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12 April 2024

Trade where others fear to tread

By Frank Kane


Over the past decade Russia has undergone an economic transformation similar in scale to the great “miracles” of post-war Germany or Japan. Financially bust in 1998, when the country had to renounce its sovereign debt, Russia is now the world’s leading exporter of crude oil, boasts annual GDP growth of more than 7 per cent, and has seen incomes grow by double digits each year.

Nobody living in Dubai can have failed to see the signs of this new affluence; nobody doing business in the UAE can ignore the new Russian influence in commercial and financial affairs. From the all-pervasive Russian presence in tourism, through the accelerating Russian investment in Dubai real estate, to the bi-lateral deals between UAE and Russian companies, the extension of the country’s economic renaissance is everywhere in the Emirates.

Today, as the votes are counted in the Russian presidential election, seems a good time to ask: is this a good thing, or a bad thing? Should the UAE regard the new cash-rich power of the Russians with suspicion, or as an opportunity?

Not that the election is likely to change anything. The outcome seems certain to confirm that President Putin’s successor will be his protégé Dimitry Medvedev, who will then appoint Putin to the post of Prime Minister. Political and economic policies will remain broadly unchanged, at least in the short term. So more growth, more oil exports and more Russian riches.

But some economic experts, especially in Europe and America, regard the country’s transformation as a superficial and sinister phenomenon. They argue it has been achieved largely because of the soaring value of oil and other strategic commodities of which Russia has plenty – gas, metals and minerals. They argue too that it has coincided with a benign period for the world economy, from which Russia took full advantage.

Some go further, and conclude the past decade has been an opportunity lost for Putin. Inheriting the wreck of the hastily privatised post-Soviet economy, they say he has done nothing to halt the corruption, bureaucracy and inefficiencies of communism that characterised business under the heirs of Lenin, and if anything has encouraged a centralised economic regime where these deficiencies have become institutionalised. The attack on the Yukos oil giant, which ended with life imprisonment of its chief executive, has come to symbolise all that is wrong with business in Putin’s Russia.

Is it healthy for Dubai and the UAE to do business with the new breed of Russian entrepreneur? Is there a risk that dubious business practices would be imported into the UAE along with the valued Russian investment?

I believe, whatever the shortcomings of the present Russian business model, the country has achieved much in its short history as a non-communist power; the current defects can be put right over time, and Medvedev – far from being a babushka-doll replica of Putin, will bring a new, more modern approach to business standards; and Russia is simply too big and powerful for any country to ignore, especially a natural trading centre like Dubai.

Russia and the UAE share crucial geo-strategic interests, especially in the energy sector, as the recent refinery deal with the Russian city of Chelnabynsk showed. Despite all the years of communism, Russians are naturally entrepreneurial people. Dubai’s history as a mercantile centre shows it should be ready to do business with anybody who can do business.

The West is suspicious of Russia for its own political reasons. Dubai should seize the opportunity to trade where others fear to tread.