LETTER FROM DUBAI: The Russians are bringing a new blend of bling

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Dubai is supposedly on the verge of fading away, having been revealed as a mirage. Bankers are deserting its financial centre in droves as the sands close in, flying back home for good as the economy collapses, deals dry up and their employers show them the door.

Nobody seems to have told VTB Capital. The investment banking arm of VTB Group, Russia's second largest bank, threw quite a party here last week to celebrate the opening of its first office in the Middle East.

First they wheeled out a Bolshoi opera singer in the swanky Godolphin Ballroom at Emirates Towers hotel. Her bare shoulders hardly conformed to the Dubai government's recently promulgated dress guidelines for foreigners, which frown on naked flesh.

But any hopes that she might be arrested mid-act, sparing the assembled bankers her ear-splitting high notes, proved unfounded. The party then moved over to the road, still courtesy of VTB, to the upmarket Cavalli nightclub, which opened last month. Cavalli is a top Italian fashion designer. Or something like that. Anyway his line in tasteless bling and chandeliers the size of pyramids has few rivals even in a city that swims in vulgarity.

In other words it's business as usual in Dubai. VTB, and Cavalli presumably, have opened here for a reason. They know that the Gulf has huge potential, that oil is not going to go out of style, and that Dubai is still the city to be seen in.

They're not the only ones. True, a load of international banks and (increasingly) regional houses have kicked people out over the last few months. Some firms have closed altogether, plenty more are rocky, and many redundant bankers have given up looking for new jobs here and slunk out of the country. Regional M&A has fallen off a cliff, private equity deal flow has subsided and share prices are well under half their levels of a year ago.

But for anyone who's still here, and that's the majority of people, the mood is far from gloomy and the party goes on. There's an increasing focus on Saudi Arabia and Abu Dhabi, which have not been as badly hit by the economic crisis as Dubai, and there's no shortage of refinancing and restructuring work around the whole region.

The medium-term outlook looks good to many bankers and, as the region recovers, Dubai is likely to come back up with it.

VTB's confidence is shared by plenty of others. A former head of asset management of a major regional bank is planning to launch his own hedge fund based in the Dubai International Financial Centre (DIFC). A broker that set up in an unfashionable part of town two years ago, because DIFC rents were astronomic, is now planning to buy an office in the there because prices there have halved.

You write off the entrepreneurial spirit of Dubai's bankers at your peril. Nothing keeps them down for long. Not even having to listen to opera.

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