Iran-UAE trade talks another sign of Gulf thaw
The United Arab Emirates, and Dubai in particular, is considering potential costs and benefits if Iran opens up to the global economy.
On June 1, a trade delegation consisting of the ministers of agriculture and infrastructure, the heads of the chambers of commerce of the seven Emirates in the UAE and their accompanying business representatives visited Iran. This was the first high-level UAE trade delegation to Tehran after an eight-year absence. The UAE business delegates represent five sectors: oil and gas, banking, food industry, automotive traders and investment companies. The trip coincided with the official visit to Iran by the emir of Kuwait as well as the presence of a Qatari delegation in the southern port of Bushehr, all signs of improvement in the relations between Tehran and Iran’s southern neighbors.
For the better part of the past two decades, the United Arab Emirates — more specifically, Dubai — has been among Iran’s top trading partners. In fact, Dubai became the natural trading platform for international exports to Iran that would be re-exported through the emirate. The partnership was not just based on geographical vicinity, but also on common historical roots (many migrant families who founded Dubai originated in Iran’s southern provinces) and also on a growing presence of an Iranian trading community in the UAE. Thousands of Iranian businesses are represented in the UAE, which points to the breadth of the trade relations. In the early 2000s, Dubai also benefited enormously from Iranian investments in the local real estate market. In 2010, the trade volume between the two stood at $20 billion, rising to $23 billion in 2011 and then dropping to $17 billion in 2012 and $15 billion in 2013.
In the past few years, the trade between these two neighboring countries declined as a consequence of external sanctions, especially US pressure on Emirati companies and banks not to engage in trade with Iran. As a consequence, Dubai gradually lost its competitive advantage as a re-exporting hub for Iranian businesses. According to the head of the Tehran Chamber of Commerce, Industry, Agriculture and Mines, Yahya Ale-Eshaq, the decline in Iran-UAE trade was initially compensated through the growth in Iran-Turkey trade and later shifted to Iraq, so that today Iraq plays an important role as a regional trading partner.
The general trend is that Iranian companies are investing in growing trade with the country’s neighbors not just to circumvent existing sanctions, but also to engage these markets as export destinations. Nonetheless, the UAE remains a major trading partner with an annual trade volume of $15 billion, second only to Turkey among Iran’s neighbors. Iran also has the highest trade deficit with the UAE at about $7.3 billion in the last fiscal year, which underlines Dubai’s utility as a re-exporting hub.
