Moscow Outbound Private Investment Moves To Dubai
Decisions may still be made in Moscow, but Dubai is becoming the Asia investment back office
by Chris Devonshire-Ellis
Sanctions imposed on Russian banks and the use of the Ruble have prompted, if not a mass exodus, then certainly a noticable trend of oligarchs, upper and middle class Russians relocating to Dubai. The reasons are simple: setting up a company in the United Arab Emirates (which also includes Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain), can be achieved with 100% foreign ownership, zero business taxes, freely available profits distribution and crucially for many, three years residents visas including two dependents – for investments of just US$50,000. Dubai tends to be the primary chosen location due to its business and travel hub amenities, coupled with a greater selection of five star hotels, restaurants and other nightlife.
UAE banks are also amendable to Russian and other nationals establishing bank accounts, while there has been discussion between the UAE and Russia concerning linking UAE banks to Russia’s SPFS network and bypassing SWIFT.
Our firm, Dezan Shira & Associates, has long had a partner firm in Dubai and can offer incorporation processes. We are also looking at expanding our operations there as we see the city developing as an investment gateway into Central and South Asia – where many Russian businesses will need to start looking for opportunities in the wake of sanctions on, in particular, ‘dual-use’ products – which may have a completely benign application but are still prohibited as they ‘could’ be used in military or other sanctioned industrial sectors. New markets and relatively skilled nations such as Uzbekistan have plenty of attractiveness for Russian businesses, including wide-reaching trade agreements with the European Union and UK.
The UAE itself is part of the Gulf Cooperation Council (GCC) a free trade area that includes Saudi Arabia, Kuwait, Bahrain, and Oman.
Under the Greater Arab Free Trade Area Agreement (GAFTA), the UAE has additional free trade access to Egypt, Iraq, Jordan, Lebanon, Libya, Morocco, Palestine, Qatar, Syria, Tunisia, and Yemen.
The UAE has also signed Asian FTA with Algeria, Armenia, Azerbaijan, India, Kazakhstan, Maldives, Pakistan, and South Korea, in addition to the Netherlands and Argentina.
The GCC signed an FTA with the European Free Trade Area in 2015 which includes Iceland, Liechtenstein, Norway, and Switzerland, and has a free trade agreement with Singapore, which entered into force in 2013.
The Russian Pavilion at the Dubai Expo 2020. Russians have had a long affection for the city which will now be joined by significant business investments.
Agreements between the GCC and Australia, China, Japan, Malaysia, and Turkey as well as with the European Union are all under discussion, with some of these, including the China deal expected this year. It has also entered into 137 Double Tax Agreements including with Russia and all other members of the Eurasian Economic Union.
This all points to the creation of ‘DubaiSki’ which has in any event long been popular with Russian visitors en route to other destinations in Asia. An extensive duty-free selection means Russians can keep up with purchases of luxury European brands without the need to travel to Europe to obtain them.
Dubai in particular then will begin to emerge as a Gulf version of Hong Kong and Singapore – targetting Asia but with more open and welcoming regulations than the two Southeast Asian financial centres are able to manage at this time given regional geopolitics. Moscow’s back office has just relocated to the UAE.
During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.
We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email email@example.com or visit www.dezshira.com