In sending goods to Iran, Dubai weighs competing interests


Iranian smugglers are seen in boats while sheep are loaded at the Omani port of Khasab Sept. 26, 2012. Until recently the Iranian boats and their fearless young skippers escorted several cargoes a day across the narrow Strait of Hormuz — loaded with everything from soft drinks to mobile phones and cosmetics — bought in the United Arab Emirates and sold to merchants in Iran. For Iranians starved for products, especially after sanctions were toughened in 2011, trade with Dubai provides access to goods they would otherwise be unable to buy. (Ahmed Jadallah/REUTERS)
December 24, 2013

After steep declines in trade starting last year, seaborne transfer of goods between Iran and Dubai is picking up again, highlighting the U.A.E.’s delicate balancing act in maintaining important commercial ties and satisfying its Western allies.

A combination of economic factors in Iran — attributed to tough international sanctions over its contested nuclear activities — resulted in a decrease in trade with the U.A.E. from $24 billion in 2011 to $15 billion last year, threatening the livelihood of thousands of Iranian sailors.

According to statistics published in November by Iran’s customs authority, the U.A.E. is still the leading source of imports to Iran, accounting this year for just over 20 percent of all imports, followed by China and India. The three represent nearly half of Iran’s total imports.

Trade is estimated to dip to $10 billion this year, according to the Iran-U.A.E Joint Chamber of Commerce. But business is improving, and Iranian sailors credit a stronger and more stable currency, a result of diplomatic progress between Tehran and world powers that led last month to an interim agreement on the Islamic republic’s nuclear program.

“Things are much better for us since [Iranian President Hassan] Rouhani took office, and we believe they will continue to improve,” said Ahmad Hajjian, one of an estimated 40,000 Iranian sailors employed in the transport of goods between Iran and Persian Gulf ports.

For Iranians starved for products, especially after sanctions were toughened in 2011, trade with Dubai provides access to goods they would otherwise be unable to buy.

By international standards, this sort of trade is considered smuggling, as it goes mostly unregulated by Iran and the U.A.E. Some of the goods are considered contraband, but both countries tolerate the activity and view it as an important source of livelihood.

Iran-Dubai sea trade annually accounts for more than 1 million tons of goods, transported by 2,800 Iranian ships.

Although the U.A.E is openly supportive of U.S. policies toward Iran, it has always maintained positive ties with both countries, despite a long-standing dispute with Tehran over three Persian Gulf islands that both claim.

Observers of the local business community agree and put little stock in the notion that Dubai has limited its trade with Iran at the behest of the United States.

“The authorities have devised a clever way of dealing with these geopolitical issues that come up every so often, figuring out a formula to appease the West and, at the same time, continuing the relationship with their neighbor,” said Ludmila Yamalova, a managing partner at the Dubai-based law firm Yamalova & Plewka and a frequent commentator on business in the U.A.E.

U.S. Secretary of State John F. Kerry and Iranian Foreign Minister Mohammad Javad Zarif made official visits to the U.A.E. this month to discuss shared concerns, underscoring the strategic importance of the Persian Gulf state to Washington and Tehran.

Iranian sailors, who report that 2012 was their worst year in decades, say that a rebound in the value of Iran’s currency, the rial, is returning the flow of goods to pre-sanctions levels.

When Mahmoud Ahmadinejad was Iran’s president, “the rial became so weak, because we had poor relations with the rest of the world,” said Hossein Daryanavard, a sailor from the Iranian island of Qeshm who has been traveling these waters for more than 40 years. “We aren’t political people, but we have to pay attention to the news, because we’ve learned that it really affects our livelihood.”

Since Rouhani became president in August, the rial has stabilized at a rate about 15 percent stronger than the day he was elected, returning some of the spending power of Iranian consumers that had been decimated by the weakened currency.

Few here, though, worry about the survival of this unique trade that predates the establishment of the U.A.E., which turned 42 years old this month.

“Our work is very important for Dubai’s economy, and it has been for years. They know it, and we know it,” said Gholamreza Shirazi, a member of a six-man crew that carries cargo twice a month to the southern Iranian port city of Bushehr.

Dubai’s rulers consider trade with Iran a fact of life that they have subtly continued to support even while other Persian Gulf states have shunned business with the northern neighbor. The emirate’s rulers understand that the symbiotic relationship with Iran has helped form the backbone of Dubai’s economy.

“Trade between Iran and the U.A.E. is very important historically. By many accounts, it’s what put the U.A.E. on the map. Even with political tensions that have arisen in recent years, the importance of the connections between the two countries can’t be erased,” Yamalova said.

When Dubai began its meteoric expansion in the second half of the 20th century, the city’s commercial activities centered on the banks of its creek, the landing and launching point of cargo headed for the Indian Ocean and the Persian Gulf.

Lining the creek are dozens of dhows, the traditional wooden boats long favored by regional sailors.

On Baniyas Street, which runs along the creek, Iran-bound goods are piled high.

For decades this area has been a hub for Iranian-owned businesses, with popular restaurants, nightclubs and shops clustered near the docks.

“We feel as if we’re at home when we’re in the Emirates,” said Daryanavard, who travels between Qeshm and Dubai several times a month.

A branch of Bank Melli Iran stands nearby, ready for transactions, although transferring funds to Iran through global banks became virtually impossible with the onslaught of tougher sanctions in 2011.

Tires, clothing, Chinese and Korean electronics and cooking appliances, and even cases of familiar Western products such as Kellogg’s Special K cereal and Ovaltine sit for weeks sometimes along the street, waiting to be transported.

Government-installed surveillance cameras atop the bank ensure that theft is rare.

On the opposite side of the busy creek is the vast U.S. Consulate compound, which has become Washington’s main listening post for matters related to Iran.

Despite the heightened U.S. presence on land and water, Iranian sailors say they have not experienced any problems because of the American encroachment on their turf and do not appear to blame U.S. policies for the impediments they have faced in recent years.

“We’re even ready to sail to America to transport goods if they let us. But, for now, Dubai will do,” Hajjian said.

Jason Rezaian has been The Post’s correspondent in Tehran since 2012. He was previously a freelance writer based in Tehran.
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