Dubai’s Glitz Dims for Russians On Costs، US Sanction Pressures

Two years ago، Dubai became a hot favorite with Russians looking to park money or build new lives after President Vladimir Putin’s invasion of Ukraine. That allure is now dimming as the cost of living in the glitzy emirate surges and its banks get stricter in enforcing US sanctions.

Russian money flows into the United Arab Emirates — which Dubai is part of - are showing signs of slowing، according to bankers، executives and investment professionals. None of them predict a widespread exodus of cash already in the UAE، yet executives say it seems to have absorbed most of the benefits of Russian money and is unlikely to see more large inflows.

No sanctions on Russia

Some Russian arrivals are considering moving to new jurisdictions or even returning home as an expat rush into Dubai drives up rents and daily expenses. Unlike the US and the EU، the Gulf country doesn’t have sanctions on Russia. Still، Russian entities setting up bank accounts are now more likely to face scrutiny from local banks as the UAE comes under increased US pressure to tackle potential sanctions evasion، according to people familiar with the matter، who asked not to be identified in discussing information that is private.

Investment based immigration firm Henley & Partners is seeing fewer Russians establishing in the UAE، “so the trendline is going down،” said Philippe Amarante، its head of the Middle East. “In fact، some of my Russian clients have either downsized their Dubai real estate assets they bought two years ago، maintain still a small base here، but moved back to Moscow or to other available and very attractive jurisdictions like Mauritius.”

UAE-based banks including Emirates NBD Bank PJSC، Mashreqbank PSC and First Abu Dhabi Bank PJSC have tightened scrutiny of Russian entities and in recent months have attempted to ensure greater compliance with US sanctions، people familiar with the matter said.

Combating financial crimes

Bankers based in Dubai said that although average middle-class Russians who aren’t sanctioned have largely not faced major issues opening accounts، several sanctioned Russians have been rejected by banks. Some with political affiliations or connections to sanctioned persons have also faced difficulties operating bank accounts، some of the people said.

In a statement، Emirates NBD said that it is committed to combating financial crime and follows “applicable international sanctions،” but declined to comment on details. Mashreqbank and First Abu Dhabi Bank didn’t respond to requests for comment.

MMC Norilsk Nickel PJSC، Russia’s biggest mining company، also decided against starting trading in the UAE due to logistics and banking issues، people familiar with its operations said. Norilsk Nickel’s press service declined to comment.

In the immediate aftermath of the invasion، Dubai real estate agents reported a surge in wealthy Russians hunting for property in the emirate’s swankiest neighborhoods.

The UAE doesn’t provide statistics on inflows by nationality. Still، in rankings of the real estate buyers، Russian passport holders have now slipped to No. 3 last year، trailing Indian and British nationals، after holding the No. 1 slot in 2022، according to Dubai broker Betterhomes. In an interview with CNBC in January، the chairman of real estate developer Damac Properties Dubai Co PJSC said Russian demand was slowing although other buyers were holding up the market.