth funds overseen by the Emirates Investment Authority (EIA)./106

Aside from the public health consequences, the economic effects of the coronavirus outbreak have been significant, resulting from travel and tourism restrictions and a decline in consumer spending as bans on gatherings have been imposed. The IMF predicts 3.1% economic growth in 2021, due to improvements in the oil sector, following a -5.9% contraction in 2020./107 As of April 2021, the UAE has reported nearly 475,000 COVID-19 infections and 1,500 deaths from the disease./108 China-based Sinopharm began a late-stage trial of a coronavirus vaccine in the UAE, in part because nationals of many different countries live and work in the UAE./109 By mid-April, the country had administered over 9 million vaccine doses from Sinopharm, Pfizer/BioNTech, and Sputnik V.

Oil and Gas Issues

The UAE is wealthy because it exports large amounts of crude oil while having a small population that receives benefits and services. Abu Dhabi has 80% of the federation's proven oil reserves of about 100 billion barrels, enough for many decades of exports at the current rate of about 2.9 million barrels per day (mbd) of exports. Oil exports, of which over 60% go to Japan, account for about 25% of the country's GDP./110 The United States imports negligible amounts of UAE crude oil.

The UAE has vast quantities of natural gas but consumes more than it produces. Through its participation in the Dolphin Energy project, the UAE imports natural gas from neighboring Qatar - an arrangement that has not been disrupted by the GCC rift discussed above. A UAE effort to become self-sufficient in gas by 2030 could benefit from the discovery, announced in early 2020, of a large field ("Jebel Ali field") of non-associated gas in UAE waters.

U.S.-UAE Economic Ties/111

U.S. trade with the UAE is a significant issue because the UAE is the largest market for U.S. exports to the Middle East. Over 1,000 U.S. companies have offices there, and there are over 60,000 Americans working in UAE. U.S. exports to the UAE in 2020 totaled nearly $15 billion, and imports from the UAE totaled about $3 billion, a decrease from 2019 figures. U.S. products sold to UAE are mostly commercial aircraft, industrial machinery and materials, and other high-value items.

In 2004, the George W. Bush Administration notified Congress it had begun negotiating a free trade agreement (FTA) with the UAE. Several rounds of talks were held prior to the June 2007 expiration of Administration "trade promotion authority." In 2011, the FTA talks were replaced by a U.S.-UAE "Economic Policy Dialogue," between major U.S. and UAE economic agencies. The UAE is part of the "GCC-U.S. Framework Agreement on Trade, Economic, Investment, and Technical Cooperation," a trade and investment framework agreement (TIFA) created in 2012.

Commercial Aviation Issue/112

One issue in U.S.-UAE economic relations has been a contention by several U.S. airlines that the UAE government subsidizes two UAE airlines, Emirates Air (Dubai-based) and Etihad Air (Abu Dhabi-based). In 2018, the two UAE airlines agreed to address the complaints by using globally accepted accounting standards for annual reports and opening their books to outside examination./113

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View report, figures and footnotes at https://crsreports.congress.gov/product/pdf/RS/RS21852