UAE is emerging as Russia's gateway to the Mena region
Moscow considers Abu Dhabi a reliable partner and an ideal place from which to kick off expansion throughout the MENA region. Many private companies, weary of stagnating opportunities at home, will probably concur.
Meagre economic growth at home and pressure from international sanctions have pushed Russian businesses to explore new opportunities abroad. Companies traditionally reliant on Western markets have increasingly set their sights on the UAE, driven by its economic wealth and encouraged by stable political relations between the two countries. It's no wonder that Lt. General Sheikh Saif bin Zayed Al Nahyan, Deputy Prime Minister and Minister of the Interior, praised these burgeoning ties on a recent visit to Moscow. For the first time, bilateral trade volumes exceeded $3 billion (Dh11 billion) this year, making the UAE Moscow's largest trading partner within the GCC region.
This 21 per cent jump in trade year-on-year confirms the longstanding interest that Emirati and Russian companies have had in each other's markets. In 2013, Abu Dhabi established a $3 billion endowment with the Russian Direct Invest Fund (RDIF) to develop Russia's agricultural sector. The RDIF has also formed a consortium with the UAE to acquire a stake in Russian Helicopters, while the Abu Dhabi Investment Authority committed to a multibillion dollar deal in infrastructure, building everything from a new ring road around Moscow and a high-speed rail line.
On top of this flurry of bilateral investments, both nations agreed on a $7 billion joint investment fund to serve as a financial driver for their various economic initiatives.
These investments may have been driven by economic imperatives, but they've been backed up by political support. The Kremlin has ratcheted up its efforts to build bridges within the GCC, a region that was traditionally considered too thoroughly tied to the United States to fall into Russia's sphere of influence. A more isolationist US administration, as well as Moscow's involvement in regional affairs-most notably the Syrian Civil War- has allowed Russia to make inroads in the area, especially in Abu Dhabi.
Over the years, the Kremlin has also come to perceive the UAE as a peaceful and development-oriented oasis with a moderate foreign policy and massive hydrocarbon wealth. Russian policymakers are undoubtedly also attracted to its strategic geographic location at the crossroads of international trade routes. All of these factors explain why Moscow has worked hard to build a stable relationship with the emirates. Last year, Russian President Vladimir Putin and His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, signed a declaration of strategic partnership that further greased the wheels for economic exchanges.
But while giant contracts between the countries such as the massive infrastructure deals highlighted above continue to dominate the agenda, Moscow and the UAE are also increasingly embracing a shared interest in SMEs, particularly in ICT.
This year, Dubai Startup Hub, an initiative of the Dubai Chamber of Commerce and Industry, participated in a roundtable in Moscow which aimed to familiarize Russian startups with the emirate's business ecosystem and growth perspectives. Last year, the Russian state facilitated the opening of a Centre for Digital Innovators and Information and Communication Technologies in Dubai's Internet City, attempting to secure a foothold in the Middle East. According to the available data, the GCC region spends almost $160 billion on ICT products. In December 2017, Russian efforts also resulted in establishment of a Skolkovo Foundation IT cluster in Dubai that brought together seven Russian hi-tech companies working in areas including infrastructure security, cybersecurity, AI, automated industry and 3D modeling.
Given Abu Dhabi's growing interest in diversifying its economy and attracting foreign entrepreneurs via long-term visas and tax breaks, Russian companies being pushed by meagre economic growth to look abroad for opportunities are receiving a warm welcome overall.
This isn't to say that there haven't been some controversies surrounding Russian firms' forays into the UAE. As Lenta.ru recently reported, Russian IT businessman Ilya Kligman is suing his former Dubai-based partner Alibek Issaev for at least $200 million over an alleged fraud related to YzerChat, the first UAE national multilanguage internet calling and messaging app. The legal battle around YzerChat could put the app's investors in crosshairs.
Nonetheless, interest in the UAE market continues to be on the rise among the Russian companies. Myriad Russian companies have successfully operated in the UAE, or secured Emirati investment. One Russian blockchain project has attracted more than $12 million from investors in the UAE. Another company linked to Russia, Brandquad, has graduated from the Chalhoub Group accelerator in Dubai and is now eying expansion on the local market. Stafory, a Russian HR startup, is aiming to facilitate the hiring of more than 25,000 employees throughout the UAE through its automated recruiting practices.
This trend is likely to continue. Moscow has made it clear that it considers Abu Dhabi a reliable partner and an ideal place from which to kick off expansion throughout the MENA region. Many private companies, weary of stagnating opportunities at home, will probably concur.
Dmitriy Frolovskiy is a political analyst and independent journalist based in Russia