How a playground for the rich could undermine sanctions on oligarchs

NEW YORK (NYTIMES) - Stretching into the Persian Gulf from the beaches and skyscrapers of Dubai is a man-made archipelago in the shape of a vast palm tree, its branchlike rows of islands lined with luxury hotels, apartments and villas.

Among the owners of those homes are two dozen close allies of President Vladimir Putin of Russia, including a former provincial governor and nuclear power plant manager, a construction magnate and former senator, and a Belarusian tobacco tycoon.

At least 38 businessmen or officials linked to Mr Putin own dozens of properties in Dubai collectively valued at more than US$314 million (S$426 million), according to previously unreported data compiled by the nonprofit Centre for Advanced Defence Studies. Six of those owners are under sanctions by the United States or the European Union, and another oligarch facing sanctions has a yacht moored there. For now, they can count themselves lucky.

Since the invasion of Ukraine, much of the world has imposed sweeping sanctions on Russian financial institutions and the circle around Mr Putin, and even notoriously secretive banking centre like Switzerland, Monaco and the Cayman Islands have begun to cooperate with the freezing of accounts, seizing of mansions and impounding of yachts.

But not Dubai, the cosmopolitan resort and financial centre in the United Arab Emirates. Although a close partner to Washington in Middle Eastern security matters, the oil-rich monarchy has in recent years also become a popular playground for the Russian rich, in part because of its reputation for asking few questions about the sources of foreign money. Now the Emirates may undercut some of the penalties on Russia by continuing to welcome targeted oligarchs.

"Sanctions are only as strong as the weakest link," said Mr Adam Smith, a lawyer and former adviser to the US Treasury Department office that administers such measures. "Any financial centre that is willing to do business when others are not could provide a leak in the dike and undermine the overall measures."

Russians in Dubai say they appreciate the hospitality. "Having a Russian passport or Russian money now is very toxic - no one wants to accept you, except places like Dubai," said a Russian businessman who owns an apartment and took refuge there, speaking on the condition of anonymity for fear of alienating the Emirati authorities. "There's no issue with being a Russian in Dubai."

The Centre for Advanced Defence Studies, a Washington-based non-profit that collects data on global conflicts, found that Putin allies owned at least 76 properties in Dubai, either directly or under the name of a close relative, and said that there were likely many others who could not be identified.

The centre's list of those under sanctions includes: Mr Alexander Borodai, a member of Russia’s Lower House, or the State Duma, who acted as prime minister of a Ukrainian province in 2014 when it was taken over by Russian-backed separatists; Duma member Bekkhan Agaev, whose family owns a petroleum company; and a son of Belarusian tobacco titan Aliaksey Aleksin. A handful of oligarchs on the list own homes valued at more than US$25 million each.

Maritime records show that in recent days the yacht belonging to sanctioned oligarch Andrei Skoch, a steel magnate and Duma member, has been moored off Dubai.

A Bombardier business jet owned by Mr Arkady Rotenberg, another Russian billionaire under sanctions, landed on Friday, and the planes and boats of other oligarchs discussed as possible targets have been coming and going, too.

The yachts of at least three other oligarchs are currently docked in Dubai. The 220-foot vessel of a Russian metals magnate appears to be en route from the Seychelles. The Boeing 787 Dreamliner owned by Roman Abramovich, the Russian-born owner of Britain's Chelsea soccer team, took off from the airport on Friday. A 460-foot superyacht belonging to another oligarch set sail the same day. He was added to Europe's sanctions list on Wednesday.