When Russian President Vladimir Putin takes the stage at his annual forum in St. Petersburg this week, his country’s business ties with a lower-key Gulf state will be on full display.

Oman, a sultanate that’s home to some 5 million people, was awarded the honorary status of guest nation for this year’s summit. The distinction underscores a deepening economic relationship since Russia’s invasion of Ukraine in February 2022. 

While the US has sanctions on Russia, countries including the United Arab Emirates and Oman haven’t imposed their own. Oman has sometimes been dubbed the Switzerland of the Middle East for its helpful role on sensitive diplomatic disputes — including talks that led to the 2015 Iran nuclear deal. 

The increasing Russian-Omani business relations now align with Muscat’s longstanding neutrality. They also come at a time when the allure of places like Dubai — one of the early magnets for Russians after the invasion — has been dimming for many. 

Some Russian businesses have considered new jurisdictions as the cost of living in glitzy Dubai has surged and its banks have been facing greater pressure to get stricter in enforcing US sanctions. Meanwhile, Oman’s crude reserves also pale in comparison to many Middle Eastern states and it can benefit from external investments. 

The new business deals have been particularly on show in the commodities space. An Omani state-owned investment fund bought a stake in the Moscow-based trading firm, Demetra Holding, last year. It was the second-biggest Russian wheat exporter in the 2021-22 season and has links to major wheat trader Grain Gates LLC. The Russian bank VTB, which is sanctioned by the US, owned 45% of the firm before it announced its stake sale.

Meantime, the Gulf state’s Saturn Fund also bought out Russian shareholders in Kazakhstan-registered Polymetal International Plc, the mining firm that was active in Russia before it split its divisions earlier this year. 

In recent months, the newly formed Oman Investment Bank, chaired by the president of the country’s wealth fund, has hired a string of former VTB executives, according to people familiar with the matter and LinkedIn profiles seen by Bloomberg. 

Efforts to reach OIB via the Oman Investment Authority as well as a number listed at its corporate address were unsuccessful.

The Omani coastline has also emerged as a hot spot for ship-to-ship transfers of Russian oil heading to India. Meanwhile, most commodities firms shifting to the country have found a home in the capital city of Muscat, known for its dazzling souks, turquoise waters and renowned opera house.

Moscow has had to strengthen its relationships with countries like Oman since its invasion of Ukraine because it needs more global partnerships and the Gulf country’s location is helpful in shipping crude, according to Anna Borshchevskaya, a senior fellow at The Washington Institute for Near East Policy, who specializes in Russia’s policy toward the Middle East. “There are two main reasons Oman is particularly useful to Russia right now: Oil and the war on Ukraine,” she said.

At this week’s forum, one Russia-Oman panel is set to feature VTB Bank chief Andrey Kostin alongside several Omani officials, according to the public schedule. A summary for the session touts the 60% rise in mutual trade between the two nations, citing 2023 data. Oman’s Foreign Ministry didn’t respond to requests for comment. 

In Oman, many of the moves remain nascent and the business opportunities in the Gulf state represent a fraction of those of larger economies like the UAE. Still, Oman’s strategic location near the Strait of Hormuz — a vital shipping lane for oil and liquefied natural gas — gives it added geopolitical heft. 

But the increased Russian interest comes at a delicate juncture as Muscat looks to lure more Western investors to its equity listings this year, gears up for an important review by the Paris-based Financial Action Task Force in October and faces questions from the Biden administration about a potential Chinese military site on its soil.

“Oman is focused on gaining economic benefits while mitigating the political risks associated with deeper ties to both Russia and China,” said Anna Jacobs, a senior analyst at the International Crisis Group.