Forbes India – Geopolitics: How a Playground for the Rich Could Undermine Sanctions on Russian Oligarchs


Airplanes leave trails in the colors of the Russian flag during a visit by Russian President Vladimir Putin to Abu Dhabi, United Arab Emirates, October 15, 2019.
Image: Olesya Astakhova/Reuters

SStretching out into the Arabian Gulf from the beaches and skyscrapers of Dubai is a man-made archipelago shaped like a vast palm tree, its rows of branch-shaped islands lined with luxury hotels, apartments and villas .

Among the owners of these houses are two dozen close allies of Russian President Vladimir Putin, including a former provincial governor and nuclear power plant manager, a construction magnate and former senator, and a Belarusian tobacco magnate.

At least 38 Putin-linked businessmen or officials own dozens of properties in Dubai collectively valued at more than $314 million, according to unpublished data compiled by the nonprofit Center for Advanced Defense Studies. Six of these owners are subject to sanctions by the United States or the European Union, and another sanctioned oligarch moors a yacht there. For now, they can consider themselves lucky.

Since the invasion of Ukraine, much of the world has imposed sweeping sanctions on Russian financial institutions and the circle around Putin, and even notoriously secretive banking hubs like Switzerland, Monaco and the Cayman Islands have started cooperating. with the freezing of accounts, seizure of mansions and seizure of yachts.

But not Dubai, the cosmopolitan resort and financial center of the United Arab Emirates. Despite being a close security partner of Washington in the Middle East, the oil-rich monarchy has also become a popular playground for wealthy Russians in recent years, in part because of its reputation for asking little questions about sources of foreign money. Now, the Emirates could reduce some of the sanctions imposed on Russia by continuing to welcome targeted oligarchs.

“Sanctions are only as strong as the weakest link,” said Adam Smith, a lawyer and former adviser to the US Treasury Department office that administers these measures. “Any financial center that is ready to do business when others are not could create a leak in the levee and undermine overall measures.”

The Emirati position exposes tensions between the United States and several of its closest Arab allies due to their reluctance to oppose the Russian invasion. Asked about solidarity at a time of crisis, the UAE, Saudi Arabia and Egypt instead prioritized relations with Moscow – the Emirates and Saudi Arabia in pushing back against US calls for increased oil supplies to appease energy markets, Egypt stifling criticism of the invasion while proceeding with a $25 billion loan from Russia to fund a nuclear power plant.

“This should be a moment of clarification,” said Michael Hanna, US program director for the nonprofit International Crisis Group. “It must be quite invigorating.”

The UAE is perhaps the most visible in its position, if only because it currently holds a rotating seat on the United Nations Security Council. The Emiratis abstained from voting on a US-backed resolution denouncing the invasion, refusing to criticize Russia. And Emirati officials have reassured the Russians that their authorities will not apply sanctions unless mandated by the UN – where Moscow’s veto guarantees against this.

“If we are not breaking any international law, then no one should blame Dubai, or the UAE, or any other country for trying to welcome anyone who comes legitimately,” said Abdulkhaleq Abdulla, a political analyst close to the leaders. of the United Arab Emirates. ” So what’s the problem ? I don’t see why the West would complain.

Russians in Dubai say they appreciate the hospitality. “Having a Russian passport or Russian money now is very toxic – no one wants to accept you except places like Dubai,” said a Russian businessman who took refuge there, speaking under the guise of anonymity for fear of alienating the Emirati authorities. “There is no problem being Russian in Dubai.”

The Center for Advanced Defense Studies, a Washington-based nonprofit that collects data on global conflicts, found that Putin’s allies owned at least 76 properties in Dubai, either directly or in the name of a close relative. , and said there were probably many more. who could not be identified.

The center’s list of those under sanctions includes: Alexander Borodai, a member of the Duma who served as prime minister of a Ukrainian province in 2014 when it was taken over by Russian-backed separatists; Bekkhan Agaev, a member of the Duma whose family owns an oil company; and Aliaksey Aleksin, the Belarusian tobacco titan. A handful of oligarchs on the list own homes valued at over $25 million each.

Maritime records show that in recent days the yacht belonging to sanctioned oligarch Andrei Skoch, a steel tycoon and member of the Duma, was moored off Dubai.

