Russia-Ukraine Conflict: Will UAE Serve as a Friendly Neighborhood for Investors?

The ongoing crisis between Russia and Ukraine on top of Covid-19 fears have put a significant strain on the economy. Although the scale and scope of the crisis is an unknown variable the western and European nations have imposed sanctions on Russia’s economy. These sanctions can heavily hinder economic activity in Russia.

However, it might not substantially derail the global economic growth. That being said, the impact that Russia has on the commodity markets is undeniable, especially the oil market. For instance, the country has a significant influence on the oil market and if there are any curbs in the supply of oil and gas from the country, it could lead to inflation or at least inflationary pressure around the world.

The rise in oil prices will also have an impact on the bond and currency markets while also seeping into the equity market and translate to higher input costs for companies. 

UAE & Russia: A History of Investment

The United Arab Emirates has always been a favorable investment destination for HNIs and UHNIs in Russia. However, with the heavy sanctions put in by the western and European markets, it’s even more appealing since the UAE is one of the few countries that have still not imposed any sanctions on the Russian market.

Ever since the conflict started, there has been a continuous flow of Russian money into the UAE, either through cash transfers or via crypto wallets. It has accelerated even more in the last two weeks as tensions between the two counties rose.

Russia’s invasion of Ukraine has ruffled the world and the UAE cannot avoid its impact now. The pressures from around the world have put pressure on the UAE leaders to pick a side after having been neutral for a decade when it comes to tensions between the western world and Russia. Although most of the UAE leaders have publicly condemned Russia’s invasion of Ukraine, no punitive measures have been taken by them against Moscow. 

This is reason enough for Russian HNIs and UHNIs to believe that the UAE still has some consideration for the investments from Russia. In addition to the varied economic expectations that they have, like energy and wheat imports along with revenues from oil, the UAE also understands the heavy geopolitical implications of this conflict on the region. There could be a reshuffling of alliances and more importantly, re-charting of gas pipeline routes.

Russian Oligarchs: Where are they Headed?

The Russian oligarchs and other HNIs and UHNIs are vigorously trying to move at least some of their wealth from Europe to the UAE because of the western sanctions. It’s no secret that the UAE has always been a point of interest for the ultra rich and as long as the country keeps its neutral stance on the matter, their money is safe there. As a result, most of the Russian money which was either in Switzerland or London is being moved to the UAE.

That’s not all, the wealthy Russians are also leaning towards the UAE’s real estate market for alternative destinations for luxury property purchases.  This is evident from the many purchases and leasing of apartments by Individuals with money tied to Russian financial institutions.

Moreover, real estate brokers in the UAE are also seeing a surge in interest among Russian investors for property, some paying as much a year of rent in advance, according to some reports. These purchases are mostly made through cryptocurrencies but some have even been made via transfers from financial institutions that are linked to sanctioned individuals.

So, the question is what does all of this mean for the UAE?

The UAE is increasingly becoming the top spot for Russian investors and ultra-net-worth individuals as the crisis deepens. This could translate into more investors moving to the UAE and investing heavily into the economy. As long as they stay true to the neutral stance, this could keep increasing. 

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