Russians are still coming - but to raise, not spend

Investment bank VTB Capital, part of Russia's second-biggest bank, has just set up an office in the city's financial centre. Its goal: to raise money from Gulf investors through Islamic bonds, known as sukuk.

Yuri Soloviev, who runs VTB's Dubai operation, says Russian clients in petrochemicals, agriculture, utilities and tourism are looking to tap Gulf investors.

He adds that he has mandates to raise the cash through sukuk.

(Islamic bonds don't pay interest, which is forbidden by Islamic finance, making them popular with Muslim investors.

In practice, though, they pay a fixed profit rate linked to a benchmark such as Libor, so for issuers looking to raise cash, the difference is negligible).

The move marks a new twist in the flow of cash between Russia and the Gulf.

Last year, Russians were among Dubai's most lavish consumers, buying luxury watches, yachts and apartments, often for cash.

Indeed, for this reason, estate agents in Dubai were as likely to be called Andrei or Svetlana as Ahmed or Sameera. That flow has since slowed to a trickle.

Still, it's not completely dried up. Any Dubai hotelier will tell you that while business is down sharply over the past 12 months, arrivals from Moscow have held up better than those from London and Frankfurt.

And Soloviev says VTB hopes to broker deals in both directions. He says Russian railways and nuclear power operators are eyeing opportunities across the Gulf.

Moody's has cut its credit rating on Dubai investment bank Shuaa Capital by three notches because of an escalating dispute with a state investment firm. Shuaa's rating is now B1 - four levels below investment grade.

Dubai Banking Group wants Shuaa to repay a $408 million convertible bond in cash. Shuaa wants to issue shares, but its stock has fallen sharply since issuing the bond on 2007; converting the bond to shares would leave Dubai Banking Group heavily out of pocket.

The dispute centres on which party has the right to enforce the conversion, and is being seen as a landmark legal case within Dubai's still-nascent financial industry.

Dubai has revealed fares for its Metro train system, which begins operations in September.

Tickets for a single journey will cost between 0.8 dirhams and 6.5 dirhams (13p and £1).