United Arab Emirates may restrict Iran’s ability to access billions in dollars that are held by the Gulf State. This could cause financial disruptions for Iranian companies who have depended on these channels of finance for many years.
The Wall Street Journal reported Thursday that Emirati authorities have informed Iranian officials that a similar step was being considered, but that no decision had been taken.
Tehran is facing increasing economic pressure due to the sanctions, and a conflict between Israel and the US that has intensified.
The UAE’s trade and fund infrastructure could be used to further restrict Iran’s access to foreign currencies and increase its commercial difficulties.
Dubai financial corridor
Dubai is a financial hub for Iranian companies and traders looking to avoid Western sanctions.
The emirate has a large number of free zones and shipping networks as well as a financial services sector that is used by businesses to maintain trade.
The Atlantic Council has published a study that describes the ways in which these channels allow Iranians to export oil and funnel proceeds directly into their military programs and regional proxy networks.
Shell companies registered in Dubai’s free zones for years have been helping to conceal the origin of Iranian commodities and oil.
Currency exchanges operating in the streets of the city facilitate cross-border transfers without conventional bank oversight.
The networks allowed Iranian companies to remain connected to the global market even when formal financial channels were restricted by sanctions.
US pressure over enforcement
The United States repeatedly pressured the UAE to demantle sanctions evasion network linked to Iran.
The US Treasury sanctioned a number of entities in the UAE accused of facilitating Iranian transactions.
American officials also indicated that Emirati enforcement hasn’t always been in line with the promises made by Emirati authority.
Washington continues to demand tighter control over businesses and intermediaries that are suspected of helping Iranian companies move money and conduct business through Dubai.
Conflict raises stakes
As regional tensions escalate, the policy review takes place.
Iran fired more than 1,000 missiles and drones on targets in the UAE to retaliate for an attack by Israel and US.
The strike damaged the infrastructure, including Dubai International Airport as well as Fairmont Hotel and nearby residential areas and tourist attractions.
These attacks have upset the international community of expatriates and investors who Dubai has been trying to lure for years by portraying itself as a stable business hub in an unstable region.
The UAE, despite the recent escalation in violence against Iran, has stated that it won’t be joining a direct military attack.
The country’s officials said earlier in the week that they would continue to maintain a defensive stance consistent with their policy of de-escalation, and commitment to the Charter of the United Nations.
Authorities are also examining the financial response.
The Wall Street Journal reports that officials are examining potential measures, including freezing assets owned by shell companies with ties to Iran. They also plan to examine local currency exchanges which form part of Tehran’s financial infrastructure.
The report in this post UAE considers cutting Iranian financial access to Dubai networks may change as new developments unfold.
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