The United Arab Emirates is a global financial centre, one of Russia’s most important foreign economic partners, and a SPIEF guest country in 2023. Today, the two influential countries have more points of contact than ever before.
Russia and the UAE are similar in many ways — both countries are major suppliers of hydrocarbons that are actively diversifying their economies at the same time. Both support the principle of a multipolar world, i.e., equal cooperation among states while maintaining their own national interests and cultures.
Technological, financial, and political sovereignty means a lot to the Emirates, just like it does to Russia. The country is strengthening its defence capabilities, developing the IT sector and space programmes, and ensuring food security. Russia is interested in investments. Given the transformation of the world economy, it is becoming obvious that it is much easier for two powerful developing nations to achieve these goals together.
Opening up the East
Russia and the UAE signed a Declaration on Strategic Partnership in 2018. This highly important document essentially affirmed the two countries’ clear successes in economic cooperation and outlined ways to further develop bilateral relations.
By 2018, hundreds of Russian companies in various sectors, from tourism to cargo transportation, had already been registered in the Emirates. Prominent holdings were involved in implementing major projects. For example, Stroytransgaz built the 244-kilometre Taweelah-Fujairah gas pipeline and Metalloinvest built an equipment production plant. Developers from Russia, such as Becar Asset
Management or the Forum Group, began to enter the Dubai market, and in 2022, almost every major developer studied the feasibility of working there and many acquired land plots. Samolet Group, Pioneer Group, VOS’HOD, and other companies have already announced their entry into the market.
Several Russian real estate agencies also operate in the UAE (some of them have been there for decades). The country’s housing market is almost doubling each year, and in 2022, buyers from Russia were some of the most active among non-residents in the UAE. Last August, the elite Moscow-based Primakov School even opened a branch in Abu Dhabi.
Both large companies, such as SUEK and Eurochem, as well as representatives of small and medium-sized businesses are opening offices in the UAE. Last year alone, roughly 700 companies from Russia registered their businesses in the UAE. Such a move enables them to maintain international ties amidst sanctions. The UAE has a rather comfortable tax regime for foreign businesses: VAT is 5% and only applies to operations within the country, which makes it possible to just have an office in the country. Starting from 1 June 2023, the UAE will introduce a 9% income tax for companies with a profit of USD 102,000 per year. However, start-ups and small businesses, as well as companies considered a Public Benefit Entity, i.e., those that provide a public benefit, which includes the healthcare sector, are exempt from paying taxes.
In addition, the UAE is a large solvent market that is attracting more and more tourists. The tourist flow from Russia last year exceeded one million people, which is 60% more than the previous year.
Against this backdrop, domestic restaurateurs and retailers have begun expanding into the country. White Rabbit Family, Tigrus, L’Etoile, 12storeez, Dodo Pizza, and Restart Vasilchuk Brothers have already launched or are preparing to launch projects there. Dubai stores feature Belle YOU, Nikita Efremov, Post Meridiem, Lichi, Sodamoda, and other Russian brands. Of course, there are risks — rent in the UAE is high, and the markets are very saturated and competitive, but this is not stopping Russian businessmen.
Trade route
Russia and the UAE have a high level of mutual interest in trade. Suffice it to say that the Emirates became Russia’s largest partner in the Middle East in 2021, ahead of even Egypt. Turnover between the two countries is growing at a rate of more than 60% annually; whereas in 2021 it expanded to an all-time high of USD 5.4 billion, this record was immediately shattered in 2022 with turnover of USD 9 billion, of which exports from Russia to the UAE accounted for USD 8.5 billion. «The partnership between our countries is on the rise, and this positive trend is reflected in Russian-Emirates trade statistics,» Russian Minister of Industry and Trade Denis Manturov happily noted.
In addition to traditional precious stones, metals, and minerals, the UAE has shown a growing interest in foodstuffs from Russia, such as meat, butter, dairy products, and confectionery, which UAE residents highly value. For its part, Russia is importing vehicle components, building materials, and equipment from the UAE.
Investment funds from the UAE are also discovering Russia. For example, the Tawazun holding has invested in the production of Aurus cars, Abu Dhabi Investment in the construction of Olympic facilities in Sochi, and Gulftainer in the port of Ust-Luga, just to name a few. UAE companies are even involved in building the Kamchatka Falcon Centre, which, based on an agreement with the Far East and Arctic Development Corporation, is being developed by Zapsibgazprom and Fund RC-Investments, the investment platform of the Roscongress Foundation: Arab countries have always respected birds of prey.
Balance of interests
The UAE has not joined the anti-Russian sanctions, but takes them into account when working with Russian business. In particular, Sberbank was forced to close a representative office in Abu Dhabi, for which there were high hopes, although the bank continued to serve customers in this market. In addition, the UAE sovereign fund Mubadala Investment was forced last year to announce the suspension of its operations in Russia. It had been working in Russia since 2013 together with the Russian Direct Investment Fund, and over this time the partners had invested USD 2.3 billion in more than 50 projects in various industries.
At the same time, other relatively smaller companies have stepped up their activities. UAE Undersecretary of the Ministry of Economy Abdulla Al Saleh, for example, predicted that UAE direct investment in Russia would reach USD 1 billion by the end of 2022. Companies from the UAE are interested in development as well as oil and gas projects. They are also actively considering investment in agricultural production in line with the country’s focus on food security. Officials and entrepreneurs from Russia regularly participate in business and investment forums in the UAE, and vice versa. The UAE’s status as a guest country at the SPIEF serves as compelling confirmation of this.
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