Escaping turmoil back home, Russians are pouring into the emirate which offers a lax regulatory environment to secure their wealth.
The glitzy emirate of Dubai has emerged as a haven for rich Russians looking to move their wealth from Europe to escape the impact of crippling Western sanctions.
A host of western nations led by the US slapped a raft of economic embargoes on Moscow in the aftermath of its attack on Ukraine on February 24.
The Persian Gulf’s financial and business hub, Dubai has long been an alighting point for high-net-worth individuals, and its lure has only increased with Abu Dhabi’s refusal to take sides between the West and Moscow, giving wealthy Russians moving to the country confidence that their money will be safe there.
In late February, the UAE abstained on a US-led resolution to condemn Russia’s military aggression in Ukraine at the UN Security Council, deciding not to back western sanctions to maintain its long-standing ties with Moscow.
Russia’s Central Bank is blocked from accessing its $630 billion chest of foreign reserves, and some of the country’s banks have been removed from the SWIFT financial messaging system. To safeguard its reserves, Russia has enacted capital controls and banned citizens from exiting the country with more than $10,000 in foreign currency.
It’s believed that over 200,000 Russians have fled the country since the conflict began. As Russian assets are seized across Europe, direct flights continue to operate from Moscow to Dubai.
The latest influx of Russians into Dubai has brought with it a spike in demand for property, sports cars and mooring space at marinas.
A Russian realtor who has operated in Dubai for over a decade tells TRT World that the past month has been a “crazy time” and that he’s been inundated with calls from Russians desperately looking to buy and rent property as the rouble plummets.
The most popular purchases are in the $250,000-$500,000 bracket, and investors are especially interested in bagging apartments at Dubai Marina, an affluent residential neighbourhood, the agent said. Some are even paying a year’s rent in advance, he adds.
Other agents have reported selling luxury properties valued at up to $20 million to Russian investors in recent weeks. “A lot of the new investors are very hush-hush,” Alan Pinto, a leasing consultant at Espace Real Estate in Dubai Marina, was quoted by The Guardian. “They will never purchase directly, they get companies to do it for them.”
Since February, Russian demand for Dubai property has gone up 40 percent, based on figures cited by real estate firm Golden Brown Group.
However, the Russian realtor downplayed the impact Russian buyers will have on prices in Dubai’s property market. “Yes, there’s been a huge increase in demand from Russians, but the market supply is large as well.”
Car dealerships in the Gulf state are also preparing for prospective Russian buyers, going as far as to hire Russian speakers to cope with the spike in demand for luxury vehicles, as reported by Bloomberg.
Ferrari and Maserati’s dealership in the UAE, Al Tayer Motors, did not respond to TRT World’s questions on whether sales in the UAE had increased over the past month. Lamborghini’s Middle East spokesperson also declined, saying that the company’s business with Russia has been put on hold as it evaluates how to proceed post-sanctions.
For the moment, the UAE central bank has not issued any guidelines regarding compliance with sanctions. The Dubai Media Office and UAE foreign ministry did not respond to TRT World’s questions on the amount of Russian funds coming into Dubai.
A safe haven in the desert
Dubai has long been a popular visa-free holiday destination for Russians, who are among the emirate’s top visitors and real estate buyers even before the Russia-Ukraine conflict began.
In 2019, close to 730,000 Russian tourists visited its shores prior to the pandemic. Some 100,000 Russian speakers are estimated to be residing in the UAE.
The presence of Russians in the emirate is now hard to ignore. A long-time Dubai resident tells TRT World that signs inside the world’s second-largest shopping mall, Dubai Mall, can be read in three languages: Arabic, English and Russian.
Reports suggest that Russian tycoon Roman Abramovich, who is sanctioned by the UK and EU, has been in the market to buy a luxury home in Dubai. One of Abramovich’s private jets made a trip to Dubai this month, according to data from a plane-tracking site.
Worried that their businesses or assets could also be at risk of being appropriated by their own government, many Russians with transparent sources of income without any links to the Russian state have also pivoted to the Gulf.
“A place like Dubai is the best option for us in such an uncertain time. We are not oligarchs, we worked hard to earn our money and want to secure our livelihoods,” a Russian businessman who identified himself as only Andrei tells TRT World. “We cannot trust the situation back home.”
Andrei decided to leave his home in Moscow and move to Dubai with his family less than a week after Russia’s offensive in Ukraine began. He was already familiar with the UAE, having visited it often, both for business trips and holidays, making for a rapid but smooth transition.
