Tens of thousands of Iranians live in Dubai, many of them involved in a re-export trade to Iran.
Ambiguity has long marked ties between the UAE and its powerful Gulf neighbour Iran.
One UAE member, Abu Dhabi, has a prolonged territorial dispute with Iran, but this has rarely disrupted the hum of Iranian commerce with another emirate, Dubai.
Those contradictions are becoming harder to sustain as the United States and its European allies impose unilateral sanctions over Iran's nuclear policy that go well beyond new measures decreed by the U.N. Security Council on June 9.
The UAE has begun curbing Dubai's lucrative, free-wheeling role as a trading and financial lifeline for Iran, a policy that could prove costly for the Islamic Republic - and for a Dubai economy already hit by debt woes and a burst property bubble.
The UAE Central Bank has told financial institutions to freeze the accounts of 40 entities and an individual blacklisted by the United Nations for assisting Iran's nuclear or missile programmes, a banking source in Abu Dhabi said on Monday.
Mounting pressure from the United States, the UAE's main military ally and protector, may be one reason for the action.
"Now when the sanctions have been passed, U.S. focus has turned towards implementation of sanctions with a specific focus on EU and UAE trade with Iran," said Trita Parsi, an Iran expert and public policy scholar at the Woodrow Wilson Center.
"While the arm-twisting has yielded some results, there is also a risk that in this specific phase, tensions between the U.S. and its allies will increase over the Iran policy."
Washington may have smoothed potential friction with the UAE by blessing the Gulf state's own nascent nuclear power plans.
Exasperation with Iran's occupation of three Gulf islands claimed by Abu Dhabi also underlies the stricter UAE stance.
"Abu Dhabi has been weighing down on Dubai to cut back on trade ties with Iran principally as a measure against that long- running sore," said Abu Dhabi-based economist Mohammed Shakeel.
"Dubai inevitably finds itself caught in the middle, unable to resist Iranian trade exchanges but also unable to fend off pressure from its economically more powerful Emirati neighbour."
Tens of thousands of Iranians live in Dubai, many of them involved in a re-export trade to Iran which grew to $5.8 billion last year as letters of credit from European banks dried up.
"Inevitably any slowdown in trade between the two will hurt Iran but also crucially hurt Dubai," Shakeel said.
The UAE has announced nothing publicly about how it is enforcing the latest U.N. sanctions -- even Arab governments fearful of Iran are wary of showing enthusiasm for measures championed by Israel's principal ally, the United States.
The Sunni-ruled Gulf states face a long-standing dilemma over Shi'ite Iran, whose regional clout gained an unintended boost from the 2003 U.S.-led war against its former foe Iraq.
"The Saudis in particular would dearly like to peg Iran's influence back across the region," said Shakeel, citing the popularity of Tehran's anti-U.S. zeal and the implicit Iranian challenge to Saudi credentials as guardians of Islam.
"On the other hand, no one, repeat no one, wants another war in the region," he said, arguing that political and diplomatic animosity toward Iran did not translate into any demand by Gulf Arabs for the Americans to attack their turbulent neighbour.
The Saudi foreign minister has said sanctions won't work either in crimping Iranian nuclear work which the West believes has military aims, not just the peaceful ones stated by Tehran.
The Gulf Arabs have few ready alternatives, but fret that harsher sanctions may only spur on Iranian muscle-flexing.
"The Saudis are concerned that if you put more pressure on the Iranians they will play a more negative role, according to the Saudi definition, in the region - in Iraq, Lebanon and with the Palestinians," said Qatar-based analyst Mahjoob Zweiri.
Instead, Saudi Arabia stresses the big picture, urging the United States to work harder for Israeli-Palestinian peace to reduce regional tension, Islamist militancy and the appeal of non-Arab Iran as the defender of oppressed Arab and Muslims.
Kevan Harris, an Iran analyst at Johns Hopkins University, said such Saudi arguments cut little ice in the U.S. capital.
"What seems obvious to most individuals living in the Middle East - that a peace settlement of any stripe in the Palestinian territories would change the calculus in the region - is barely entertained as a serious strategy in Washington any longer."
U.S. President Barack Obama and Saudi Arabia's King Abdullah made no mention of Iran after their talks in Washington this week, focusing only on the need for Middle East peace.
