How UAE Became a Money Laundry Den for Russia's Oligarchs?

When the Russian military invasion of Ukraine began on February 24, 2022, America and European countries imposed sanctions on the oligarchs for their "role in supporting the regime of President Vladimir Putin and financing his military campaign."

The Russian oligarchy is a name given by Western political and media circles to the elite of society, businessmen, and high-net-worth individuals close to Putin.

This wealthy and heavily sanctioned elite seemed to need a safe haven to go with their money as a kind of maneuver to ensure financial protection, in a process akin to money laundering.

Under pressure and after searching for ways to escape, they could not find better than the UAE, specifically the city of Dubai, and began to flock to it in groups and individually on their own boats until it became a real stronghold for them.

This has caused anger in the European camp, even calling for sanctions against the UAE.

 

Dangerous State

In this context, the Spanish newspaper Publico revealed a letter sent by the European Commissioner for Financial Stability, Mairead McGuinness, to the director of the European Union's NGO Transparency International.

On October 29, 2022, she said that Brussels (the seat of the European Union) would soon propose to the European Parliament and the European Council to add the UAE to the list of third countries with a high degree of risk.

She added that this action is due to accusations against the UAE about helping Russia circumvent international economic sanctions, which supports it in continuing its aggression against Ukraine.

The Spanish newspaper pointed out that "the expected European move falls within the reservation of the UAE, as it is one of the largest countries in the world receiving wealthy Russians (oligarchs) and their money after the outbreak of the war in Ukraine."

In early 2022, the UAE was placed on the "grey list" for money laundering by the Financial Action Task Force (FATF), an intergovernmental organization to combat money laundering and illicit finance based in Paris, France.

The Tax Justice Network, one of the largest groups that monitor financial and tax evasion globally, ranks the UAE among the top 10 countries that enable the abuse of corporate taxes and financial secrecy.

This is not the first time that sanctions against the UAE over Russian oligarchs have been discussed.

On June 11, 2022, the British newspaper The Guardian reported that "sanctions should be imposed on the UAE unless it provides assistance to countries pursuing oligarchs' assets."

Members of the European Parliament have submitted a letter to Financial Services Commissioner Mairead McGuinness demanding that the UAE be included in the list of third countries that pose a serious threat to the financial system.

Danish member of the European Parliament Kira Marie Peter-Hansen said that "the UAE was a safe haven for criminal proceeds, corrupt officials and Russian oligarchs.

"We want to put the UAE on a blacklist, especially in light of the large number of Russian oligarchs using the country to avoid sanctions."

 

Oligarchs in the UAE

On March 17, 2022, the New York Times revealed that the UAE had hosted more than 4,000 Russian companies operating in the infrastructure, real estate, industry, food, ports, aviation, and petrochemical sectors.

Many of these companies follow Russian oligarchs who went to the Gulf state even before the Ukrainian war broke out.

It stated that the UAE accounts for 55 percent of Russia's foreign trade and is the first Arab destination for Russian investments so that it includes about 90 percent of Russia's investments in Arab countries.

On the other hand, the UAE is the largest Arab investor in Russia, contributing 80 percent of Arab investments in it, and Dubai is a distinguished destination for Russian tourists.

The Russian government even assured the oligarch that their money would be safe in the UAE.

One of the most famous oligarchs who have taken refuge in Dubai is Ruslan Baysarov, a Russian businessman with close ties to Ramzan Kadyrov, the president of Chechnya, a close ally of Putin.

So is Alexander Borodai, who became prime minister of Ukraine's Donetsk region, which declared unilateral secession in 2014 when Russia first invaded Ukraine.

Alhurra reported on March 27 that there was widespread news among real estate brokers in Dubai that the billionaire former owner of English football club Chelsea, Roman Abramovich, was looking in the market for a luxury property overlooking the Gulf.

Speaking about the Russian oligarchs, Robert Barrington, a professor at the Centre for the Study of Corruption (CSC) at the University of Sussex, said: "They are a back line of two to three thousand people."

He told AFP on March 14: "They are also very wealthy, all linked to and supported by the Putin regime."

 

Why UAE?

The reasons why Russian oligarchs and other shady capitalists chose the UAE as a safe haven for their activities are varied.

One of the most important reasons is that the Gulf state is one of the most mysterious financial centers on earth, and it is a secret destination for illicit and shady money.

This was confirmed by the head of the Tax Justice Organization, John Christensen, in April 2022, when he said that "the confidentiality rate in the UAE is 86 percent, and it is one of the world's most secret destinations for money laundering."

The French newspaper Le Monde reported on March 17 that "the UAE is a favorite destination for oligarchs because it has a strong government apparatus, the level of bureaucracy is relatively low, and its banks are free of legal restrictions, foremost of which is the prohibition of taking interest."

"Zayed's children and state rulers know all this and are ready to absorb the money of the huge Russian elite."

Kate Kizer, a researcher at the Quincy Institute for Responsible Statecraft, said, "The UAE is one of the few safe havens for Russian oligarchs and their wealth because Abu Dhabi avoided criticizing Putin's illegal invasion of Ukraine."

"Because it is also unwilling and cannot emulate Western sanctions on Russia."

Not only that, but the economic and political relations between Russia and the UAE impose themselves, as there is a deep bridge of communication, through which the oligarchs crossed, and from which they entered Dubai, known globally as the "paradise of money laundering."

On September 20, 2018, the French magazine L'Obs published an interview with William Bourdon, president of the French Sherpa Foundation for the fight against economic crimes, in which he described Dubai as "becoming the world's washing machine of dirty money."

"Dubai's role as a hub for laundering dirty money has long been an open secret," Bourdon said.

"This city, which has become a symbol of globalization, has been able to use its image as an attractive city, a symbol of excessive modernity to which tourists from all over the world flock and businessmen flock to it in droves to watch its major international exhibitions," he said.

"This money laundering has expanded significantly, as Dubai has benefited greatly from the tightening of OECD tax haven laws to become a destination for greedy people fleeing taxes in their countries, attracting wealth from China, Russia, Africa, and Europe," he said.

Bourdon saw this as a schizophrenia of globalization manifested in this city. On the one hand, the world has an arsenal of increasingly compelling anti-corruption laws; on the other, old practices seem to have not changed, at least in Dubai.