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Trailing Money: from Russia to Dubai and Turkey

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The invasion of Ukraine on the 24th February and the start of the ongoing war led many countries to impose strong economic sanctions on Russia. This economic blockade deepened the gap between West and East and is threatening the economy of the Russian Federation, with consequences for the whole world.

Russia found itself economically isolated when countries wanted to stop all relations with Moscow. and Many companies that suspended operations in the country. Russian companies and company owners found themselves in a position where they could not do business with the world like before the war, so they turned to those countries that have been somewhat neutral, like Turkey or the United Arab Emirates. Despite having condemned Putin’s actions, Turkey and the UAE have refused to take a side in the Russia-Ukraine war, not closing their doors to Russia, or imposing sanctions. Those who are moving to Turkey or Dubai are not just wealthy Russian businessmen, but also oligarchs that leave Russia or other countries where they are not welcomed anymore, in order to secure their wealth. Private jets have been flying back and forth from Moscow to Dubai and yachts have been spotted harbored in Dubai. 

These two countries have become “hot spots” for wealthy Russians seeking financial safety. Even before the start of the war, as Russian troops were ammassing at the Ukrainian border, they were pouring money into different businesses. One such example is real estate. Russians are buying around seven or eight units every day and either paying by cash or opening bank accounts. Sometimes they paid by bringing gold because of the many banking problems they have been facing since the start of the sanctions. Moreover, Russia has been excluded from the SWIFT banking system, resulting in companies not being able to benefit from smooth and instant transactions provided by the system. For this reason, Moscow decided to start using its own transfer system called the System for Transfer of Financial Messages (SPFS). Created back in 2014, after the invasion and annexation of Crimea, the system was only used domestically. However, in April the head of the Bank of Russia announced that the SPFS was open to international transfers as well.

The number of Russian investors that started making business in Turkey grew so widely since February: it was reported that around 14,000 Russians arrived in the country. In particular, in Antalya – Turkey’s biggest international sea resort – there has been a boom of Russian companies, with more than 60 companies being opened in the past 6 months. Interested in this area are investors focused on sectors such as real estate, textiles, furniture and boats.

Regarding the real estate sector, according to TurkStat, sales to foreigners rose 58.1% in April to 6,447 units, with Russian citizens boosting their purchase by 186.6% year-over-year to 1,152 houses from 547 in March, proving to be big buyers of Turkish properties. 

The main reason is that Turkey in particular has maintained close ties with both Russia and Ukraine, often acting as mediator and peacemaker since the beginning. This happened because Ankara relies heavily on Russian oil, gas, trade and tourism, but also because the country needs Moscow’s approval on international matters. Without Russia’s support, Turkey could not keep being present in northern Syria – where it is carrying on an offensive against the Syrian-Kurdish militia.

In the UAE, Russians have always been welcomed and they have always been among the biggest buyers of real estate, with about 100,000 Russian speaking-residents. In particular, in the “free zones” – mostly in Dubai – the number of Russian entrepreneurs and start-ups has strongly increased. According to a report published by the Dubai property agency Betterhomes, property purchases increased by 67% only in the first three months of 2022. In these free zones foreign company owners have been looking for office space and warehouses and it is easier for them to locate or relocate their companies there. It started with IT or software companies, but now the group includes a wider range of companies, such as art galleries, resale. 

Buying a property in the UAE is much quicker than buying it somewhere else and it also offers investors a three-years residency visa, so they will not need local sponsorship and the paperwork needed requires minimal effort.  Also, in the Gulf state there is little financial transparency, most things can be paid in cash and there will be no questions asked. 

Dubai and Turkey’s position towards the war and their role as a “safe haven” for Russian citizens importing their businesses abroad have been cause for concern for many countries. For example, members of the European Parliament urged the UAE to be included on its list of third countries that are a threat to the financial system because of the lack of financial transparency. According to an investigation, several property owners or businessmen close to the Kremlin have been accused or convicted of crimes or are under international sanctions. Despite concerns, money is moved anyway from the Russian side and it is converted into Euros or other currencies, or through letters of credits as well. 

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