The Obama administration may in fact recognise some kind of link between Iran and the Israeli-Palestinian conflict, but simply lacks good options to achieve its goals on either.
The Gulf Arab states, uneasily aware of the limits of U.S. power in dealing with Iran, have to accommodate themselves somehow to the awkward but permanent reality on their doorsteps.
"There is a reluctant acceptance that Iran will continue along its path of belligerence without too much concern about what its neighbours and others may think," said Shakeel.
"I do not think there is any coherent strategy on the part of the Gulf Arabs to put a brake on Iran's aspirations." (Reuters)
Just for your information the Islands are claimed by Emirate of Sharjah and not Abu Dhabi. There is no historic basis in this claim and very similar to Iraq claims on Boubyan Island. Greater and Lesser Tombs, where for some time under Portuguese occupation (15 Century) and the Island of Abu Musa has been a shared "Island". The situation could be analogical to the Channel Islands that although Physically they are closer to the coast of France they have always been part of United Kingdom. Both sets of Islands were invaded by a 3rd party, in the case of the Gulf Islands they were invaded by Britain and in the case of Channel Islands by Germany during the Second World War. But they should always return to the Sovereign country that presided over them. It is disappointing to see agitators are always trying to bring the 3 Islands in to the discussion and not link them to guaranteed Sovereignty of Bahrain!
The islands in question are NOT claimed by Abu Dhabi. One is claimed by Sharjah (Abu Musa) and two are claimed by Ras Al Khaimah (Greater & Lesser Tumb). These claims go back to when the British made a deal with the Shah in order for them to pull out of the Gulf in 1971.
"tensions between the U.S. and its allies will increase over the Iran policy" An Israeli prime minister once said something like this: 'the Arabs might have the oil wells, but we hold the match over them..'. Unless we are all pretending to be ostriches, the so called Israeli lobby in the US, has had and will continue to have by far the largest influence on the shape of sanctions (non-military war) and its implementation against Iran. With the Gulf of Mexico oil spill disaster (cost of drilling for oil on land v over sea) and the absence of a viable alternative source of energy on the one hand and the Western belief in the Adam Smith type of economic theory (scarcity of resources v Muslim belief in the abundance economic resources) on the other, the Israelis have the opportunity to tempt the the US further and further into panic - greed- over securing oil supplies 'by any means' before its too late! (I.E. the boogie man-Iran- gets hold of the dreaded eggenboomersplater A-bomb) Thus there is no doubt that both Israel and its US lobby will go on fomenting far more hate against Iran around the world to help it push the US to push Abu Dhabi to weigh down even further on Dubai even on ordinary Iranians. Either way the Israelis probobly see it as a win; as the moral for them is probobly 'whether its an Arab that suffers or an Iranian or a Muslim it doesn't make a hap of difference' Why, you might ask? Well, probobly because we are all considered to be an 'existential threat' to Israel.
Most wars are created when lack of diplomacy by world leaders, and their intellectual capacilty has reached its limits. Any war therefore can be avoided, provided a dialogue is maintained. Even in the worst case scenario one should aleays keep its interest and dialogue ongoing..it is the only way to keep, even your biggest enemy, involved as part of the solution... isolation means destruction and this always worsen the situation. The Israele lobby & pressure on the white house has the US government again indoctrinated, but it is unwise to engage the region, the applaudible approach by the Saudi's, although influenced by commercial interests witht he US, is perhaps a realistic one. If one wishes to keep peace, maintaining the dialogue is crucial to at least excercise some form of control in ongoing negotiations. Abandoning your "ennemy" only drives them into desperate actions, unfortunately this may be what the CIA is often provoking, thus creating another war, to keep the US economy afloat.
The two islands (Greater and Lesser Tunb) are claimed by RAK. Keep in mind that the UAE was formed in 1971 without RAK. RAK did not join the union until a year later (they joined in 1972). This is because Abu Dhabi promised RAK that they will resolve the island issue if RAK joins the union.
"There is a reluctant acceptance that Iran will continue along its path of belligerence without too much concern about what its neighbours and others may think," said Shakeel." Is'nt that what Iran has always done, they don't care what people think because they see everyone else as inferior to them. To be Friends with your neighbour will always require some form of compromise. Iran does not compromise - FACT ps- What good has Iran ever done for the rest of humanity? Anything?