Dubai reacts to US pressure on Iran

updated 11:13 p.m. ET Dec. 20, 2007
Mention sanctions to Iranians and their answer is, often, Dubai. As the US has tightened the squeeze on financial dealings with Tehran and other countries have slowly followed, Iranians have sought to do business through neighbouring Dubai, an open, free-wheeling emirate and transhipment hub that has long welcomed them.

But even Dubai, and the federal government in the United Arab Emirates, is now showing signs of unease as US pressure on banks to stop lending to Iran mounts and security concerns over the presence of a large Iranian community intensify.

Following the introduction of new export control laws, the UAE has stepped up the inspection of cargoes heading for Iran, confiscating last month a shipment that contravened United Nations sanctions aiming to hem in Iran's nuclear and missile programmes.

Some of the 350,000 Iranians in Dubai are also starting to face restrictions. Anecdotal reports suggest some have been unable to renew residence visas. Nasser Hashempour, vice-president of the Iranian Business Council of Dubai, says it is becoming almost impossible for new Iranian businesses to secure permits.

Such is the emerging nervousness about doing business with Iran that Dubai-based and UAE-majority owned firms underwriting Iranian merchants' transactions are finding that international banks are "more cautious" about extending credit, says Mr Hashempour.

UAE banks, meanwhile, have stopped issuing lines of credit to Iranian banks, making it difficult for Iranian front companies to circumvent sanctions.

The restrictions suggest that politics is finally intruding on business in the emirate, despite long-standing UAE government attempts to keep the two apart.

Alarmed by Iran's nuclear programme and upset by a territorial dispute over three islands in the Gulf, the government has long shared Washington's concerns about Tehran. The UAE is a key US ally in the region, the largest Gulf importer of US goods and a party to the multi-billion dollar arms deals announced in July designed in part to combat the perceived Iranian threat.

Despite grumbles among Washington politicians that the UAE has not done enough to curb the financing of terrorism, US officials say co-operation over Iran has been deepening.

Since 2002 the US has built up the intelligence capacity of a "listening post" at its Dubai consulate, where a team of about five Iran specialists monitor events in the Islamic republic, while also making contacts with Iranian expatriates, many of whom hold the current regime in low regard.

However, with the large Iranian community promoting trade flows that make Iran the emirate's single largest trading partner, the UAE has been keen to also promote business with Iran.

The UAE government dismisses suggestions that the welcome to Iranians has cooled.

Instead, officials cite a combination of factors that could affect the business relationship.

First, the government's attitude is that it will not follow the US in adopting unilateral sanctions against Iran but will resolutely abide by UN Security Council resolutions, which have targeted three leading Iranian banks and the Quds Force of the Revolutionary Guard.

Second, concern over the UAE's reputation - particularly following the embarrassing discovery that front companies working for the A Q Khan illegal nuclear procurement network were based in the UAE - has led to tighter controls on re­export trade. "Export controls are not designed against Iran but they protect the reputation of this place," says an ­official.

Some 40 companies have been shut down over transhipment offences, a few of them allegedly involved in shadowy Iranian-related business.

"This is related to the tension in the region because security and stability are more important than trade," says Mustafa Alani, analyst at the Dubai-based Gulf Research Centre. "Financial benefit will come second to security."

Despite the easing of the international frenzy over the threat posed by Iran's nuclear activities - following US intelligence findings that Tehran stopped its atomic weapons programme in 2003 - the US will continue to press its allies, including the UAE, for more action.

"We want all countries to do whatever they can to help prevent Iran from developing nuclear weapons," says Tom Casey, a State department spokesman. "Beyond compliance with UN Security Council resolutions, each nation will have to decide for itself what other steps it can take."

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Source: http://www.msnbc.msn.com/id/22346350/