“I know many people here, it’s a welcoming place and open to the world. As a foreigner, it is quite easy to create a new life. Of course, it is easier if you have money, then you don’t get too many questions!” he laughs.
Andrei confirmed he was in the process of registering a company at one of Dubai’s many free zones but declined to share any further information.
A spokesperson for FTL Advisers, a Moscow-based law firm that serves wealthy Russians, tells TRT World that there has been high demand from its clients to set up companies in the UAE to store their assets, so much so that the firm has decided to dedicate resources to creating a presence in Dubai to serve their clients.
TRT World was not able to get in touch with FTL Advisers' point of contact in Dubai, Daria Nevskaya, for more information.
Residence visas are relatively easy to acquire in the UAE and don’t need local sponsorship. To be able to obtain one requires either purchasing a property worth AED 5 million ($1.5 million) or registering a company. “If we talk in absolute numbers about UAE residency, the demand has increased by 100%” from Russians, Bloomberg quoted Polina Kuleshova, of the residency and citizenship advisory firm Henley & Partners, as saying.
One of the more than 40 free zones where foreigners can relocate or set up companies, Dubai International Financial Centre (DIFC), experienced a record year in 2021 with nearly a thousand new company registrations. DIFC did not respond to TRT World’s questions on how many new companies or relocations have been registered by Russian nationals in the last month.
Additionally, international banks like Goldman Sachs and JP Morgan have wound down their Russian operations and moved their Moscow workforce to Dubai, with the ease of getting a visa believed to be a key driving force behind the relocation.
Acquiring residency permits and opening a bank account can be done in 30 days following the registration of a company.
Speaking to TRT World, a Dubai-based private banker working for a leading European bank says that Russian clients were opening accounts with their private bank’s UAE branch, while some were opening accounts with local Emirati banks.
“They [Russians] are looking for a safe haven to park their money, and are deciding to channel it into investments like real estate. In some cases, they are looking to purchase funds that will not divulge any ownership details,” the banker adds.
He warned of the heightened risk of reputational harm to organisations that received Russian funds as firms globally cut their commercial ties with Moscow.
Looking the other way?
Complicating the picture, the UAE’s international money flows have come under increased scrutiny after the global financial crimes watchdog, the Financial Action Task Force placed the country on its “grey list” (which means a “jurisdiction under increased monitoring”) in March.
The latest surge in murky Russian capital in the face of international sanctions is likely to put a brighter spotlight on the oil-rich state. Under the eye of the FATF, UAE banks and financial intermediaries will need to exercise a cautious approach in handling Russian funds.
While Russian financial flows have been washing over Dubai for decades, illicit finance experts are concerned opaque financing channels alongside a lax regulatory environment could mean that sanctioned Russian elites’ wealth can move from places like Geneva to Dubai in a frictionless manner.
Among the reasons why the UAE is attractive to wealthy individuals and kleptocrats from around the world is the “secrecy they offer and lack of willingness to investigate and cooperate with other countries” on such issues, a researcher for Transparency International, Maria Martini tells TRT World.
Coupled with the fact that Dubai has become a cryptocurrency hub in the region, the likelihood that funds of sanctioned Russian individuals are being moved from European banks to Dubai through crypto to pay for real estate or luxury items is another issue that could be escaping regulatory crosshairs, Martini adds.
While the UAE has attempted to make improvements by implementing new rules to control illicit financing, Martini believes enforcement has been found wanting. “Being put on the grey list shows they haven’t done much,” she says.
“Cracking down means that they will stop attracting the kind of people that go to invest in the UAE. Are they ready to take that step?”
So far, she says, Emirati authorities have not been proactive in cooperating with other countries. In the interim, she suggests that the international community will “need to keep an eye on and make decisions on how they want to engage with the UAE” if it remains unwilling to act.
That includes participating in global efforts to report on Russian wealth transfers. Earlier this week, the Organized Crime and Corruption Reporting Project (OCCRP) released its Russian Asset Tracker, which links 150 assets worth $17.5 billion to 11 individuals currently targeted by sanctions — a small fraction of the immense Russian wealth believed to be held abroad.
“It’s very unlikely that they can move assets, shift money or buy property without the help of an enabler somewhere,” Martini notes. “In those cases, there should be extra attention by supervisory authorities to make sure that there are consequences for those who help Russian kleptocrats move money elsewhere.”