Iran sanctions to halve trade with the UAE to $6bn
Posted on 29 June 2010 with 1 comment from readers
The new United Nations’ sanctions imposed on Iran on June 9th are likely to halve trade between the UAE and Iran from its peak of $12 billion in 2008 to $6 billion this year, according to Iranian Business Council director Morteza Masoumzadeh.
He told Bloomberg: ‘What we see is the UAE customs is being very strict. These sanctions will have a negative impact on trade’.
Bank credit closed
Masoumzadeh also explained that UAE banks were refusing letters of credit to Iranian enterprises and that trade is now on a cash-only basis. He said his own firm’s business was down 70 per cent over the past two years, and that 400 Iranian businesses in the UAE had closed in this period.
The UN has imposed its fourth round of sanctions on Iran because they fear the latter’s continued nuclear development program. They include tight restrictions on financial transactions, a tighter arms embargo, and the authority to seize cargo suspected of being used for Iran’s nuclear or missile projects.
This is clearly not good news for Dubai as the main UAE entrepot for Iran. The UAE acts as a transhipment port for goods going into Iran on the traditional dhows from the Dubai Creek. Iran’s economic isolation for decades means that its port infrastructure is old fashioned, besides marine insurance would not allow most ships to dock in the country.
That means Iranian consumers have to pay more for products expensively moved through Dubai, and now subject to tight economic sanctions. However, what is a problem today could be the opportunity of tomorrow.
Opportunity knocks
If the Iranian nuclear situation is ever resolved then Dubai would be a major beneficiary. Trade with Iran would flourish, especially if accompanied by a renewal of foreign direct investment.
Once upon a time we used to laugh at the very idea of the iron curtain coming down in Europe, and yet today Eastern Europe enjoys a standard of living not so far different from the West. Young people have been the biggest winners with immense opportunities unfolding for them.
On the other hand, the Russian revolution lasted for 70 years so you never can tell how long a regime will last. But the dynamics of change are considerable when they finally happen, and Dubai would be a major beneficiary if Iran sorted itself out.
1 Comment posted by readers:
I guess this means that only the relatively small, high value stuff will get smuggled into Iran. Will the ‘fishing’ fleet in the Persian Gulf expand a lot? I wonder how many of Iran’s neighboring countries are smuggler friendly? They have a very long border with a lot of other countries. Can you say bribe the officials? Some members of Iran’s Revolutionary Guards are going to get even richer, if that is possible. I wonder if they will take the euro as payment, or demand payment in dollars. That sounds like something the CIA would study. They will need more foreign language speakers to monitor all the radio traffic about where the fish are. That is, when they aren’t too busy listening to the traffic of all the Russian spies over here in the USA.
Funny how the FBI busted the Russian spy ring right after Obama announced how friendly we were getting with the Russians, helping them develop high tech competition for our own high tech companies in that little city outside Moscow and all. A cynic might assume that the FBI didn’t like us helping build up Russian high tech industries to help put more Americans out of work. But we know how well that ‘develop China’ idea worked out. No unemployment over here. Well, not in Washington. We helped the Chinese take the low tech manufacturing jobs, and now the Russians take the high tech ones. That sounds like a good plan to me. I wonder how you say TARP and bailout in Russian?