Dubai a haven for wealthy Russians fleeing sanctions

Dubai has become a haven for wealthy Russians fleeing the effects of Western sanctions over the war in Ukraine.

Russian billionaires and entrepreneurs have arrived in the United Arab Emirates (UAE) in unprecedented numbers, business leaders have said to the BBC.

Property purchases in Dubai by Russians rose 67% in the first three months of 2022, a report says.

The UAE has not imposed sanctions on Russia, nor has it criticized its invasion of Ukraine.

It also provides visas for unsanctioned Russians, while many Western countries have restricted them.

It is estimated that hundreds of thousands of people have left Russia in the past two months, but exact figures are not available.

A Russian economist said that in the first 10 days after the war began, up to 200,000 Russians left.

Virtuzone, which helps companies set up business in Dubai, sees a huge increase in Russian clients.

“Since the beginning of the war we have received five times more inquiries from Russians,” said managing director George Hojeige.

“They are worried about an impending economic collapse. That’s why they move here to secure their wealth,” he added.

The influx of Russian nationals has fueled demand for luxury villas and apartments across the city. Real estate agents are reporting a surge in property prices as Russians arriving in Dubai look to buy homes.

Dubai-based real estate agency Betterhomes found that property purchases by Russians increased by two-thirds in the first three months of 2022.

And another real estate agency, Modern Living, told the BBC it had hired many Russian-speaking agents to meet rising demand. Chief Executive Thiago Caldas said they had received numerous calls from Russian nationals wanting to relocate to Dubai immediately.

“Russians coming down don’t just buy for investment, they see Dubai as a second home,” he said.

Many multinational companies and Russian start-ups are also relocating their employees to the UAE.

Fuad Fatullev is co-founder of WeWay – a blockchain technology company with offices in Russia and Ukraine. After the outbreak of war, he and his partners relocated hundreds of employees to Dubai.

“The war had a massive impact on our operations. We couldn’t go on [as we were] since we had to relocate hundreds of people outside of Ukraine and Russia,” says Fuad, who is a Russian citizen.

He adds that they have chosen to relocate their employees to the UAE as it offers a secure economic and political environment to run a business.

He said Russian companies were pulling out as they found it incredibly difficult to operate due to sanctions. The challenge is even more acute for companies dealing with international customers and brands, as most Western firms have severed ties with Russia-based companies, he said.

Global companies like Goldman Sachs, JP Morgan and Google that have closed offices in Russia are also relocating some of their employees to Dubai.

“There is definitely a brain drain of highly qualified professionals. A lot of people are leaving because there are a lot of business restrictions at the moment,” says Mr Fatulley.

Russia’s central bank is barred from drawing on the billions in foreign exchange reserves held in foreign banks abroad. Some Russian banks have been removed from the Swift financial messaging system.

To protect its reserves, the Russian government has imposed capital restrictions and banned citizens from leaving the country with more than $10,000 in foreign currency.

Since it is difficult to transfer cash, many Russian buyers make payments in cryptocurrencies. Some of the buyers have an intermediary who takes the payment in crypto and then forwards the money to the seller on the buyer’s behalf.

Gulf states, including the United Arab Emirates and Saudi Arabia, have rejected calls by Western governments to impose sanctions on Russia.

Abu Dhabi was one of only three countries, along with China and India, to abstain in a February United Nations Security Council vote to condemn Russia’s invasion of Ukraine. She also abstained from a vote in the General Assembly on April 7 to exclude Russia from the UN Human Rights Council.

The surge in Russian investment comes just months after the UAE was placed on a “grey list” by the Financial Action Task Force (FAFT), a global financial crime watchdog.

This means the country faces increased scrutiny of its anti-money laundering and anti-terrorist financing efforts. The UAE government has claimed to have taken significant measures to regulate incoming investment and has said it remains committed to working closely with the FAFT on areas for improvement.