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Economy

Dubai Postcard: Russian Oligarchs Find Refuge From Sanctions In UAE

Hit with Western sanctions, Russian oligarchs are racing against time to relocate their assets to tax havens. They turn to private banks where transactions, opaque as they are in the UAE for instance, make it almost impossible to trace funds.

Picture of the Burj Al Arab hotel from the window of an aeroplane

Burj Al Arab hotel from the sky

Laura-Mai Gaveriaux

DUBAI — In the neo-baroque hall of the Burj Al Arab hotel, surrounded by colored marbles, one can hear all the world’s languages. A mirroring image of this cosmopolitan bubble that Dubai has become over the past 30 years, a sort of Monaco of the Middle East. But from large red armchairs, it’s a Slavic atmosphere that stands out the most.

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At 2,000 to 12,000 euros a night, the rooms at the Burj Al Arab, situated on an artificial island, make it the most expensive palace in the emirate of Dubai — and the preferred meeting site of Russia’s richest businessmen. They are, of course, close to the Kremlin’s networks since it is virtually impossible to make a fortune, and above all, to keep it, without at least getting Vladimir Putin’s seal of approval first.


“It may be an impression, but I feel that there have been more people here at the bar for the past three weeks,” says Josh, a British waiter who wishes to remain anonymous. This influx coincides with a series of sanctions taken against the Russian state — the most comprehensive ever taken in the modern era. Since then, the race has begun for oligarchs: a race against time to relocate assets, and safely store them away in tax havens.

Moving Assets

In reality, the Russian president has been advising elites to move their assets for years. “The exodus began in 2014, during the annexation of Crimea which deteriorated relations with the European Union,” says Tom Keatinge, director of the Center for Financial Crime and Security Studies in London.

The Western response is brutal. We are counting on a business-driven rebellion.

But the sanctions of the time, which were not cosmetic, left some leeway for Russia, which took advantage of it to get organized. Magnates also seized the opportunity to become pioneers in as of yet unexplored sectors.

While the majority of these oligarchs surrounding Putin mainly profited from the uncontrolled privatizations of the 1990s in the industrial sector, Alisher Usmanov, whose fortune is estimated at $14 billion, thus redirected the profits of his metallurgical conglomerate Metalloinvest toward new technologies, since many of its activities fell within the scope of the 2014 sanctions.

Already Facebook’s first private investor in 2009, he now owns 70% of the Russian web through a fund. “We think that he participates, like a service provider, in the development of digital weapons for intelligence services,” the famous “SVR”, says a European diplomat. The European Union has also learned the lesson: Usmanov is now one of the priority targets.

“After the wave of post-Crimea sanctions, which it survived relatively well despite a 10% increase of poverty, according to our estimates, Putin believed the country could withstand the subsequent ones,” a diplomat tells us, off the record, at the American pavilion of the Expo 2020, then following up through encrypted messaging services. “However, the Western response is brutal, coordinated and technically well put together. We are counting on a business-driven rebellion. Did you see that parade of tanks that seemed to be paralyzed on the way to Kyiv? An artillery maneuver necessarily involves some logistical delays, but not to that extent…” He then mentioned reports by British intelligence on the possible sabotage by the Russian generals themselves, all the while not really knowing whose propaganda this serves.

Leisure and refuge

The only grain of sand that could stop the machine: tax havens. “We must bring them on board — but as far as the United Arab Emirates are concerned, so far we are not making progress,” says David Szakoni, a political science professor at George Washington University who specializes in Russian money laundering circuits. “Geopolitically, they remain the West’s best allies in the Middle East. But they are also, traditionally and de facto, where those close to Putin go to have fun and find safe harbor. That’s where international efforts find their limit,” he says, pessimistic about a potential shift in gears.

They know how to fit into the mentality that demands deference but not submission.

The partnership goes way back between the small Arab federation with great strategic ambitions and the “Czar” of the 20th century that no longer hides his dream of recreating the great Russian empire. For the past ten years, businessmen have been going to the Emirates “and unlike the French, who are too conspicuous when they solicit the support of princes, they know how to fit into the mentality that demands deference but not submission,” the American diplomat says.

Russia, for that matter, perfectly plays its role at the center of OPEC +, also known as “the Vienna group”, consisting of 24 of the most important oil-producing countries, including the 13 OPEC member countries. There, the group generally votes according to Abu Dhabi’s interests, which it perceives as coinciding with its own.

