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August 13, 2008 

The Axis of Commerce: Dubai - Iran Trade

The September issue of Conde Nast's Portfolio magazine contains an extensive article on the diversion of U.S. goods from Dubai to Iran. The article "Axis of Commerce", written by Christopher S. Stewart, discusses the wide availability of grey market U.S. consumer and other goods in Iran and the role that Iranians play in Dubai. Mr. Stewart's research for the article included a trip to Iran where he went inside stores searching for American products.

Some interesting excerpts:

Iranians have partnerships in about 9,500 businesses in the emirates . . . , the bulk of which are involved in exporting. Some are connected to the Iranian government and military. There are 450,000 to 500,000 Iranians living in the U.A.E., with three-quarters of them in Dubai. The number of Iranians in Dubai has almost doubled in the past five years, and they account for about a quarter of the city’s total population. Iranians here also have a lot of money—estimates run as high as $300 billion in assets. Many Iranians would not be in Dubai . . . if it weren’t for American policy.

* * *
What I learn in a week in Iran can be summed up in a conversation I have with an older man in a store selling H.P. printers.

“We like America,” the man tells me, “just not American politics.”

“But where does all this American stuff come from?” I ask.

“It comes from Dubai,” he says. “Everything.”

“But how does it get here?”

“Are you C.I.A.?”

* * *
Last year, the U.S. shipped almost $11.6 billion worth of goods to the U.A.E., the bulk of which went to Dubai. That’s a 230 percent increase over the past five years. Experts estimate that between 30 and 40 percent of those goods—$3 billion to $5 billion worth—are then exported, though there are no official numbers. Iran, meanwhile, has become the U.A.E.’s No. 1 trading partner.

Underlying the entire operation is an informal “Don’t ask, don’t tell” philosophy, focused on maximizing profits no matter what. Thanks to an almost perfect convergence of American and local business interests, this approach has essentially turned the emirate into a global center for sanctions-busting. Some exports are innocuous, like refrigerators and stoves; others, such as high-speed computer chips, military hardware, and nuclear components, are more ominous.

* * *

Earlier this year, the Government Accountability Office released “Iran Sanctions: Impact in Furthering U.S. Objectives Is Unclear and Should Be Reviewed,” a report that spotlighted transshipment in the U.A.E. as a “considerable problem.” President Bush later flew to Abu Dhabi and Dubai with a request that the U.A.E. reconsider its business dealings with Iran. While Bush issued a subtle warning, Stuart Levey, the U.S. Treasury undersecretary for terrorism and financial intelligence, was more direct. In Dubai last year, he told a group of bankers and executives, “Those who are tempted to deal with targeted high-risk actors are put on notice.”

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