These measures are particularly crucial
Adding to their woes, Iranian shipping
because of how economically close the UAE
companies and exporters in the UAE have
and Iran have been historically. Bilateral trade
found their access to basic insurance cut.
between the two countries stood at close to
Without proper coverage for damages, they
$8.45 billion in 2009, while re-export trade
are bound to be denied entry to most ports.
volume amounted to close to $7.1 billion. This
Iranian letters of credit are no longer valid
places Iran as the Emirate of Dubai’s number
outside of Iran, so most transactions must
two re-export partner after India. Estimates by
now be done in cash. These spiraling costs and
the Iranian Business Council of Dubai have trade
trade risks have created an atmosphere ruinous
declining 29% to $6 billion in 2010.
to small traders and shipping giants alike.
Anecdotal evidence provides an even clearer picture of this deterioration in trade.
The proportion of the UAE’s economy linked to Iran is rather signiÀcant.
Dhows, Arab sailing vessels, used to hop with considerable frequency across the Persian Gulf to Iran, but are now sinking under the weight of the clampdown. Smaller sailors, whose boats lie dormant in the Dubai Creek,
The UAE needs to take into account the
have been hit hardest. In an interview with Gulf
resultant economic impact of its estrangement
News, a local newspaper, Mazher Hussain, a
sailor who sailed regularly between the Dubai
strengthening ties with the US and restoring
and Iran, said “The loads have decreased.
trade relations with Iran. The proportion of
Earlier, one dhow was ﬁlled up in a day. Now it
the UAE’s economy linked to Iran is rather
takes a week.”
signiﬁcant. The 23% of total trade volume
suffer major declines. There are over 8000 Iranian-owned businesses in Dubai alone (a ﬁgure that has dropped by nearly 400 since the past year.) The Iranian community also has a large presence in the UAE. Needless
implications for cutting economic relations with Iran. The UAE needs to carefully weigh them and consider just how far it is willing to accommodate the US’s demands to abandon a close trading partner. The list of countries in the Middle East distancing themselves from Iran is growing, increasing pressure on the UAE. Other countries like Qatar, also under US pressure, will likely follow in the UAE’s footsteps. Though the exact impact of these choices is unknown, it is safe to say that both Iran and the UAE will struggle to cope with the consequences. iBR
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I N T E R N AT I O N A L B U S I N E S S R E V I E W
11/27/2010 3:13:20 PM
Fall edition of the IBR magazine at the Wharton School.