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Letters From |
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Dubai |
Crippled Creek
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| Increasingly tough sanctions directed at Tehran strike an unintended blow against Dubai’s Iranian traders |
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Published : 1 November 2010 |
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KAMRAN JEBREILI / AP PHOTO |
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| Iranian sailor Ali Veysi performs evening prayers on the banks of Khor Dubai, an important trading channel for the UAE city.
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LONG THE NORTHERN BANK OF KHOR DUBAI, a saltwater creek that divides the
city into Deira and Bur Dubai, hundreds
of traditional wooden dhows float alongside
what’s known locally as the Iranian
Bazaar. |
The bazaar and its immediate surroundings are in sharp
contrast to the Brobdingnagian Vegas-style real estate
developments that have defined Dubai’s image abroad in the
last decade. The creekside quarters are older, lower, softer,
in colours of sand-brown; they lack the wildness of the city’s
modern architecture.
Right opposite the bazaar, Ali, a 32-year-old boatman
from Iran’s Fars province, is standing on the quayside of his
boat, smoking a cigarette. His dhow, like many on the creek,
is empty. Some others are packed tight with crates possibly
filled with electronic items, spare automobile parts, clothes,
bags, shoes and even furry teddy bears.
His skin is rough and he has a toothy smile. When he
speaks, his breath is a mix of tobacco and raw onions. He says
it’s been 33 days since he sailed to Iran. The boat’s Emirati
owner would like him to sail to Africa, but Ali prefers not to
undertake the new route.
“My boss says there’s no business for shipping to Iran
because of America. They seem to be creating problems
everywhere,” he says and spits into the creek. “I will wait
for another 30 days and if I don’t sail with goods then I’ll
return to Iran on another boat.”
As he waits for his deadline, Ali helps other boatmen load
and unload their goods for some spare change that sorts out
his food and cigarettes. He sleeps on the boat.
Long before the discovery of oil catapulted Dubai and the
six other states that comprise the United Arab Emirates
into enormous wealth, it was trade that defined Dubai’s
economy, with the creek acting as a critical lifeline. Boats
have carried goods from Dubai to the southern coast of
Iran since the early 19th century, and the city has become a critical re-export hub for shipments to Iran during the
Islamic Republic’s years under US sanctions.
Though Iranian president Mahmoud Ahmadinejad
dismissed the fourth, and most severe, round of UN
sanctions as “meaningless” during an interview this
September, Iranian businessmen and traders in Dubai are
not so sanguine about their impact.
“This time is different,” says Morteza Masoumzadeh, the
vice president of the Iranian Business Council-Dubai and
the managing director of a shipping agency. There are about
8,000 Iranian businesses in Dubai, and the city’s annual
trade with Iran is estimated at about 10 billion dollars;
Masoumzadeh expects that figure to drop by about 40
percent this year.
The recent UN sanctions are only part of the equation,
Masoumzadeh explains: the United States and the European
Union have also each introduced unilateral sanctions, and
local businessmen fear the end result will cripple any trade
with Iran.
“After the US and the EU, the Japanese followed, then
the South Koreans and now we’re hearing maybe the
Australians,” he says. “It’s hard to operate. Our ships are
being subjected to extra checks by the UAE’s customs
officials. There’s extra screening of the containers. We’re
being asked to provide more documentation and verification.
Even the free zones are being monitored.”
As a result of the EU and US sanctions, which place new
restrictions on foreign trade and financial services, local and
international banks are refusing to grant Iranian traders
letters of credit. A letter of credit (LC) is a document issued
by a financial institution and acts as a guarantee to sellers
that a trading partner will pay for imported goods. It is used in international trade. Iranian traders say that the absence
of LCs will affect trade as a whole, including shipping
basic necessities such as food to Iran. The traders are also
finding it increasingly difficult to secure insurance as the
new sanctions make it illegal for European insurers to cover
cargo being shipped to Iran.
Small and medium-sized businesses have been hit
particularly hard by the recent clampdown on transferring
money to Iran, which is hurting the entire trading community.
The local newspaper, Gulf News, cited an unnamed source
in a June report that the UAE had closed down more than
40 companies in a crackdown on those “illegally dealing
in strategic dual-use equipment and materials and moneylaundering.”
According to Masoumzadeh, “In the last two years, 400 companies have shut down because of earlier sanctions and
the recession.”
In the bazaar, there are numerous Iranian shops that
trade spices, blankets, clothes, toys and surreptitiously sell
fake designer bags. Western tourists traipse through the
bazaar’s alleys, pausing in front of gunny bags of spices and
incense. Eager Iranian men call out in English, French and
Russian, selectively inviting the persons with the cameras
and baseball caps into their shops. The spice shops are
busier than the wholesale stores.
Afshin, who asked not to give his last name, is a third-generation
Iranian trader. His shop still occupies the stall
established by his grandfather, who came from Iran to set up
the family business 100 years ago. “We are an Iranian family
having a business in Dubai. But we don’t import or export to
Iran, so our business is still operating without problem. We
are experiencing problems in converting local currency into
Iranian money,” he says.
His neighbour, Aslam Saleem, an Indian wholesale trader
who imports toys from China and re-exports them to Africa
and Iran, has not been so lucky. Saleem is owed about a
million dollars by Iranian importers. “The Iranians are
saying they have sent the money but my bank is not releasing
it,” he says. In 2009, Iranian businessmen accounted for
70 percent of Saleem’s exports. This year, he says, they
represent less than five percent.
According to the Iranian business community, many of the traders have no ties to the Iranian government or the
Revolutionary Guard. “The Iranian business community
in Dubai doesn’t understand why they are victims of the
sanctions. They are private sector and are not connected to
the government of Iran,” says Masoumzadeh.
Analysts say Dubai now has to follow stricter policing
of the new sanctions because of the UAE’s larger foreign
policy interests. “In the past, Dubai has generally followed
its own economic policy that has been independent from the
country’s foreign policy, which allowed it to benefit from
trade with Iran,” says Dr Samir Pradhan, a researcher at the
Gulf Research Center.
However, the potential for a nuclear-armed Iran is of
concern to the Gulf’s Arab nations including the UAE,
whose capital Abu Dhabi has recently signed a civilian
nuclear co-operation deal with the US. A group of South
Korean companies will build the country’s first nuclear
power stations.
In Dubai, the Iranian business community is making its
point through various media channels, but Dr Pradhan
is more concerned about the impact of the sanctions on
the Iranians in Iran. “Sanctions will hurt all businesses,
whether they are Iranian or dealing with Iran. But until
Iran finds another re-export hub to replace Dubai, it’s the
Iranian population that will struggle,” he says. “Inflation is
already at 11 percent and if the cost of business rises, it’s not
the businesses that will pay, but the everyday people.”
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