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Sanctions squeeze Iranians in trade hub Dubai

By Fredrik Dahl

DUBAI (Reuters) - Asian workers in a Dubai port load an Iran-bound ship with sacks of sugar. U.S. and U.N. sanctions over Tehran's nuclear work do not bar such goods, but Iranian traders based here are feeling the heat all the same.

Morteza Masoumzadeh, shipping agent for the 3,300-tonne cargo, says punitive international measures against Tehran are increasingly hurting Iranian businessmen in Dubai.

The Gulf emirate is a vital economic link for the Islamic Republic, but as many as 400 Iranian businesses in Dubai might have closed over the last year or so, said Masoumzadeh, who is also vice president of the local Iranian Business Council.

This was partly because of Dubai's property downturn and the global economic slowdown, but the sanctions had also made life more difficult by restricting access to credit.

"We can feel it. The sanctions on the financial sector are badly affecting traders in this country dealing with Iran," he said in his 14-storey office in downtown Dubai, with the sea glittering in the distance.

"It is obvious that the future is dark," said Masoumzadeh, who moved to Dubai nearly three decades ago to transport rice, timber, home appliances, cars and other items to his native country a short distance away across the Gulf.

With Iran facing growing Western pressure, its close economic and other ties with Dubai have drawn scrutiny from the United States, which is pushing for a fourth round of U.N. sanctions on Tehran for refusing to halt its atomic activities.

Washington and its allies suspect Iran, the world's fifth-largest crude exporter, of seeking a nuclear weapons capability. Iran says it only aims to generate electricity.

Highlighting the kind of sanctions-busting transactions Washington is trying to clamp down on, a U.S. judge last year jailed an aviation company owner for 17 months for conspiring to ship military aircraft parts to Iran via Dubai.

U.S. authorities said numerous procurement networks use suppliers around the world to obtain and ship American-made military products to Iran, in violation of a U.S. embargo.

IRANIAN SHIPS "CHANGE FLAGS"

Dr Theodore Karasik, research director at the Institute for Near East and Gulf Military Analysis, said there were "forces in Iran" that were using the United Arab Emirates to circumvent the sanctions. Dubai is one of seven emirates in the UAE.

"Iranians have been very crafty at going around sanctions," Karasik said. "Overall sanctions don't work in this regard."

But he suggested most trade between Iran and Dubai was legitimate, saying a "few bad apples" spoilt things for others.

The Institute for Science and International Security, a U.S.-based think-tank, said in a 2009 report that countries of "transit concern," such as the UAE, should step up action to help prevent Iran acquiring items for its nuclear program.

Roughly 80,000 Iranians live in Dubai, a regional trade and financial hub which is also home to some 8,200 Iranian businesses, Masoumzadeh said.

Last year Dubai's re-exports to Iran -- goods originally coming from Europe, Asia or elsewhere and then sold on to Iran -- rose 4.8 percent to 21.3 billion dirhams ($5.8 billion).

U.S. brands such as Motorola mobile phones, Dell computers and Apple iPhones can also be found in shops in Tehran, despite a U.S. ban on most trade with the Islamic state.

"There is a lot of trade going to Iran," said Mahboob Arshad, the Pakistani captain of the M.V. Monoxylion, a Russian-built vessel preparing for the 300-mile (480-km) voyage to the Iranian port city of Bushehr carrying raw sugar.

"These general cargoes have no problems," he said on board the vessel in Dubai's Hamriya Port, when asked whether the sanctions had any impact on his work.

But in a sign of the sensitivities involved, Arshad said he had noticed in the last six months how some Iranian ships had changed their flags and names to avoid attracting attention.

U.S. officials regularly travel to the UAE to urge vigilance against Iranian banks and businesses based in the Arab country.

Stuart Levey, U.S. Treasury undersecretary for terrorism and financial intelligence, said during a visit in March that Washington wanted to "affect the decision-making" of the Iranian government and did not target ordinary people.

"We have no desire to harm the Iranian people economically or otherwise," he told The National, an UAE newspaper.

"This is not an area where you can always be 100 percent surgically precise, but we try to do the best we can."

A U.S. draft for new U.N. sanctions proposes more curbs on Iranian banking, a full arms embargo, tougher measures against Iranian shipping, moves against Revolutionary Guards members and a ban on new investments in Iran's energy sector.

"THOUSAND SPOTLIGHTS"

Nicole Stracke, a researcher at the Gulf Research Center, said measures against Iran could also hit Dubai. "A new round of sanctions would deepen the problems in Dubai and make it more difficult for the economy to recover," she said.

Sanctions based on U.N. Security Council resolutions would "have more legitimacy and their implementation would find more acceptance in Dubai and the rest of the Gulf," than separate steps by the United States and the European Union.

Masoumzadeh rejected any idea that Dubai was a center for illicit trade with Tehran, saying Iranian traders were innocent victims in the long-running nuclear standoff.

In 2007, Washington imposed sanctions on two Iranian state banks with branches in Dubai, Bank Melli and Bank Saderat, making it harder for clients to obtain trade finance.

"We have to pay in cash for whatever goods we require to import ... it makes it very difficult and it has reduced the size of our business," Masoumzadeh said.

In December, Standard Chartered Bank told Masoumzadeh it would close his account, which he had held for over 10 years. It gave no reason. A bank spokesman said it did not comment on individual clients, but that it had suspended business with Iran and parties in the country in 2007.

Masoumzadeh said it was like he had become a "criminal" overnight. But if Iran wanted to import nuclear-related or other sensitive items, it could do so directly and not via Dubai, where the authorities checked the transports, the trader argued.

"They don't need to use Dubai which is under a thousand spotlights ... I'm not related to any of those illegal items."

(Editing by Alistair Lyon and Samia Nakhoul)

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