Rich Russians Flock to the UAE as the Financial Iron Curtain Descends

In the aftermath of Russia’s invasion of Ukraine, and the unprecedented international sanctions targeting Russia’s economy, people and money have been fleeing Russia. Among them are some of the richest people in the world, Russia’s oligarchs, who are the target of both personalised sanctions and international attention.

Many of them are making their way to the United Arab Emirates. The Financial Times reported that several Russian oligarchs are establishing business and buying up property in the Gulf nation, hoping to avoid the worst of financial restrictions and a weak currency in Russia, and clinging on by all available means to the currents of global finance.

The UAE spent much time turning itself, and especially Dubai, into a playground for the world’s rich. Its leaders have turned Dubai into a glittering tourist destination, filled with amenities and shops, to attract the wealthy.

As campaigners against kleptocracy have long argued, the UAE has established a system of offshoring, lax regulatory oversight, and a lack of transparency, all of which has attracted dirty money. This month, the Financial Action Task Force, a global financial crime watchdog, added the UAE to the ‘greylist’ risk of jurisdictions being monitored. 

A seminal 2020 report for the Carnegie Endowment argued that ‘part of what underpins Dubai’s prosperity is a steady stream of illicit proceeds borne from corruption and crime.’

‘The wealth’, the editors argue, ‘has helped to fuel the emirate’s booming real estate market; enrich its bankers, moneychangers, and business elites; and turn Dubai into a major gold trading hub.’

Until now, the system that Russian oligarchs are now seeking to use to their advantage has escaped major international scrutiny. Campaigners against kleptocracy expressed their pleasure to The New Arab that now, amid unprecedented global focus on dirty money, this could begin to change.

‘Dubai has been working very hard to position itself as a wealth haven for a long time and has been able to take advantage of rules put in place by the West banning blood diamonds and blood gold, both of which can be part of the economy in Dubai,’ said Oliver Bullough, the author of Moneyland and Butler to the World.

‘The UAE has created this system of offshore finance and services, basically pro-kleptocracy services, for practically everyone who has dirty money burning a hole in their pockets,’ said Casey Michel, an Adjunct Fellow at the Hudson Institute’s Kleptocracy Initiative and the author of American Kleptocracy.

Among the rich, the wealthy Gulf nation is known for ‘opaque corporate ownership, a clear lack of willingness to implement oversight and transparency mechanisms.’

‘The UAE has followed a similar playbook to other offshore jurisdictions,’ Michel said. This has brought a ‘tsunami of illicit or questionable or suspect wealth, fleeing and looking for a new home with its arms wide open, more than happy to welcome anybody in.’

This attitude has always been appealing to oligarchs but now, as they are running out of alternative destinations, all eyes have turned to the UAE.

‘Oligarchic figures and their families are, as they have been for the past three decades, constantly looking for locations they can move and hide, and I would argue, launder their money, moving it into third party jurisdictions,’ Michel said.

But as even previous financial havens like Monaco and Switzerland have closed their doors to sanctioned individuals, the net has grown tighter.

Publicly visible data has shown oligarchs’ yachts arrive in larger numbers than usual in Dubai and Israel. Firms working in the UAE claim to have seen significant interest from Russians and Belarusians in buying UAE property and establishing businesses in Dubai, both possible ways of securing residency and lodging some money in assets unlikely to depreciate or to be frozen and seized by sanctioning authorities.

‘No one has any idea where this is going to end. Recent weeks have seen targeted sanctions unlike anything we’ve seen before. There is nothing to compare this to,’ Michel added.

For the moment, the authorities in the UAE appear willing to accept this new interest and these new visitors.

‘It’s not surprising to me that it’s the UAE and Dubai in particular that’s had this transformation. It has been the UAE for the past few decades that’s stood at the centre of some of the greatest money laundering and bank scandals in financial history,’ Michel said.

‘This is one of the transitions – moving from Western jurisdictions that have acted as offshore havens, to the UAE – there is no concern of eventual domestic pushback. Oligarchs do not need to worry about Emirati voters waking up one day and voting out the authorities in question.’

In Europe and America, where much dirty Russian money has sloshed around for years, things appear suddenly different.

‘Folks are finally realising the national security threats these unchecked systems pose. It’s a shame it took this long to have this realisation in capitals like Washington and London,’ Michel explained.

Britain’s parliament has fast-tracked a new Economic Crime Bill aimed at dirty money. Buoyed up by popular pressure, it has been voted through Parliament and received Royal Assent with uncommon speed.

Unlike in western Europe, where public opinion and the political current has decidedly turned against Russian oligarchs, and property allegedly belonging to men like Oleg Deripaska has been taken over by squatters, Dubai remains calmer and more welcoming – and more willing to respect new residents’ privacy.

‘These systems are built upon anonymity in itself. The purpose of their existence is making it difficult to track and trace people in the first place. At the end of the day, we’re not going to have a whole picture because of the UAE’s opacity.’

There are already 60,000 Russians estimated to live in the Emirates. Their numbers could barely change, yet money in large quantities could move almost entirely undetected as the Russian rich relocated their assets.

‘There’s no reason for Dubai to poke their head up and advertise themselves as an offshore destination. They want to remain a boutique, bespoke offshore destination without alerting regulatory authorities or Western partners elsewhere,’ said Michel.

News coverage in sanctioning countries is already beginning to pick this thread up. Both Israel and the UAE have faced criticism for their claimed equivocation on the subject of Russia’s invasion of Ukraine. The UAE’s abstention on the United Nations General Assembly vote on the subject was widely noted, and broadly derided.

It might be hoped by Emirati authorities that if Russian wealth arrives in Dubai without making too much of a splash, the country might be able to absorb it quietly, without either falling victim to secondary sanctions or being pressured by allies into levying new tough measures on Russian wealth.

But oligarchs and their children might unintentionally bring matters to a head. Many of them live on Instagram, which has now been banned in Russia. If these children continued to post about their lavish lifestyles, this time from Dubai, the financial dealings of their parents could receive yet more scrutiny.

‘All the daughters of the oligarchs are showing up in Dubai, having a lovely time,’ Michel noted.

‘Oligarch’s children are a journalist’s dream. They are so indiscreet,’ Bullough said.

‘Many oligarchs have been very happy to move to Dubai when things have looked uncomfortable here [in the West]. And this looks certain to accelerate. This is profitable for Dubai, but it is not a risk-free policy. Dubai is wealthy, but it is small and reliant on the goodwill of western powers to function,’ said Bullough.

‘A lot of Russian oligarchs will be looking to move their wealth to Dubai. But I suspect that the people in charge of the financial sector there will not want it to be too public. They will not want to become victims of their own success,’ Bullough added.

The world is moving under their feet. Things that were once impossible – in both defence and economic terms – are becoming commonplace.

‘This is a generational crisis, and the United States and European allies are throwing everything at this. If Dubai is going to be really blatant about being a loophole, Washington will be cross,’ Bullough explained. ‘I will be surprised if we start seeing pictures of oligarchs like influencers on their Dubai balcony – they won’t want to embarrass the Emiratis.’

If things become really flagrant – impossible to deny or hide – both the oligarchs and the UAE will likely be unable to avoid new pressure, Bullough explained. This could fray relationships between the UAE and its Western allies. 

‘They will feel a cold wind from Washington very fast.’

This piece was originally published in The New Arab.

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