Investing in the Rift

“UAE tightens noose on front companies”, was the title of a report published on June 21, 2010 by the Emirati Gulf News daily.

Among the countries who take advantage of Iran’s struggle with global powers, UAE indeed tops the chart. Substantial profits inundated the sheikhdom for the first time when the war between Iran and Iraq broke out. While it heavy funded Iraq’s war machine for 8 years, United Arab Emirates used the situation to ascend itself to the position of the most secure trade hub in the Persian Gulf region.

Trade restrictions imposed by Western countries on Iran have created a golden opportunity for the UAE government to absorb Iranian capital while mediating between Western and Iranian companies. Dubai’s astonishingly rapid transformation into a modern city would never have been realized if it wasn’t for the 300 billion USD of Iranian capital attracted during the past twenty years.

Nonetheless, UAE has never stopped harrying Iran. Voices claiming sovereignty over the triple Iranian islands (Abu Musa, the Lesser Tunb and the greater Tunb) have become louder in the sheikhdom whenever tension between Iran and the West has mounted. The Arab League and the Persian Gulf Cooperation Council summits never conclude without releasing a statement in support of United Arab Emirates’ territorial claims.

In the current circumstances, while Iran is facing another sanction resolution by the UN Security Council, UAE has resurfaced to undermine Iran’s position, court West, create more economic opportunities and take advantage of the black market.

Iran should counter United Arab Emirates in the economic field. Shoring up strategic trade ports (like Chabahar), reforming investment regulations and consulting Dubai-based companies to find practical solutions to neutralize UAE’s new restrictions appear necessary at the moment.