Dubai, UAE - The United Arab Emirates has become an oasis for Russian capital. As Western sanctions force Russian companies to move to new territories, the UAE is witnessing an influx of Russian investors.
This kind of investment can both bring benefits and some risks that can complicate relations with key economic partners. Therefore, it is important to be selective in choosing investors with whom you would like to work.
The UAE's trade with Russia is negligible compared to the United States. Although the UAE and Russia are economic partners, and in 2021 the trade turnover reached $ 3.5 billion.
Over the past few months, the volume of Russian investments in UAE real estate has increased dramatically. The demand for real estate in the UAE from Russians at the end of April 2022 was 336% more than in the same period of 2021, and the number of transactions increased by 67%, Betterhomes reports. As a result, Russia has moved from 7th to 5th place in the UEA real estate investor rating.
The UAE, as a world-class global real estate trading center, has become the preferred destination for investors. And since European countries restrict Russian investments and seize the accounts of Russian entrepreneurs, the Russians redirect money into reliable financial assets. For example, in the same Armenia and Kazakhstan, which are in the orbit of Russia, there are few investment opportunities. Turkey, especially Istanbul, may seem attractive to Russian investors, but the Turkish authorities are wary of new investments. The UAE enjoys a reputation for a neutral foreign policy and a friendly open position towards various countries. "We have been seeing an influx of Russian clients since the start of the operation in Ukraine, and this prompted us to create a special Russian department to serve them," Michael Kortbawi, a partner at the law firm BSA Ahmad Bin Hezeem & Associates, told the BBC.
Customers prefer to buy real estate in the most prestigious areas of Dubai, said Betterhomes CEO Ryan Mahoney. They are especially interested in elite residential complexes overlooking the bay. Entrepreneurs affected by the sanctions are sending their capital to the UAE. There are even record deals of $76 million in a record deal. For comparison, the most expensive London house bought by a Russian businessman cost $ 42 million.
Not only Russian billionaires, but also some companies send their assets to the Emirates. According to Forbes Russia, many technology companies and startups are moving their headquarters or main offices to the Persian Gulf coast. This is true for companies that find it almost impossible to continue working due to Western sanctions, including restricting access to modern technologies.
For many Russians, the UAE is a center for further redirection of assets to the West. Switzerland, in particular, recorded a sharp increase in gold imports from the United Arab Emirates shortly after the introduction of sanctions against Russian business. At the end of February, Swiss factories, which process about 70% of the world's gold, stopped direct gold imports from Russia. However, in March of this year, the Federal Customs and Border Administration of Switzerland (Bundesamt für Zoll und Grenzsicherheit BAZG) reported that 36 tons of gold worth 2.1 billion Swiss francs were imported from the EEA, which is equal to the total volume of gold imports from the Emirates over the past six years. The Swiss non-governmental organization Swissaid calls for "greater transparency" in this sector so that Russians cannot avoid sanctions in this way.
There were calls for caution. Among the companies transferred to the UAE from Russia, there may be such respected ones as Tinkoff, which are positively perceived by the West, but there are others. According to the BBC, the UAE Central Bank urges its clients to be careful in transactions with Russian clients due to "increased risks associated with sanctions and restrictive measures imposed by other countries.” As of mid-May, the Russian businessmen affected by the sanctions were large investors in real estate. The Emirati economy can benefit from foreign investment, but it is necessary to adhere to traditional business standards in order to preserve the reputation of an international reliable partner.
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