The Central Bank of the United Arab Emirates has granted local banks temporary authorization to manage some cloud computing functions through data centers located abroad. The decision comes after disruptions to the country’s digital infrastructure caused by a series of drone attacks – attributed to Iran – on several IT facilities in the Persian Gulf region.
THE ATTACKS ON AMAZON WEB SERVICES DATA CENTERS
Last week, two Amazon Web Services (AWS) data centers in the United Arab Emirates and one in Bahrain were hit by drones, causing structural damage and leading to the interruption of cloud services.
“Financial institutions using AWS services were affected by the outage,” Reuters wrote. Among these are some of the main Emirati banks, such as Abu Dhabi Commercial Bank, Emirates Islamic, and First Abu Dhabi Bank, which rely on AWS’s cloud infrastructure to operate internal management systems and to offer digital services to their customers.
THE DECISION OF THE CENTRAL BANK OF THE UNITED ARAB EMIRATES
The issues with IT systems then prompted the Central Bank of the United Arab Emirates to intervene with an extraordinary measure. Under normal conditions, Emirati financial institutions must comply with a series of rather strict data localization rules, which require – among other things – that sensitive information be stored and processed within the country. The central authority’s temporary authorization instead allows banks to use cloud infrastructures located abroad, in order to ensure service continuity while the damaged infrastructures are restored.
DATA TRAFFIC SHIFTS EASTWARD
Reuters also noted last week that companies affected by the AWS service outage in the Persian Gulf were working to temporarily redirect data traffic outside the region: preferred destinations would be India and Singapore.
THE EMIRATES WANT TO BECOME A DIGITAL HUB
In recent years, the United Arab Emirates has heavily invested in expanding their computing capabilities to transform into a major hub and diversify the economy beyond hydrocarbons. The main example of this ambition is the Stargate UAE project for building artificial intelligence infrastructure: it is effectively an extension of the initiative that the US startup OpenAI intends to carry out in its home country.
Specifically, Stargate UAE involves the construction of a 1-gigawatt computing cluster in Abu Dhabi: it will be built by the Emirati company G42 and managed by OpenAI and Oracle; the facility will be equipped with Nvidia microchips and Cisco connectivity systems. G42 is supported by Microsoft, which is also the lead investor in OpenAI.
The cluster is expected to become operational in 2026 and will be part of a larger artificial intelligence data center with a capacity of 5 gigawatts, covering an area of about twenty-five square kilometers.
Emirati authorities consider Stargate UAE a transformative and strategic project. However, the recent attacks on data centers also highlight the vulnerability of the plan: for companies, relying on data centers located in the Emirates could prove risky given the strong political instability in the region.
