While the international community is stepping up its sanctions on Iran for suspicions about the country's nuclear ambitions, their repercussions are being fully felt in this United Arab Emirates city on the other side of the Persian Gulf.
More than 500,000 Iranians live in Dubai, including many merchants engaging in trade with their home country.
They say business has become more difficult because the financial institutions are making it harder on them.
"The proceeds of our trade arm have decreased 70 percent over the last two years," said Morteza Masoumzadeh, a 62-year-old Iranian who runs a marine transportation and trade company in Dubai. "And it's not missile parts or nuclear-related materials that we are dealing with."
Masoumzadeh set up his company in 1981 and has since been re-exporting sundries and other goods to Iran that he imports from Europe and elsewhere.
Around the autumn of 2009 his business, once cruising along, took a turn for the worse.
He said all financial institutions stopped accepting letters of credit issued by the Dubai branch of an Iranian state-run bank that he deals with, because the bank was included on a list of targets of the United Nations' sanctions on Iran.
There is no way to purchase goods without the letters of credit, which guarantee payment for the traded goods.
Masoumzadeh attempted to open a new account in a different bank, but even opening one turned out to be difficult because of his Iranian citizenship.
"The sanctions are targeting merchants like myself. That's the only way I look at it," said Masoumzadeh, who somehow manages to continue doing business in the maritime transportation sector.
Last August, a 41-year-old dealer, who exports sugar and other goods to Iran, was instructed to close his account in a local bank that he had dealings with.
"They explained that they had no way to confirm what I was dealing in," he said with resentment. "That was preposterous."
About 8,000 Iranian-affiliated enterprises of all sizes are said to be located in Dubai. The rumors are that at least 200 of them have been forced out of business since 2009.
There has, however, been no significant change in trade figures as far as statistics of the Dubai customs authorities are concerned.
Exports and re-exports to Iran totaled 43.5 billion dirhams ($11.84 billion, or 981.03 billion yen) in 2010, only slightly below the 43.6 billion dirhams in 2009. The figure for the first six months of last year was 24.7 billion dirhams, even up slightly year on year.
Industry sources said that is because an increasing number of companies in Europe and elsewhere, which stopped direct exports to Iran for fears of sanction risks, have turned instead to exporting goods nominally to Dubai and redirecting them to Iran after clearing customs in Dubai.
That could be called one ripple effect of the sanctions.
It has become virtually impossible to settle trade transactions in U.S. dollars between Dubai and Iran. The euro is also falling out of favor, so an increasing number of settlements are being made in UAE dirhams or other currencies.
"Some dealers are settling their transactions by barter," said Parviz Rezaei, a commercial attaché at the Consulate General of Iran in Dubai. "There are a myriad of ways to circumvent the sanctions."
Refrigerators, TVs, air conditioners, tires and bedding--these were just some of the materials that guest workers from Pakistan were loading one after another aboard some 20 wooden boats along a creek that runs through Dubai's commercial district. The boats were bound for Bandar Abbas in southern Iran.
While it is true that many dealers are suffering under the sanctions, the liveliness of the scene led me to think that distribution of goods was not likely to drop sharply any time soon.
Calls for strengthened sanctions on Iran regained momentum after the International Atomic Energy Agency released a report last November suggesting that Iran was likely pursuing its ambition to develop nuclear weapons.
In late December, the United States enacted independent legislation to punish foreign financial institutions that have carried out transactions with the Central Bank of Iran to pay for crude oil purchases. The European Union also decided in January to introduce a total embargo on Iranian crude oil that will take effect in July.
The U.S. administration of President Barack Obama has repeatedly called on the UAE to act in concert with the sanctions. In autumn 2010, UAE financial authorities temporarily regulated remittances to and from Iran.
That plunged Tehran into great turmoil, as the public was no longer able to remit money overseas by way of private money exchangers as they had always done.
But for Dubai, whose prosperity relies on transit trade, Iran is the second largest re-export destination on the heels of India. While Abu Dhabi, the political capital of the UAE, is willing to comply with the sanctions out of consideration for its relations with the United States, Dubai, the commercial capital, remains less enthusiastic, sources said.
"Our trade with Iran is robust, but we don't know what will come about if the political tensions continue into the future," said a senior official of Dubai's Department of Economic Development. The emirate will consider measures to boost its exports to Central Asia, East Africa and other regions to make up for a possible drop in exports to Iran, the official confided.
Iran is sticking to its nuclear programs, ostensibly to promote civil use of nuclear technologies. Sanctions by the international community, suspicious of the country's nuclear armament ambitions, are likely to intensify in the coming days.
Dubai and Iran are next door to each other across the Persian Gulf. There is every reason to keep an eye on how their relations will develop in the future.
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Editor's note: Being a foreign correspondent is not all it's cracked up to be. As Asahi Shimbun journalists--assigned to 34 offices around the world--can attest to, the challenges of getting the story in a foreign land are much greater than on the homefront. In the Correspondent's Notebook series, Asahi Shimbun journalists will write about their experiences on the road, including the difficulties, the frustrations, the long hours, the roadblocks, etc. They will take readers along with them and give them a glimpse into their lives.
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