DUBAI // Harsher US sanctions against Iran will be introduced before the end of this year, an American official said yesterday. It is a step that traders in the UAE said could dry up business with their Gulf neighbour.
The impending sanctions, which have been described as "making the current ones look weak", are being drafted by the US Congress, said the government official, who spoke on condition of anonymity yesterday.
The legislation outlining the sactions follows an alleged Iranian-backed plot to kill the Saudi ambassador to Washington.
The official said David Cohen, the US Treasury Department's undersecretary for terrorism and financial intelligence, will fly to the UAE next week.
"The UAE is on the front lines, and David Cohen will meet with government officials to discuss the plan," the official said on the sidelines of the International Bar Association annual conference in Dubai.
Dr Anwar Gargash, the Minister of State for Foreign Affairs, could not immediately be reached for comment yesterday.
In October, Mr Cohen said the Obama administration was considering sanctions against Iran's central bank.
Mr Cohen leads the Treasury Department's policy, enforcement, regulatory and intelligence functions, which are aimed at identifying and disrupting the lines of financial support to international terrorist organisations, proliferators of weapons of mass destruction, narcotics traffickers, and other illicit actors posing a threat to national security, according to the US Treasury Department.
The UAE is one of Iran's largest trading partners, and Iran is the second largest destination for UAE re-exports, topped only by India.
The value of direct exports from Dubai to Iran, according to the Department of Economic Development, is Dh1.8 billion, while re-exports stand at Dh24bn.
"This is terrible news for us," said Mortaza Masoumzadeh, the executive deputy of the Iranian Business Council in Dubai.
Since the introduction of the last set of sanctions in 2007 against four major Iranian financial institutions, UAE-based trade with the Islamic republic has been slashed by 70 per cent, according to Mr Masoumzadeh.
"If they introduce newer, tougher sanctions the remaining 30 per cent of trade will cease and we should just pack up and leave," he said.
Most of the trade between the UAE and Iran is in consumer goods, foodstuffs and livestock. For his part, Mr Masoumzadeh estimated the value of total annual trade at US$10 bn to US$12bn (Dh36.7bn to Dh44.1bn).
Djavad Salehi-Isfahani, a professor of economics at the Virginia Polytechnic Institute and State University, said harsher sanctions against Iran might not have a significant impact on the global economy.
"It depends on the sanctions," he said. "For example, if they are imposed on the Iran central bank, it could impact oil exports and cause oil prices to rise, but only slightly."
Such sanctions would have a greater impact on Iran itself, he said, because of its reliance on imported goods, such as consumer electronics.
In the UAE, he said, Dubai would be the most affected, because of its high dependence on re-exportes.
"There is a significant investment and benefits from the exports that are accrued annually," he said. "There's no other GCC country that does much [trade] with Iran."
The US first applied economic sanctions against Iran in 1979.
Barack Obama, the US president, said last month that his country would apply the "toughest sanctions" to further isolate Iran over the alleged murder plot.
[ mismail@thenational.ae ]
