Dubai has emerged as a major hub for Russian oil trade, taking over from Geneva as the primary location for traders selling Russia’s oil to consumers globally. Since Switzerland joined the embargo on Moscow following the Ukraine invasion, a significant portion of the trade has shifted to Dubai and other cities in the United Arab Emirates.
According to Russian customs documentation analyzed by the Financial Times, companies registered in the UAE purchased at least 39 million tonnes of Russian oil worth over $17 billion from January to April. This accounted for around a third of Russia’s declared exports during that period. While some of the oil was received in the UAE, most of it was directed to new buyers in Asia, Africa, and South America.
The UAE’s energy trading industry was already growing prior to the Ukraine conflict, but the conflict and subsequent western sanctions have accelerated this growth. The customs data reveals that eight out of the top 20 traders of Russian crude in the first four months of the year were registered in the UAE. In refined petroleum products, such as diesel and fuel oil, the UAE dominated even further, with ten of the largest 20 traders being registered in the country.
This trading boom has brought significant economic benefits to the UAE, with billions of dollars in additional oil revenue passing through its banks and attracting numerous new companies to its free-trade zones. However, it has also strained relations with allies such as the US, which wants Russian oil to continue flowing but is cautious about creating trade routes that undermine sanctions.
Executives in the trading industry describe Dubai as a hub of excitement, competition, and suspicion, as new teams battle for talent and trade flow in a market suddenly filled with buyers and sellers. The UAE, with its favorable business infrastructure, banking services, and light-touch regulation, has long been an important commercial hub. It has attracted merchants for centuries who traded goods between Europe and Asia, as well as more recently becoming a major trading location for commodities such as gold, diamonds, and agricultural products.
While the UAE is the world’s eighth-largest oil producer, historically it has not been a significant oil trading location. However, its proximity to growing oil markets in Africa and Asia, coupled with the absence of personal income taxes, had already started to attract profit-hungry traders even before the Ukraine conflict escalated. Many traders find Dubai particularly appealing due to its perceived political neutrality. The UAE provides a platform for transacting, trading, and traveling freely, serving as a reliable location in a world where global rivalries often lead to sanctions on different countries’ exports.
The war in Ukraine and the UAE’s willingness to welcome Russian businesses have been driving factors behind the current boom. The Dubai Multi Commodities Centre, located in the Jumeirah Lake Towers district, is one of the UAE’s most successful free zones and has become the new center of the Russian oil trading universe. Out of the 104 buyers of Russian oil listed on Russian customs declarations from January to April, at least 25 were companies registered in the DMCC.
Litasco, the trading arm of Russia’s Lukoil, emerged as the largest single buyer of Russian oil during this period. The company’s operations shifted from Geneva to Dubai last year, taking advantage of the favorable trading environment. Other DMCC-registered traders, such as Demex Trading and Qamah Logistics, have also become significant players in the trade of Russian crude.
Trading Russian oil from Dubai is not illegal, as western sanctions only prohibit imports into specific countries enforcing the G7’s rules. As a result, western companies can continue selling Russian oil to non-western buyers as long as the oil is sold under a certain price. These measures have been put in place to keep Russian oil flowing to new markets while reducing its reliance on western buyers.
Overall, Dubai’s rise as a hub for Russian oil trade reflects the changing dynamics of the global energy market and the UAE’s efforts to capitalize on its economic advantages. The boom in oil trading has provided substantial economic benefits to the UAE, but it has also posed challenges in managing relationships with western allies and navigating international sanctions. Despite these challenges, Dubai’s position as a major trading hub seems set to continue as companies take advantage of its modern business infrastructure, political neutrality, and tax advantages.