A Bombardier business jet belonging to Arkady Rotenberg, another Russian billionaire under sanctions, landed on Friday, and planes and boats of other oligarchs seen as possible targets also come and go. The yachts of at least three other oligarchs are currently moored in Dubai. A Russian metal magnate’s 220ft vessel appears to be on its way from the Seychelles. The Boeing 787 Dreamliner belonging to Roman Abramovich, the Russian-born owner of British football team Chelsea, took off from the airport on Friday. A 460ft superyacht owned by another oligarch set sail the same day; it was added to the European sanctions list on Wednesday.

For a decade, Moscow has been quietly forging closer ties with the United Arab Emirates and other Western-leaning Arab states, seeking to capitalize on complaints about Washington.

Autocrats who dominate the region were outraged by Washington’s declarations of support for the Arab uprisings in 2011. Arab monarchs in the Persian Gulf have cried treachery to the Obama administration’s deal with their adversary Iran on its nuclear program. Their frustration only grew when the Trump administration did nothing to retaliate to a series of apparent Iranian attacks on them.

Today, people close to those leaders say their neutral responses to the Ukraine invasion should teach Washington not to take them for granted.

“The automatic expectation in DC is that ‘you Saudis now have to jump on the bandwagon and isolate Russia like we did,'” Ali Shihabi, a Saudi political analyst close to the royal court, said. but the kingdom cannot “burn” its relationship with Russia just to please the White House.

“Our relationship is there with the Americans,” he added, “but it won’t be a monogamous relationship because the Americans are unreliable.”

Others noted that the Kremlin had ignored human rights abuses often criticized by Washington and that relations with an alternative power gave Arab states more clout. “It is useful for Arab countries to adopt this position,” said Mustapha Al-Sayyid, professor of political science at Cairo University.

Russia has sold arms to the three countries and some Saudi military officers have started training in Russia. Egypt and the United Arab Emirates have been cooperating with Russia for several years in Libya, where all three have supported the same strongman in eastern Libya in its conflict with the UN-backed government. Egypt provided bases near the border, the United Arab Emirates sent fighter jets and Russia deployed mercenaries.

Crown Prince Mohammed bin Zayed, the de facto ruler of the United Arab Emirates, visited Moscow at least six times between 2013 and 2018. When Putin visited the Emirati capital, Abu Dhabi, the following year, the city has illuminated monuments in Russian colors and repainted its police cars with Russian banners and Cyrillic writing.

Other entanglements also bind their interests, including the ongoing civil war in Yemen pitting supporters backed by Saudi Arabia and the United Arab Emirates against others favored by Iran.

At a session of the UN Security Council last week, Russia unexpectedly backed an Emirati resolution aimed at labeling Iranian-backed fighters as “terrorists”. Analysts sympathetic to the UAE have argued that they won Moscow’s support in part by abstaining from the resolution denouncing the invasion of Ukraine.

Russia, however, has also used financial ties to bring Arabs closer to the Gulf, in part through its state-controlled Russian Direct Investment Fund and its CEO, Kirill Dmitriev, who was added this week. Last on the sanctions list.

Wealthy Russians, however, have reasons beyond geopolitics for buying property in Dubai. The sheikhs who ruled the city-state have long sought to attract business by allowing a high degree of secrecy over asset ownership and sharing only limited information with other jurisdictions, said Transparency International researcher Maíra Martini. , which campaigns against corruption.

“Dubai has been a key player in most major corruption or money laundering schemes in recent years,” she said, citing recent scandals involving Russian businessmen, the daughter of the former Angolan president, key Namibian fisheries regulators and the South African Gupta family.

Citing such failings, the Financial Action Task Force, an influential money laundering watchdog, put the UAE on its “grey” list on Friday.

Emirati officials, seeking to get off the “grey” money laundering list, are already promising new transparency measures. These measures could also limit the ability of sanctioned oligarchs to hide assets or move money into Dubai.

The cut of some Russian institutions from the international electronic bank transfer system, called SWIFT, has already made it harder for them to do business with Dubai. And if Washington threatens to restrict Emiratis’ access to the US financial system – as during the early years of sanctions against Iran – that could motivate the Emiratis to cooperate more.

Yet Washington often weighs its military and intelligence partnerships against other priorities, including sanctions enforcement.

“The question,” said David Laufman, a lawyer who previously worked as a senior official in the Justice Department’s national security division, “is going to be how heavily the Biden administration relies on the United Arab Emirates to set up the program”.

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©2019 New York Times News Service

Harold B. McConnell