How Russian economy survives during the Ukrainian war?

One statement of the Ukrainian Minister of Foreign Affairs reignites the topic of how Russia fuels the war against Ukraine with the indirect support from the western countries. What Mr. Kuleba said on January 19th, 2024, was that 95% of the foreign components of the weapons used by Russia to attack his country were manufactured in western countries. What Mr. Kuleba did not directly say was that these western components land in Russian military factories with the help of the thousands of Russian companies which operate in countries like United Arab Emirates or Saudi Arabia.

Although a declared ally of the USA and other western countries the UAE leadership embraced an ambiguous behavior when it comes to the Russian aggression against Ukraine. On one side they officially condemned, from the UN tribune, Russian aggression but behind UN and western allies’ back they became a real heaven for the Russian interests worldwide.

Most of us remember the royal reception of Mr. Putin on his last visit to UAE. Fighting jets drawing on the sky the Russian flag, cavalry escort, luxurious cars, bands, camels, and cannon fires. And remember, this royal reception was organized by the same country and by the same leader who did not take Joe Biden’s call just few months earlier.

Make no mistake, all these gestures did not come out of the blue. Since the starting of the Ukrainian conflict the UAE became the main hub for the Russians businesses worldwide and the heaven for their fishy affairs. Re-exporting the Russian oil in complete disrespect for the UN’s embargo, processing the cheap Russian oil and export the products at the market price, buying the Russian gold or laundering their money are just some of the bricks of this unexpected friendship between the two countries.

 The reality is that the UAE profits economically and potentially politically most from the Russia-Ukraine conflicts. Just imagine that the oil and oil products which before the war were traded through Geneva, London, Singapore, or Hong Kong they now all flow through a single point hub: the UAE. Millions of barrels of oil are indigenized by the UAE market and escape the rules of the embargo. Other millions of barrels of very disgustingly cheap Russian oil are refined in the UAE and the products are sold at the market price. The profits are shameless.

So, this flow of cash must be managed by the UAE banks since the western banks shot their doors in front of the Russian money. Billions and billions of US Dollars, Euro, Yeni and other currencies land every day in the UAE banks. They are brought here by the tens of thousands of Russians who know that here no banker would ask them where this money was coming from. Bags of cash are counted every day by the UAE banks in complete silence and discretion. Since May 2022 the Russian money infusion grew every month with over 20% compared to the previous year, according to Capital Economics.

The UAE bought just in 12 months between 2022 and 2023 Russian gold of over 4 billion USD. If we compare this huge number with the level of 2021, which was just 61 million USD, we have an idea of the size of this operation.

Obviously, part of this money fuels the UAE economy but most of it fuels Moskow’s efforts to survive the UN embargo and to feed the Russian war machinery. Most of the western components from the Russian’s weapons Mr. Kaleba mentioned pass through the dark paths of the thousands of new Russian companies registered in the UAE since the conflict started. Everybody knows it but no one made any decisive step on enforcing the embargo.

In mid-2023 officials from USA, UK and EU had a shy attempt to convince the UAE rulers to enforce the UN embargo against Russia at least on the technical components like IT chips and other components which have dual use, civilian and military. Well, as Mr. Kuleba stated, they failed to convince the UAE to correct its wrongdoing, so these western components still drive the rockets which bombed civilians and homes in Ukraine.

A legitimate question pops instantly: how come such great powers cannot persuade one of their allies to comply with the UN decision and stop feeding the Russian economy and the Russian war machine? What is behind their shyness?

Well, it might look like an easy question but it’s not. The ties between the world’s superpowers and a rather tiny emirate covered by sand are deep, variate and some of them unknown to the public. They vary from national security and military interest to money and power, lots of money.

Since 2009 the UAE has been the largest export market in the Middle East for the USA. The trade surplus in favor of the Americans reached 17 billion USD just in 2021.  The UAE investment in USA passed 27 billion USD by year 2019, according to the UAE Embassy in Washington. The small emirate manages to do business with all 50 US states and creates over 125,000 jobs throughout the USA.

Worth to mention that the UAE is one of the largest foreign military customers for the US defense hardware and their purchase goes way beyond 20 billion USD, according to the same Embassy.

Strategically speaking, the UAE is the most important USA ally in the Gulf.  The Al Dhafra Air Base, just outside Abu Dhabi, hosts over 5,000 American troops with key missions in the Gaza conflict as well those from Iraq and Siria. So, hard for the Americans to raise their voice on the Sheikhs since there are so many interests at stake.

When it comes to France the best description is the one done by Orient XXI; “discreet and fruitfully partnership with the especially in the realm of arms sale”.

Since 1971 when the British retreated from the new emirate France aimed to take the British chair and influence. Nothing new. The long-lasting competition between the two. France opened one of his main militaries bases outside the country close to that of Americans near Abu Dhabi. France ambitions in selling arms to the UAE are high but their results are rather modest: just 1,5 billion USD in 2019 and slight increase since then. So, it can be said that the UAE rulers buys France silence at a very discounted price.

The UK sold itself much better than their cross-channel neighbor did. The UAE is the UK’s largest trading partner in the Middle East and the third largest partner outside Europe. They are just exceeded by the USA and China.

Bilateral trade increases every year since the start of the Ukrainian conflict and hit over 27 billion pounds in 2022, an increase of 63% compared with the year before. UK officials often say there are tens of billions of pounds more to be invested by the UAE funds into the UK. So, the UK government, no matter what color has, will continue to look on the other side when it comes to the UAE’s wrong-doing or human rights abuses. Money talks!

Well, these facts should answer Mr. Kuleba’s perplexity of why western IT components still helps the Russians rockets to fly and take the lives of his compatriots. Because money is more important than human lives and human rights. Because a shirt is much closer to the skin than the jacket.