Picture of the Dubai frame landmark during the sunset

Aerial view of Dubai frame landmark during the sunset

Amazing Aerial/Zuma

Emirates Golden Visa

While Europe always showed a certain disdain for the nouveau riches, i.e. these extravagant Russians shopping at Parisian luxury boutiques, the Emiratis have always stayed true to the same line: “Come as you are.”

A new kind of tourism ensued: In 2021, Russia became the Emirates’ second largest source market, according to the Arabian Travel Market, with 256,000 arrivals recorded in Dubai alone despite the pandemic. In Europe, the Sputnik-V vaccine does not allow people to obtain a green pass, while the Emirates quickly reopened their borders to Russians, removing quarantine very early on.

There is then a concerted strategy between the two countries — mutual services from which Russia profits, virtually isolated as it is today. In 2019, the Emirates instituted the “golden visa,” a 10-year residence permit, allowing business facilities, notably property investments: 44,000 have already been issued, and although authorities keep the details of the figures to themselves, “there are between 10,000 and 13,000 Russians benefitting from it,” the American diplomat says.

Offshore intermediaries

Taking advantage of this opportunity, the richest made trips through London before the sanctions. They began to transfer their assets as soon as the Biden administration took office, which was considered as a sign: for the Arabs, receptive to the U.S. new policy of disengagement from the Middle East, and for the Russians who had been content with the Trump presidency.

The oligarchs made calls to private banks whose transactions — highly opaque in the Emirates — make it almost impossible to trace funds. In 2019, the Pandora Papers exposed the breadth of money laundering in Dubai, with the revelations leading the Financial Action Task Force (FATF), the international watchdog whose headquarters are in Paris, to include the Emirates on the gray list of countries subject to enhanced surveillance.

“The most difficult thing to track are investments on the stock market, because of obscure legislations that have even become a selling point for regulatory authorities,” Szakonyi says. Again, the movement preceded the invasion of Ukraine. Yélizaveta, an analyst at JP Morgan’s Russian office we contacted through LinkedIn who preferred not to give her last name, says “In case of greater ethical demands, the princes will put their interests first and will drop Russia; their partnership is firstly a contract of opportunity, not a marriage of love.”

“I was relocated to Abu Dhabi last September, overnight, in exchange for a 4% increase in my salary and a $2,000 bonus,” Yélizaveta says. Reluctant at first, she ended up enjoying this material comfort, contrasting with the cost of daily life in Moscow, which continues to increase. These maneuvers allow Putin to tame the country’s middle class, the only real source of possible opposition, which he fears much more than a revolt of oligarchs, whose destinies he can undo with a snap of his fingers.

Photo of protestors gathering outside a Russian oligarch's mansion in London

Demonstrators gathered outside a mansion in Holland Park owned by Russian oligarch Vladimir Yevtushenkov

Vuk Valcic/ZUMA

Safe haven for gold and cryptocurrencies

Two sectors that still largely escape transnational authorities remain.

There is the huge market of illegally-mined gold from Africa, where Russia continues to increase its presence. The gold arrives, for example, from Uganda or from areas of the Sahel where artisanal mining goes unnoticed, and lands at the Dubai Multi Commodities Center, the place for trading in raw materials, which was targeted by a Bloomberg investigation last year.

The $4 million generated by the regulated market, according to IMF figures, “must be multiplied by three, to get an idea of the profit generated on the black market,” the American diplomat says. “Because the African governments are OK with it, it’s almost impossible to detect.” Such is the case for the Central African Republic, which uses this way to pay the Wagner militia, whose services have an estimated value of several million euros per month.

Then there is the cryptocurrency sector, a point of vigilance since their emergence several years ago, but for which “technology still lacks,” Szakonyi says. Between 2009 and 2017, the FBI estimated that the Darknet amounted to $76 billion. Abu Dhabi is at the forefront in this sector, with its 62 start-ups dedicated to fintech, while Dubai accommodates more than 1,000 international headquarters, according to the IMF.

Reputational damage

The fact that UAE authorities have announced an upcoming permit to regulate the activity gives a sense of the magnitude of the problem. Though it is unlikely that Russia will turn to cryptocurrency for direct transactions of wheat, oil or gas, according to Chainanalysis, a blockchain consulting firm, it can still serve as a digital safe, for however long the sanctions last.

According to the Center for Financial Crime and Security Studies’ Tom Keatinge, the only weapon to encourage the Emirates to align themselves with the West is “reputational damage.”

While the Emirates run a ruthless race for attractiveness with Saudi Arabia, multinationals could hesitate to keep their offices in the Emirates, in a global context of greater ethical requirements. “In this case, the princes will put their interests first and will drop Russia; their partnership is firstly a contract of opportunity, not a marriage of love.”


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