The Falcon and Bear Braving a Storm: UAE and Russia in the Dawn of Multipolarity

• Ayanangsha Maitra

Russia, THE TSAR of diamond mining, and the UAE, where the raw brilliance is honed into luxury, share a warm economic relationship and the pair contribute immensely in the grand design of the  geoeconomics. Ukrainian President Volodymyr Zelenskyy’s state visit to Qasr Al Shati in Abu Dhabi, following the Munich Security Conference signifies the Emirate’s growing role as a mediator in global diplomacy.  It also shows the trust Abu Dhabi commands from both Moscow and Kyiv in advancing peacemaking efforts.

Moscow’s policy to diversify trade from the West to Asia has benefited the United Arab Emirates (UAE). Trade between Russia and the United Arab Emirates tripled over the last three years, remarked President Vladimir Putin when he hosted UAE ruler Sheikh Mohammed Bin Zayed Al Nahyan in Moscow in October 2024, followed by a meeting at the Novo-Ogaryovo state residence. The bilateral trade between the two burgeoning economies crossed $11.4 billion in 2023, redefining the relations between the two nations.

The UAE has joined the BRICS as a full member in January 2024. Against the backdrop of seismic geo-politics as well as geo-economics shift, several factors have altered the trajectories of Moscow and Abu Dhabi, shaping their destiny. Since the war in Ukraine began in February 2022, the UAE has experienced greater economic success as Moscow has diversified its trade strategy from the West to Asia. In the UAE, Russia exports transport items and IT in addition to the energy. On the other hand, the UAE exports products such as shisha tobacco, broadcasting equipment and selected aviation parts to Russia. The UAE is not only the largest trading partner of Russia but receives about 90 percent of Moscow’s total investment in the gulf region. The UAE supplies butter, machinery, nuclear reactors, boilers, and vehicles.

infrastructure to facilitate trade. The Ministry of Finance of the UAE, has concluded the negotiations for Double Taxation Avoidance Agreement on income and capital with Russia. The UAE and the Eurasian Economic Union (EAEU) have concluded final round of negotiations to form a comprehensive economic partnership agreement to enhance bilateral trade in goods between the UAE and the five members of the EAEU bloc, comprising Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. Russian President Vladimir Putin paid a one-day lightning tour to Abu Dhabi in December 2023 during COP28 climate talks. 

The state visit of UAE ruler Mohammed bin Zayed Al Nahyan to Russia in October 2024 warmed up the Moscow-Abu Dhabi relations, which encompass diverse sectors, including energy, trade, space exploration, and humanitarian cooperation. Additionally, Foreign Minister Sergey Lavrov’s participation in the 7th Russia-Gulf Cooperation Council (GCC) Ministerial Meeting for Strategic Dialogue in September 2024, along with his visits to Qatar and the United Arab Emirates and engagement with the League of Arab States (LAS), played a significant role in strengthening ties with the Arab states.  The Russia-Arab bonhomie was rekindled in the meeting of the Russia-Islamic World Strategic Vision Group at Kazan Forum 2024 in May.

The UAE: A Magnet for Russian Expats

The UAE has emerged as a dream destination for Russians for plethora of factors. The cities like Dubai and Abu Dhabi offer  a seamless blend of accessibility, convenience, and an elevated lifestyle at a reasonable cost. With direct flights ferrying between multiple cities, streamlined visa policies, and the ease of securing a Dubai residence permit (Dubai ID) and banking facilities, relocation is convenient. However, securing visas for the US and Europe remains a formidable challenge, placing the UAE as an appealing alternative. Dubai, in particular, promises a sophisticated standard of living, featuring upscale residences, prestigious schools, a dynamic culinary scene, and an exclusive social environment for affluent Russian-speaking expatriates. The presence of a well-established Russian-speaking community—estimated at 100,000 as of 2019, comprising 40,000 Russian nationals and 60,000 individuals from former Soviet states—creates a sense of familiarity and belonging. Additionally, the influx of Russian tourists continues to grow, with flights connecting various Russian regions to key UAE destinations such as Sharjah, Ras Al Khaimah, Fujairah, Dubai, and Abu Dhabi.

Economic Relations

Economic ties are one of the key determinants of UAE–Russia relations. The two nations have come forward mostly over the decades from the relations of ecommerce. The UAE is playing a role in facilitating parallel imports into Russia, with a significant increase in exports of electronics, spare parts, and microchips from the Emirates to Russia. However, despite this increase in trade, the UAE is under constant pressure from the West to limit its cooperation with Russia. The financial institutions of the Emirate are exercising caution in their dealings with Russian entities because they are closely followed by US regulators. The UAE was included in the “grey list” of the Financial Action Task Force, prompting increased oversight of cash flows, making it more difficult to transfer assets from Russia or bypass sanctions.

From the late 1990s onward, Moscow has progressively solidified its partnership with the Arab nation, resulting in a marked surge in Russian exports to the Emirates. Concurrently, a mushrooming Russian diaspora has emerged in the urban habitats like Dubai and Abu Dhabi. The Russian community, comprising business professionals, skilled laborers, and entrepreneurs is cajoled by the appealing economic nature and abundant investment opportunities these cities offer.

