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West's Sanctions Hurt Iranians In Dubai

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By SCHEHEREZADE FARAMARZI, The Associated Press

Published: December 30, 2007

DUBAI, United Arab Emirates - As the sun sets, the sky slowly turns a deep orange rose over Dubai. Crates of merchandise - food, clothes, General Electric appliances, Hewlett-Packard computers - are loaded onto dhows, the traditional wooden vessels that still ply the ancient routes to Iran about 60 miles to the north.

But it's no longer business as usual. The West, led by the United States, is cracking down on business in and out of Iran to protest against its nuclear ambitions. Dubai is caught in the middle - eager to maintain its lucrative business with Iran just across the Gulf, but wary of angering the United States and the United Nations.

So the pressure is increasing on thousands of Iranian businessmen in Dubai, such as Mustafa Hoobakht. Hoobakht sends Iran refrigerators, freezers and even the color for Teflon pots and pans that he imports from Germany, but these days he has trouble getting bank loans because of the crackdown. His profit is barely $100,000, down from a minimum of $800,000 to $900,000 in the past.

"It's all been loss for me," he said. "It's the hardest time I've ever had, because fish need water to survive and a trader needs money."

In the 21st-century bazaar that is Dubai, Iranians are among the chief investors. They worry that more severe U.N. sanctions - even worse, war - will deal a serious blow to Dubai and the rest of the Persian Gulf.

The prospect of more U.N. sanctions dimmed somewhat recently when U.S. intelligence concluded that Iran had halted nuclear arms development. But Washington is slapping its own unilateral actions on Iran, targeting energy companies and shutting down Iranian banks in America.

The U.S. government has stepped up its anti-Iran efforts in Dubai, opening the State Department's Iran Regional Presence Office. In March, Stuart Levy, the U.S. undersecretary for terrorism and financial intelligence, traveled to Dubai to warn Arab bankers to halt dealings with Iran or face U.S. sanctions. Washington and the Emirates also maintain a joint team to track Iran-linked financial transactions, ostensibly for ties to Tehran's nuclear program.

Although there has been no official change of policy toward Iranian businesses by the Central Bank in the Emirates, most international and local banks here are issuing fewer letters of credit for trade finance involving Iranian-owned businesses. The Emirates also acted on a U.N. move this year against Iran's Bank Sepah, which is said to be linked to Iran's Islamic Revolutionary Guards Corps, a target of U.S. sanctions.

To avoid losses, many Iranian merchants are diversifying - doing business with other countries as well as Iran. Others avoid dealing with Iran.

Emirates officials are apologetic. "We greatly value our trade with Iran. ... We would like to continue this without disruption, but unfortunately the pressure is being brought on Dubai," said Abdullah Saleh, director of the National Bank of Dubai. "It's very sad and very unfortunate."

Since financial restrictions were imposed earlier this year, Iranian businessmen say, authorities have been holding up goods longer than usual - up to two or three weeks - and charging fees, even though Dubai is a free port.

Despite the restrictions, Iranian businessmen in Dubai say the government helps them find loopholes. But Iran itself is not helping. When Iranian merchants in Dubai complained to Iran's president in May about how his defiant rhetoric over nuclear plans was hurting their business, Mahmoud Ahmadinejad was less than sympathetic.

Ahmadinejad told the merchants it was time to take a stand against American-led pressures. And he added: Be prepared for consequences.

Consequences have yet to show up in the numbers. Iran-Emirates trade came to $12 billion last year, according to the Iranian Business Council. About $8.5 billion of it involved the re-export of goods to Iran, mostly American goods, and the remaining $3.5 billion involved the import of goods from Iran for local markets or other Gulf states, India and Europe.

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