Tougher international sanctions against Tehran would have a major effect on Iranian-run businesses in the Emirates, a leader of the country's Iranian business community says.
Iranian traders uneasy about sanction plan
Tougher international sanctions against Tehran would have a major effect on Iranian-run businesses in the Emirates, a leader of the country's Iranian business community says. The US and French governments this week called for stricter sanctions after Iran's move to step up uranium enrichment. "This could mean grave consequences for Iranian traders in the UAE," said Masoum Zadeh, the executive deputy president of the Iranian Business Council in Dubai. "Traders are already complaining about the restrictions they are facing through banking channels and this could make it worse."
Dubai, Iran's largest non-oil trading partner, acts as an offshore business centre for Iran, with goods including carpets, petrochemicals and electronics traded between the rest of the world and Iran through the emirate's borders. As many as 1,200 Iranian companies operate in the emirate and trade between Dubai and Iran tripled to more than US$12 billion (Dh44.07bn) in the four years to last year, according to figures from the Dubai Chamber of Commerce. And about $2.8bn of petroleum products pass through the UAE to Iran every year, making up nearly 75 per cent of the country's refined fuel imports.
Traders fear more severe sanctions may hamper their operations by making it even harder to obtain credit needed to import goods. Companies in Dubai with Iranian business partners have already been impacted by international banking restrictions and trade embargoes. US banks are forbidden to service accounts of Iranian banks, including more than a dozen branches in the UAE of Bank Saderat and Bank Melli, two of Iran's biggest lenders, according to a document on economic sanctions produced by the US department of treasury's office of foreign assets control.
The refusal of US banks to accept letters of credit from Iranian banks has implications for the corporate customers of Iranian lenders who need credit to do business. "Letters of credit are an instrument of business for traders in international markets," said Mr Zadeh. "If you don't have a letter of credit facility you have to pay all the money in advance to a supplier to process your order. This shrinks the size of your order and your trade."
Mr Zadeh's Dubai-based trading company imports timber from Europe and the Far East to Dubai, before exporting 70 per cent of it on to Iran. Other international banks are increasingly reluctant to extend lending to companies with an Iranian business partner, he said. IDRO International Trading, an Iranian owned-company based in the Jebel Ali Free Zone, imports steel, oil and heavy machinery from Russia and China for re-export to Iran.
"We are still waiting to hear about further sanctions but it could make it more difficult," said a spokeswoman for the firm, who asked to remain anonymous. "It's already difficult because we can't open letters of credit to certain companies and can't import goods from certain countries like Canada and Australia because of restrictions." Mr Zadeh's remarks come ahead of a series of high-profile visits to the region from US government officials over the next week.
The US secretary of state Hillary Clinton will visit the region tomorrow, stopping off in Qatar to speak at the US-Islamic World Forum and then meeting King Abdullah in Saudi Arabia, and the Saudi foreign minister Prince Saud al Faisal. Meanwhile, the US deputy treasury secretary Neal Wolin is travelling to the UAE, Saudi Arabia and Kuwait. Commentators see the visits as an effort to gauge support in the region for tougher measures against Iran as the US pursues a new UN Security Council resolution of economic sanctions.
But Iran appears defiant. Mahmoud Ahmadinejad, the president, said yesterday that the country had produced its first batch of uranium enriched to a higher level, adding that Iran would not be pushed by the West into curtailing its nuclear programme. @Email:firstname.lastname@example.org