The UAE and the USSR (Union of Soviet Socialist Republics) established diplomatic ties shortly after the UAE’s formation in December 1971. A USSR delegation visited the UAE in January 1972, acceding to establish diplomatic missions at the ambassador level. Despite the early agreement, the actual establishment of embassies was delayed until November 1985, when Moscow and Abu Dhabi officially announced bilateral relations. The USSR opened its diplomatic mission in March 1986, with the UAE Embassy opening in Moscow in April 1987. The missions provided a significant boost to bilateral ties, particularly in the economic sphere.

Economic Cooperation and Trade

• Early Financial Agreements: In April 1988, Moscow received a loan of $50 million from the UAE, marking early economic cooperation. In December 1989, the Russian Foreign Bank visited Abu Dhabi to explore additional borrowing opportunities and the participation of UAE financial institutions in issuing Soviet financial credit instruments.
• Air and Sea Transport: An Air Transport Agreement was signed in 1987. Notably, Aeroflot had an office in Abu Dhabi since 1979. Later in 1988, several Soviet sea carriers inked deals with the UAE company Sharaf Shipping.
• Trade and Industrial Cooperation: An Agreement on Trade, Economic, and Industrial Cooperation was signed in Moscow in January 1990, further strengthening economic ties.

Trade Relationship

Deliveries of electronic items and spare parts for them from the Emirates to Russia have grown significantly to become the country’s biggest category of exports to Russia, while deliveries of microchips soared 15 times. In the 2022, the UAE sold Russia 158 civilian drones. The bilateral trade between Russia and UAE crossed $11.4 billion (1 trillion rubles)  in 2023.  In 2022, Russia exported $8.07 billion to the UAE, while the UAE exported $2.47 billion to Russia, indicating a significant trade surplus in favour of Russia. Russia’s main exports to the UAE in 2022 were gold ($5.36 billion), diamonds ($1.64 billion), and refined petroleum ($214 million). The UAE’s main exports to Russia in 2022 included broadcasting equipment ($1.4 billion), computers ($244 million), and microphones and headphones ($71.8 million).

Despite the difficulties faced by Russia in the 1990s after the dissolution of the USSR, the warm relations between the two nations were maintained and gradually developed, with rapid growth occurring in the first decade of the 21st century. Since the start of the war in Ukraine in February 2022, Dubai has become an increasingly important hub for trade with Russia. This has been aided by Western sanctions on Russian energy products which have led to an exodus of oil and commodity traders from London and Geneva to Dubai.

The UAE-Russia relationship has evolved from its early diplomatic foundations to a significant partnership characterised by robust trade and economic cooperation. The increasing volume of trade, coupled with continuous high-level diplomatic engagement, highlights the importance of this relationship for both nations. The establishment of Dubai as a key trading hub post-2022 further demonstrates the adaptability and growing significance of this bilateral relationship in the current scenario.

In 2023, Russia exported 902,000 tonnes of agricultural products to the UAE, marking a 2.8-fold increase from the previous year. According to Agroexport, Russia has steadily expanded its wheat shipments to the UAE, with exports surpassing 900,000 tonnes in the 2019/20 agricultural year—accounting for 50% of the UAE’s total wheat imports. Andrei Terekhin, Russia’s trade representative in the UAE, highlighted the Emirate’s market as a promising destination for a diverse range of agricultural products.

Several prestigious Russian universities have established a presence in the UAE. Russian companies have showed enormous interest in the UAE across sectors and about 4000 Russian companies are functional in the UAE. Russian enterprises like Rosneft, Metalloinvest, Volga-Dnieper, Kurganmashzavod, Amtel, Stroitransgaz, Metallurgical Pipe Company, Interkomholding, Alrosa, KAMAZ, Lukoil, VTB Capital,  and several  others not just created their footmarks but also earned name as a respected corporation. UAE’s logistics major DP World, signed a strategic cooperation deal with Rosatom State Corporation, to establish an international logistics joint venture (JV) to develop container shipping through the Arctic and operate in the Russian and international markets. The Russia-UAE Working Group for Regional and Investment Cooperation conducts their meeting time to time. The enterprises from the two nations formed Russia-Emirates Business Council in September 2005.

Conclusion:

The Emirate’s prestige, prosperity and tax-friendly policies make it an attractive gateway for businesses looking to engage with Russia, particularly as trade routes and partnerships shift in the current geopolitical landscape. The UAE’s business-friendly approach allows Russian companies, making it a significant bridge for trade and commerce.

The UAE’s warming ties with Russia and intuitive move to be a member of BRICS  a clear move towards supporting multipolarity – while simultaneously maintaining a business diversification strategy. The Emirates’ role in facilitating parallel imports into Russia highlights its function in circumventing Western sanctions and enabling continued trade relations. This is further supported by the increase in exports of electronics, spare parts, and microchips from the UAE to Russia. The UAE provides an excellent opportunity for several other countries to access the Russian market. By establishing itself as a major trading hub, the UAE facilitates the flow of goods and services between various other nations in addition to Russia. The presence of a growing Russian community in the UAE creates a conducive environment for business, further promoting trade and investment. In essence, the UAE’s actions show a dual commitment to both strategic diversification and enabling multipolarity.

[ Ayanangsha Maitra, PhD is a writer and producer at COGGS. He can be contacted via @Ayanangsha  on X or via email : ayan@thegeoeconomics.com . ]