The local head of the Iranian Business Council says trade between the UAE and Iran is near "a standstill" because local banks are going beyond UN sanctions to prevent almost all transactions tied to the Islamic Republic.
Masoum Zadeh, senior vice-president of the organisation based in Dubai, said UAE banks were denying lines of credit to Iranian traders and refusing to allow cash transfers to and from Iran.
The fourth and most recent round of UN sanctions, enacted in July, targeted military purchases and commercial activity connected to the Iranian Revolutionary Guard. Last month, the UAE Central Bank ordered 40 accounts frozen that were blacklisted by the UN but Mr Zadeh said local banks were increasingly restricting the activity of other Iranian businesses as well. Asked if local banks were going beyond the scope of the sanctions, Mr Zadeh said they were. "Absolutely. The UN has not advised the banks to stop doing business with legitimate Iranian businesses," he said.
Several businessmen said the impact of the sanctions was initially felt in July when they were passed but the situation became more serious about two weeks ago when the UAE sharply restricted the foreign currency operations of Iranian banks operating in Dubai, including Bank Melli and Bank Saderat. "We have problems but we don't know if that is because of sanctions or other causes," said the manager of a Dubai currency exchange, who asked not to be identified.
He said the company's daily volume lately was about Dh500,000 (US$136,124), down from Dh5 million before the sanctions. "We don't know why. We are so confused," he said. Mr Zadeh said he believed the banks were operating under the direction of the UAE Central Bank. The Central Bank did not return calls for comment. Several banks also declined to comment when asked if their policies were developed internally or at the request of the Central Bank. In a statement, HSBC said it did not have a blanket ban on transactions connected to Iran.
"As a result of the sanctions imposed against Iran, HSBC in the UAE continues to closely monitor transactions with Iranian links. This may result in HSBC declining to act in a transaction that poses a risk of sanctions breach," the bank said. Last month, the Central Bank asked lenders to submit monthly reports on the volume of remittances to Iran, signalling heightened scrutiny of money flowing in and out of the country. The Dubai Financial Services Authority has also warned banks to treat transactions with Iranian-based entities as "high risk".
When the EU passed sanctions tougher than the UN's in July, many businessmen with operations in Iran flocked to Dubai, said Heydar Mudarressi, the manager of Bin Belaila Exchange in Deira, where much of the UAE-Iran trade is centred. "They were using this as a hub to send money. Now they are finding other hubs," he said. The Iranian Business Council previously estimated that trade between the two countries would fall to $6 billion this year, down by half from 2008.
On Sunday, Hamad Buamin, the director of the Dubai Chamber of Commerce, said businesses were primarily confused about how to apply the sanctions correctly. "What we hope for is that there is some clarity as far as what is allowed," he said. "Right now, there is no clarity." Along the docks in Deira, where pallets are still stacked high with goods such as shampoo, pasta and electronics destined for Iran, traders said they were increasingly dealing in cash and asking fewer questions to avoid potential trouble.
"If a customer walks in and you ask so many questions, you put yourself in a bad situation and the customer might not come back," said Faral Tabazini, a Dubai import-export agent of Iranian descent. "So we try not to bother customers with questioning and focus on the deal."
* with Gureni Lukwaro and Gregor Stuart Hunter
Correction: In an original version of this article the quotes attributed to Masoum Zadeh were incorrectly attributed to the president of the Iranian Business Council, Hadi Motamen. It has now been amended.