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Dubai traders fear sanctions on Iran business
Iran-Dubai export trade has thrived in recent years but the latest sanctions are making Dubai businessmen uneasy with more difficult trade financing and tougher customs inspections.
December 3, 2011 12:41 by Reuters
…aiding its nuclear programs; and expanded sanctions to target firms that aid its oil and petrochemical industries.
Britain banned all its financial institutions from doing business with Iran, including the Iranian central bank, and Canada said it would ban the export of all goods used in Iran’s petrochemical, oil and gas industries and “block virtually all transactions with Iran”.
Such sanctions still do not forbid flows of merchandise trade through Dubai, but they do make it increasingly difficult for traders to get financing for their business. Even banks from countries which do not ban financial ties with Iran may be reluctant to extend financing for fear of jeopardising their US business, or because they fear being exposed in the event of future sanctions.
“Now, none of the UAE banks are opening a new account for any Iranian trader,” Masoumzadeh said.
“We cannot establish letters of credit to our suppliers in Europe or the Far East. They cannot send the goods to us, and we cannot do the trade. Therefore, our trade department has lost at least 70 percent of its business during the last two years.”
In June last year, the UAE central bank told financial institutions to freeze Iran-linked accounts belonging to firms targeted by UN sanctions. UAE banks contacted by Reuters declined to comment publicly on Iran business, but banking sources confirmed there was now very little of it.
“Iran has been on the sanctions list for a long time so there should be, with the exception of one or two branches of Iranian banks on the ground, almost no business between Iranian banks and local banks here,” said a treasury source at aUAE bank, who declined to be named.
“I’m sure some might try and push the boundaries occasionally but any transactions would turn up on the regulatory radar so I don’t see it happening that much.”
Some trade can be paid for by cash and through personal transfers of money through foreign exchange houses. But Mohamed al-Ansari, chairman and managing director of Al Ansari Exchange, a major house, said such transfers were also under pressure.
“Remittances between the UAE and Iran have reduced due to the sanctions,” he told Reuters. “Although the sanctions are not targeted at individual transactions, they are creating difficulties.
“Even though there are no legal restrictions to do individual transactions, because of the difficulties, banks and exchange companies are not interested to do Iranian transfers.”
The United States has been pressing other countries to enforce sanctions strictly. The US Treasury’s top national security official, undersecretary for terrorism and financial intelligence David Cohen, visited the UAE last weekend to discuss the new US steps with government officials.
Under such pressure, the UAE’s enforcement of customs checks on trade appears to be becoming more aggressive, with the effect of deterring some Iran-bound shipments from coming through Dubai, analysts said.
“The shipping and customs controls are getting tougher. A lot of the shipping that was coming to Dubai now goes to Pakistan for disembarkment of goods there,” said Theodore Karasik, director of research at the Institute for Near East & Gulf Military Analysis in Dubai. “Customs are doing more inspections.”
Meanwhile, sanctions are having a chilling impact on shipping services to Iran; although most trade remains legal, the sanctions are complex so some international shipping firms are wary of falling foul of them by accident, and find it easiest to cut back services to Iran, shippers say.
Much of any Iranian trade lost to Dubai can potentially obtain financing and new trans-shipment ports in Asia. When Iran’s biggest crude oil tanker operator, NITC, lost its ship insurance cover earlier this year because European providers pulled out, it said it obtained fresh cover that was 80 percent underwritten by Asian insurers.
Nevertheless, such changes can be expensive, as the countries pushing for sanctions against Iran understand. The US government is pursuing a strategy of “raising the costs of doing business past where the burden is sustainable”, said J. Peter Pham at US think tank The Atlantic Council. (By Martina Fuchs)
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