How the UAE became a safe haven for Russia to evade sanctions

‘s signature US-backed Abraham Accords The 2020 relationship between the UAE and Israel was supposed to represent a new era in the relationship between Abu Dhabi and Washington.

Since then, however, the UAE has battled the US on global issues, especially in Russia invades Ukraine.

At the start of the Moscow war, the UAE took a surprising stance at the UN Security Council, abstaining from voting to condemn Russia’s “special military operation”.

A few weeks later, the UAE abstained in another vote to suspend Russia’s membership of the UN Human Rights Council.But more importantly, Abu Dhabi also started Help Russia overcome Western sanctions Designed to destroy its will to fight.

“Russian influx into Dubai means billions of dollars and euros could be diverted to UAE”

Russian businessmen and entrepreneurs are trying to move their operations to Dubai to benefit from its global status as a major financial center. Similar to many Iranian businesses that have been sanctioned by the West, Russian businesses are using the UAE as a base to avoid such sanctions and continue to operate.

Wealthy Russians have been applying UAE Golden Visa Program This enables applicants to obtain long-term residency in the country on the condition that they invest AED 10 million (£230,000) in a local company or investment fund. The flock of Russians to Dubai means billions of dollars and euros could be diverted to the emirate.

The UAE’s real estate market is also another major recipient of Russian money, leading to a boom in a market that has been growing from Covid-19 slowdownThe UAE also aspires to become an industrial hub for some Russian factories that have struggled to gain access to global markets due to sanctions, which will generate huge inflows of capital into the country.

Luxury yachts are docked in Dubai, and private jets hang from its airport. A growing number of Russians are also interested in tourism in the UAE as they struggle to access other destinations due to sanctions.

The result is to attract the UAE market billions of dollars And backed the strength and reserves of the UAE national currency, the dirham, which tumbled in February in part due to the impact of the Russian war on the global economy.

While the UAE Chamber of Commerce confirmed that the country complies with major sanctions against Russian oligarchs, it confirmed that sanctions will not be imposed on ordinary Russian citizens.

Such policy choices effectively open the door to state-sponsored evasion of sanctions. E.g, Sheikh Mansour bin Zayed Al NahyanKnown as Manchester City’s boss and deputy prime minister, he helps manage relations with wealthy Russians who want to move money to the UAE.

Valeria Scuto, Middle East and North Africa analyst at London-based risk consultancy Sibylline, called the increasing connections “not new, but increased”.

she explained new arab The UAE is effectively dealing with competition with other regional players such as Turkey, Iran and Egypt, which may use its currency to help Russia evade sanctions, thereby enhancing its currency’s international standing.

Russians are taking advantage of UAE’s lax financial transparency regulations and data secrecy on capital flows Using cryptocurrencies to evade sanctions.

Currency circleis an over-the-counter cryptocurrency exchange that is a favorite of Russians who have difficulty transferring money through their banks due to Western sanctions or local restrictions. The over-the-counter (OTC) structure allows clients to buy crypto assets in their local currency and sell them for cash in Dubai within minutes.

Since the transactions were cash-based and not reported publicly, it is unclear how much money was transferred using cryptocurrencies. The company also helps Russian clients buy and sell real estate and luxury watches using cryptocurrencies.

While the UAE wants to maintain a strong relationship with the US, the inherent domestic political instability in the US has kept Abu Dhabi on its toes and undermined its confidence in the strategic partnership.

As a result, Egyptian economist Magdi Abdul Al-Hadi told the UAE that the UAE is seeking to hedge its bets by deploying its financial muscle to support countries such as Russia in balancing the US. new arab.

“Russia is a key player in many regional conflicts involving OPEC+ and the UAE, such as Yemen, Libya and Syria, and the UAE cannot fail to coordinate with it on issues of major national concern”

In addition, the UAE is using its participation in the Abraham Accords and the resulting US tolerance to pressure Washington to make concessions on the many outstanding issues in the bilateral relationship.

At the same time, the explosion of financial transactions between Russia and the UAE has also led to a deepening of official financial relations.

This Moscow Exchange It was announced in June that it would start trading new currency pairs, including the UAE dirham. Trading start dates for the pairs have not been announced, but the move marks a deeply ingrained financial arrangement.

Andrei Scabelin, Director of the Foreign Exchange Market Department of the Moscow Exchange, Say: “We are seeing increasing interest in these currencies and we know they will be liquid. We will launch these pairs as some technical issues are resolved”.

Skabelin explained the need to sign interbank lending agreements with UAE counterparts to carry out transactions. The measures will help Russian traders use the UAE stock exchange as a way to stay in business as they are shut out of Western financial markets.

These deepening financial ties are gaining attention globally.Russia is reportedly seeking Payment in UAE Dirham Used to export oil to some Indian customers. also, Bangladesh The company is also looking to buy Russian energy as an alternative to U.S. dollars and is considering options similar to India, including the use of dirhams, according to media reports.

“Prime Minister said if India can import fuel from Russia, why can’t we?” Bangladesh Planning Minister SayHe added that the prime minister ordered the government to figure out which currency should be used to buy fuel from Russia.

“While the UAE is not betting on the demise of the US, it is certainly planning a multipolar world where dollar hegemony is no longer guaranteed”

Scuto sees these developments as strategic. “Russia is a key player in many regional conflicts in which OPEC+ and the UAE are involved, such as Yemen, Libya and Syria, and the UAE cannot fail to coordinate with it on issues of major national concern, even if it frustrates the West,” she told new arab.

In the long term, however, Scuto does not see the UAE transforming into a global hub that helps circumvent Russian sanctions, as it places greater emphasis on economic interests with Western businesses.

Abd Alhadi assesses the UAE’s better prospects for global financial restructuring. In his view, the UAE is using its soft financial power to play an arbiter role in the emerging global financial world, which will enhance its global status as a small country that relies on soft power for influence.

The UAE is trying to develop a partnership with other global powers such as Russia.

Leveraging its position as a global financial center is helping it cement that position in a more financially decentralized world.

While the UAE is not betting on the demise of the US, it is certainly planning a multipolar world in which the US dollar’s hegemony is no longer assured and other financial power brokers have emerged to seek to rewrite the global financial order and its empowerment power. manufacturer.

Ahmed Alqarout is an expert in the political economy of conflict. His research focuses on the impact of financial and economic policies on regime stability in the Middle East and North Africa.