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Tue 6 Jul 2010 12:45 PM

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New sanctions seen hurting Iran businesses in Dubai

Many of the thousands of Iranians in Dubai involved in large re-export trade.

New sanctions seen hurting Iran businesses in Dubai
IRAN TIES: Iran and the UAE have close economic and historic relations but with Tehran facing growing Western pressure, its ties with Dubai have drawn scrutiny from Washington.(Getty Images)

New sanctions on Iran are expected to complicate life further for Iranian businesses based in the UAE, home to regional trade hub Dubai, and may force some to close down, one of their representatives said.

Morteza Masoumzadeh, vice president of the local Iranian Business Council, also said he believed the authorities in the Gulf Arab federation would impose more restrictions after the latest wave of international measures against Iran.

Thousands of Iranian companies and businessmen operate in Dubai, many of them involved in the multi-billion-dollar re-export trade with the Islamic Republic across the Gulf.

But the UAE, a US ally, has signalled a tightening of its role as a trading and financial lifeline for Iran after the UN Security Council last month imposed a fourth round of sanctions on Tehran over its disputed nuclear programme.

"I predict a further decline in Iranian businesses in the UAE and other countries doing direct trade with Iran, like Turkey, Malaysia etc," Masoumzadeh told Reuters.

"This will make it even much worse than before, there is no question about it," he said on Monday when asked about the impact of the new sanctions on Iranian businesses in the UAE.

His comments were in contrast to statements by Iranian officials in Tehran dismissing the latest measures. President Mahmoud Ahmadinejad has called them "pathetic".

Previous sanctions have hurt Iranian business activities by making it more difficult to access vital trade finance, such as letters of credit, after the United States three years ago targeted two Iranian state banks with branches in Dubai.

The latest U.N. resolution calls for measures against new Iranian banks abroad if a connection to the nuclear or missile programmes is suspected, as well as vigilance over transactions with any Iranian bank, including the central bank.

"I'm sure that from now on... trade transactions in foreign currencies such as the euro and (UAE) dirhams will become more difficult," said Masoumzadeh, who rejects any idea that Dubai is a centre for illicit trade with Iran.

Further stepping up pressure on Iran over nuclear work the West suspects is aimed at making bombs, something Tehran denies, U.S. President Barack Obama last week signed into law sanctions on Iran's vulnerable petrol imports.

Iranian aviation officials accused the UAE, Germany and Britain on Monday of refusing to refuel Iranian passenger planes in response to the tougher U.S. measures, but this was later denied by the country's Foreign Ministry.

Iran and the UAE have close economic and historic relations but with Tehran facing growing Western pressure, its ties with Dubai have drawn scrutiny from Washington.

In 2009, Dubai's re-exports to Iran - goods originally from Europe, Asia or elsewhere and then sold on to Iran - rose 4.8 percent to AED21.3bn ($5.8bn).

In a possible sign of tougher times ahead, an Abu Dhabi banking source said last week the UAE's central bank had told banks to freeze any accounts belonging to dozens of Iran-linked firms singled out by the latest UN sanctions.

"I have no doubt that more restrictions will be applied towards Iranian businesses by the UAE authorities," said Masoumzadeh, who has a Dubai-based shipping business. (Reuters)

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Ali 10 years ago

New sanctions will definitely hurt Iranian businesses BUT what about the Dubai economy in general. I dont think Dubai can afford to lose one of its biggest trading partners.

Mehdi 10 years ago

I agree that any atomic related companies should be closed but the UAE government and bank system getting tough with normal Iranian business firms will only cause a shift to another country. Already with the recession UAE is facing a lot of problems and driving Iranian Business out of the country will only cause more. I think the UAE should think about the advantage and disadvantage of their actions and act accordingly in their own interest and not to others. This will be a blow to the UAE as much as to Iran.

Jon 10 years ago

Medhi - maybe you should actually read the latest UN sanction on Iran (1929 (2010)) then you will find that if the UAE (or any country for that matter) does not comply, they too run the risk of having sanctions applied to them. I'm pretty sure that will hurt even more than the current pain. They key here is diversify your trading activities and don't have all your eggs in one Iranian basket.

rouzbeh 10 years ago

John i hope you managed to complete your high school, UAE's largest trading partner is Iran not America, Largest single investor in UAE are iranian, If the iranians decide to pack up from uae, its gonna effect UAE as a whole. The americans wount think of imposing sanctions on UAE, Or else whose gonna buy there 777's , 747's, american cars, Nuclear plant, tires, fast food franchises.

jon 10 years ago

Yes, I did finish my high school education (and much more) thank-you; did you? This is not about America - this is the United Nations. Go to wikipedia and look at the UN mandate on imposing sanctions - it is a global organization and not one single country acting alone; although single countries can impose sanctions as they wish and the individual US sanctions on Iran are far tougher. My point, should you have bothered to read it, was if the UAE flouts the UN sanctions on Iran by continusing to trade, then it is likely the UAE will also attract UN sanctions; which would be far worse for the country than continuing to trade with Iran. Also, maybe you should do more reading before posting - the UAE gave a USD 40 billion contract to Korea to build the nuclear power plants, not USA.

Usman 10 years ago

Total deal nuclear deal worth is US 40 billion dollars & US has got it business share. As per NEWSWEEK, this nuclear deal has created 10,000 jobs in USA. And for us ... US or UN both are same

Jon 10 years ago

I can't really help you with your lack of understanding of how the UN works!!!

Usman 10 years ago

If you say that korea got a contract of 40 billion dollars , despite the fact that total nuclear deal was worth infact 40 billion dollars, taken by US, France & south Korea... then obviously I would be least interested to take help from you how UN works. I hope you have heard the terminology FRONT MAN and must know that MIGHT IS RIGHT.

rouzbeh 10 years ago

Bravo usman..... I don’t totally disagree with u jon regarding UN embargo, Its only that America has its way of squeezing other nation's to go a bit further then the UN embargo dictates. For example the pressure on Pakistan not to go ahead with IPI pipeline ( which they very badly need if there economy is going to survive). the illegal refusal to fuel Iranian passenger ( not military) planes at UAE airport by private fuel operators ( although this claim has been pressed down) . If only the Americans can take a vow of silence for a year, the world will figure out its flaws and get back on the right path, how ever the continuous nagging and finger pointing is casing rebellious nature not only in iran but the whole region