American and European sanctions on Iran haven't stopped Hasan Safdari from exporting electronic equipment to his homeland across the Gulf from this small US ally. But they have forced the Iranian trader to change the way he does business. Most banks here won't financially back his exports or transfer money to Iran, which is only a short flight away. So Safdari turns to more expensive money dealers and exchange shops. “I've found loopholes but still I have to go through third channels to get it done,” he said. And that increases business costs. “Banking restrictions have obviously harmed our business, but they have never halted outside trade with Iran,” he said. “I wonder how it's possible to impose unilateral sanctions against a country that has land and sea borders with 15 countries.” The European Union adopted new sanctions against Iran in June, slapping financial restrictions on a string of Iranian companies it says are connected to the country's nuclear program. In the strongest move, it froze the assets of Iran's largest bank, Bank Melli, and barred dealings with it. But the EU's actions, along with similar US sanctions in place since last year, are unlikely to end the role the United Arab Emirates - and particularly, its financial boomtown Dubai - plays as a key gateway for business with Iran. Business ties between the UAE and Iran run deep. The UAE re-exports about $8 billion worth of goods to Iran annually, accounting for nearly a fifth of Iran's total imports last year. About half a million Iranians live in the Emirates, with assets estimated at $300 billion, and about 300 weekly flights connect the two countries. Some 9,500 companies in the Emirates have an Iranian partner owning up to a 49 percent stake, said Nasser Hashempour, vice president of the Dubai-based Iranian Business Council. The close business relations force the UAE to walk a fine line. “We don't want to antagonize our neighbor Iran or upset our friend the United States. We don't want to get very close to America and at the same time distance ourselves from Iran,” said Abdullah Abdul Khaleq, a prominent political analyst at the Emirates University. “UN collective sanctions are binding upon all countries and the UAE has a duty to obey them. But sanctions by the US or Europe are not binding,” he said. “We are not party to it and won't pay attention.” The United Nations has imposed three rounds of sanctions on Iran over its refusal to halt uranium enrichment, a process the US and others fear it will use to produce nuclear weapons. The sanctions bar financial dealings with 35 companies and impose travel bans and other restrictions on 40 individuals. The sanctions also prohibit shipments of material to Iran that could be used for its nuclear and missile programs. US sanctions are stronger. They bar weapons transfers and dealings with a wider range of companies - particularly Iran's top banks - although they don't seek to halt all trade with Iran. In fact, US exports to Iran have risen ten-fold during the Bush administration, from $8.3 million in 2001 to $146 million last year. The sanctions on the Iranian banks have the potential to hurt wider trade if enforced beyond the US. Many international banks operating in the Emirates have become more wary of dealings with Iran and Iranians, fearing repercussions from Washington. Last year, Stuart Levy, the US undersecretary for terrorism and financial intelligence, traveled to Dubai to warn Arab bankers to halt dealings with Iran or face US sanctions. Most international and local banks in the UAE issue fewer letters of credit for Iranian-owned businesses. Such letters are vital for international trade, ensuring that a buyer in one country will deliver payment to a seller in another. Bank-to-bank money transfers have also become difficult, with bankers asking about the purpose of the transfer and the nature and use of the item being shipped. All that has left many Iranian small businessmen in the UAE to turn to small local money transfer and exchange shops, which are legal and can't easily be hurt by American punishment because they have no assets in the US. Safdar Azizollahi, an Iranian who imports dried fruits, nuts and saffron to sell in his shop in Dubai's bustling Deira district sends his payments through the exchanges. “Sanctions have not done any harm to me,” he said. Iranian businessman Mashallah Bemanali Gharibi said that if the UAE cracked down and started to enforce US or EU sanctions, “Iranian assets will leave the UAE.” China, Turkey and Central Asian states might go after the business instead. “Some 40 years ago, Dubai was a village. Iranians were the first to settle here,” Gharibi said, pointing toward the city's Bastakiya quarter. Rows of tall Iranian-style wind towers and coral-stone houses with carved wooden doors and windows in the area are testimony to a strong link with Iran. “UAE authorities can't forget the connection, nor they can afford (the) consequences of an Iranian exit,” he said.
