Dubai is booming. Demand for real estate in the glittering city of the United Arab Emirates (UAE) has skyrocketed so steeply that villas are becoming scarce in some areas.
The trend is likely to intensify this year as Dubai becomes a mecca for wealthy Russians seeking to protect their wealth from Western sanctions or shield their families from the impact of war on everyday Russian life.
This allows a large amount of money to flow into the United Arab Emirates. but it also draws the attention of international investigators who are targeting the Gulf state on suspicion of money laundering.
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The UAE has established itself as a regional finance and tourism hub to free itself from dependence on oil exports. Investors are attracted by favorable trading conditions and a liberal interpretation of Islamic rules. In a World Bank index, the Emirates ranked 16th among the most business-friendly countries in the world, well ahead of other countries in the region and also ahead of Germany, Austria and Switzerland.
Rich Russians discovered the United Arab Emirates and especially Dubai a long time ago. According to the New York Times, more than 20 businessmen and politicians close to the Kremlin own luxury properties on an artificial palm-shaped peninsula off the city’s coast. You can feel safe in Dubai despite the Russian war against Ukraine.
The UAE is an important partner of the West: Federal Economy Minister Robert Habeck (Greens) visited the Emirates just a few days ago, and the location of a US air force base.
However, they do not participate in Western sanctions against Moscow and keep their airspace open to Russian planes.
Investment against right of residence
This makes Dubai the ideal haven for Russians who previously invested their wealth in London, Paris or other Western cities.
The United Arab Emirates grants foreigners who buy a house or apartment for at least €185,000 a three-year right of residence for themselves and their families. The Russian Business Council in Dubai estimates that around 40,000 Russians live in the United Arab Emirates. A million tourists from Russia and the former Soviet Union recently arrived in the Emirates each year.
Even before the Ukraine war, purchase prices for villas in Dubai rose 22 percent year-on-year, according to property consultancy Core. “Supply in established, centrally located villa settlements is becoming scarce,” the company said in a recent report.
Since the beginning of the war, even more interested parties have entered the market. Private jets bring wealthy Russians to Dubai in search of a safe place to store their money. Real estate agents in Dubai are registering far more inquiries than before the war started, as the “Financial Times” reports, citing the industry.
The Reuters news agency reports that billions of cryptocurrencies are currently being converted into dollars in Dubai so that Russian homeowners can buy houses or transfer their money from Dubai to other parts of the world.
What is legal What is not?
Dubai benefits from the fact that many Russians in the city “solve their problems”, prominent real estate developer Hussain Sajwani told US broadcaster CNBC. Western sanctions made “a lot of people” nervous. He himself will do business with anyone interested in bringing his money legally to the UAE.
But there is a problem of what is legal and what is not. That could still cause a headache for the UAE government. Questionable financial practices in the Emirates have so far been largely ignored internationally, experts say.
Dubai’s prosperity is based in part on a “steady stream of illegal profits from corruption and crime,” the US think tank Carnegie Endowment for International Peace said in a report last year.
The UAE authorities have so far not raised many questions about the origin of the foreign funds. Now the arrival of the oligarchs highlights these grievances. The international money laundering investigative agency FATF has now placed the Emirates on a “grey list” of states that are suspicious and need to be monitored more closely. The investigation could damage the image of the United Arab Emirates.
Prices will likely continue to rise
According to the FATF, the Emirates have committed to tightening their laws against money laundering and the financing of terrorism. Investigators have given the UAE a number of tasks, including fighting sanctions violators. But the Russian empires need not worry just yet, even if they are subject to sanctions from the West.
The UAE is unlikely to bow to pressure from Western countries and show the door to the Russians any time soon. Therefore, the boom in Dubai should continue. Real estate prices in the city could hit record highs this year.