Bloomberg: Business with Iran at CP World, a freight forwarder in Dubai, has fallen 20 percent in the last two months and director Abhijit Pradhan says it may drop further as the emirate cracks down on trade with the Islamic Republic.
By Henry Meyer and Ali Sheikholeslami
July 14 (Bloomberg) — Business with Iran at CP World, a freight forwarder in Dubai, has fallen 20 percent in the last two months and director Abhijit Pradhan says it may drop further as the emirate cracks down on trade with the Islamic Republic.
“If this gets really vigorous, then surely there will be a very big impact on exports and imports,” Pradhan said in a July 10 interview.
The United Arab Emirates, which lies across the Persian Gulf from Iran, is tightening restrictions on trade with the Islamic Republic in line with new sanctions aimed at curbing Iran’s suspected nuclear weapons program. Trade between Iran and the U.A.E., which in two years slipped from the first to third- biggest Iranian commercial partner, will halve to $6 billion in 2010 from 2008, according to Dubai’s Iranian Business Council.
The clampdown will hurt Dubai, which is in its second year of recession after suffering the world’s worst property crash and a debt crisis last year.
“It will have an impact on Iran because it depends on imports through Dubai but it will affect the economy of Dubai too because Iranian business has quite a grip there,” said Mohammed Shakeel, an independent business consultant based in the capital Abu Dhabi. “Given the economic climate in Dubai, this is significant.”
For the past several months, customs agents in Dubai, home to the largest port in the Middle East and the second largest of the seven emirates in the U.A.E., have been inspecting all shipments to Iran, said Morteza Masoumzadeh, director of the Iranian Business Council and owner of a shipping firm which mostly transports from Dubai to Iran. Exports to the Islamic Republic from Dubai fell 9 percent in June from a year earlier, according to the Dubai Chamber of Commerce.
Since the UN Security Council on June 9 approved a fourth round of sanctions on Iran, which were followed by tougher U.S. and European Union restrictions, the Dubai Financial Services Authority warned banks to treat transactions with all Iranian- based entities as “high risk.”
Masoumzadeh said only one of his company’s four ships are delivering goods to Iran now, with the other three largely idle. Business, which has also been hit by the global financial crisis, has fallen 70 percent in the past two years, he said.
“Our business with the previous sanctions was already hit hard,” Masoumzadeh said in a June 27 interview. His Jumbo Line Shipping Agency transports sugar, rice, cooking oil, steel and iron to Iran. “Up to what extent can we continue?”
Dubai-based Simatech Shipping, one of the largest shippers to Iran, says in the past month its customers have experienced increasing difficulties in obtaining re-insurance for their goods destined for the Iranian market.
Abu Dhabi Leverage
There are 8,000 Iranian businesses in Dubai and 400,000 Iranians living in the emirate, according to the business council. U.A.E. government figures show 100,000 Iranian residents of the country, mostly in Dubai.
Dubai had to seek a $20 billion bailout last year from wealthier Abu Dhabi, which owns 90 percent of the U.A.E.’s oil reserves. That gave Abu Dhabi leverage to pressure Dubai to limit trade with Iran at U.S. urging, said Philippe Dauba- Pantanacce, senior economist for the Middle East and North Africa at Standard Chartered Plc in Dubai.
“We know that Abu Dhabi has been putting some pressure on Dubai,” he said. “It is putting huge constraints on the way you can trade and it is becoming more expensive.”
A federal grand jury in Washington this month charged Mac Aviation Group, an Irish trading company, with purchasing F-5 fighter aircraft parts, helicopter engines and other aircraft components from U.S. firms and illegally exporting them to Iran via Dubai and Malaysia between August 2005 and July 2008.
Some of the trade may still be diverted to less policed coastal areas in other emirates across the Gulf from Iran such as Ras al-Khaimah, another U.A.E. emirate.
U.A.E. Minister of State for Foreign Affairs Anwar Gargash didn’t respond to emails and calls seeking comment. Khater Massaad, an adviser to Ras al-Khaimah Crown Prince Sheikh Saud, said the emirate doesn’t trade with Iran and respects international laws.
The U.A.E.’s central bank asked financial institutions in the federation to freeze the accounts of 41 individuals and companies in compliance with United Nations Security Council sanctions, Emirates Business 24/7 reported on June 28, citing a bank circular. There was no response to telephone calls and e- mails to the central bank seeking details of the list.
“The blocking of 41 bank accounts was in line with sanctions, although the basis of it is illegal,” Ramin Mehmanparast, Iran’s Foreign Ministry spokesman, said in a July 8 interview from Tehran.
An Iranian business leader on July 6 accused the U.A.E. of going beyond the UN sanctions. “We don’t like the behavior of the Emiratis,” said Masoud Daneshmand, the Tehran-based head of the Iran-U.A.E. Chamber of Commerce.