Published in Gulf States News, 22 May 2014 Iran is exploring the option of setting up an inward investment office in Dubai to help funnel money into the Islamic Republic, if a deal can be done to resolve the stand-off over the country’s nuclear programme.
The initiative involves businessmen close to President Hassan Rouhani, although it will not necessarily be an official government office. Dubai is already home to an outpost of the state-run Iranian Trade Promotion Organisation, but this new office would rely on more agile private sector actors rather than the lumbering state bureaucracy.
“They are very actively thinking of doing this,” said one source familiar with the plan. “They are very keen to bring inward investment into Iran. They want the private sector to come in and they realise that the government is not as adventurous as the private sector.”
For the plan to be realised, there will need to be a breakthrough in the nuclear negotiations between Tehran and the P5+1 group – which includes the five permanent members of the UN plus Germany and which is led by European Union foreign policy chief Catherine Ashton The latest round of talks ended in Vienna on 16 May with no sign of progress.
Talks will resume in the Austrian capital next month, when the pressure on the negotiating teams is likely to be even greater. An interim deal which gave Iran some mild sanctions relief was signed in November and came into effect in January, but it will lapse on 20 July. If the Iranian economy is to recover, Tehran needs the deal to be extended or replaced by a more comprehensive accord.
If that does happen, Dubai is well placed to play an important role. The emirate has long provided a trade and finance link between Iran and the rest of the world, although in recent years the UAE authorities have taken a far harder line on trade ties. The most recent data available from the country’s National Bureau of Statistics show the value of trade with Iran fell from 22.5% of all re-exports in 2011 to 13.2% in the first half of 2012.
In response to the harder line from the authorities, many Iranian businesses have left Dubai and are now believed to be operating from places such as Turkey, Georgia and Malaysia. However, Dubai’s ruler Sheikh Mohammed Bin Rashid Al- Maktoum has called for normal ties to be resumed. In a rare interview with the BBC in January, he said that “everyone will benefit” if sanctions on Iran are lifted.
Notwithstanding the sanctions, there is still a lot of trade between the two countries, with dhows loaded with goods tracking back and forth between Dubai Creek and the Iranian coast on a daily basis. At least some of the cargo is likely to be in contravention of the trade embargoes.
“What is really happening is that a lot of engineering goods are coming from Europe and the US to India. Indians take off the ‘made in the US’ sticker and put a ‘made in India’ sticker on instead and then ship it to Iran,” claimed one source who works closely with a number of Iranian businesses. “I’m sure the same is happening in China.”
Dubai also has a track record of providing the financial and logistical links for other emerging economies in the region, which could provide a model for Iran’s new investment agency.
“An Iranian investment office would make sense,” said one expatriate banker in Dubai. “Kurdistan has not formalised it but they pretty much use Dubai as their gateway to Erbil and it has worked out pretty well for them.”