International financial sanctions against Iran are hurting its trade with the United Arab Emirates, the UAE’s economy minister Sultan bin Saeed al-Mansouri said on Monday.

 

“Trade with Iran was always with consumable items...We should not really stop that. The issue is with the financial transactions...regarding that, it has been affected,” he told a news conference.

 

“If you want to export 20 tons of rice, the financial system does not allow you to do that.” Mansouri did not elaborate.

 

Banking sanctions led by the United States have made it legally dangerous for many banks around the world, including those in the UAE, to do business with Iran, making it very difficult for UAE to export to Iran.

 

Dubai has been a major center for trade with Iran; re-export business between the two countries - goods sent to the UAE for on-shipment to Iran, and Iranian goods sent to the UAE for on-shipment to other countries - totalled 31.9 billion dirhams ($8.7 billion) in the first nine months of 2011, data from the UAE customs authority show.

 

The International Monetary Fund has estimated the sanctions could cost the UAE as much as 0.7 percent of gross domestic product if trade halts completely.

 

Iran sanctions pose trading challenge to PGCC 

 

The ease of doing business with Iran is deteriorating as a result of the difficulty of transferring money to and from the country, said experts at a recent seminar in Dubai discussing the upshot of sanctions on businesses in the UAE.

 

Approximately two hundred lawyers and senior executives from the business community attended a seminar entitled ‘Sanctions against Iran: hindering the flow of trade’ hosted by leading international law firm Clyde & Co held in Dubai and Abu Dhabi.

 

In recent years there has been an increase in sanctions legislation around the world, much of it overlapping, and with that increase comes a certain degree of uncertainty.

 

In addition, due to the swift response needed to rapidly changing political environments, sanctions legislation tends to be implemented with immediate effect, causing difficulties to businesses with long term trading relationships.

 

According to Clyde & Co, the growing number and complexity of sanction regimes means that organizations not only have to look at their domestic law for regulatory guidance but also the laws of other jurisdictions, in particular the U.S. and European Union.

 

For example, a new EU regulation, which came into force on March 24, increases the breadth of the EU sanctions against Iran including not only a phased embargo on Iranian petroleum imports to the EU but also the carriage or insurance of Iranian petroleum.

 

Recent U.S. sanctions have also targeted non U.S. banks that carry out significant trade with Iranian financial institutions.

 

Iran is a major market for businesses in the UAE with 8,000 Iranian trading firms in Dubai alone and trade reaching $8.7 billion in the first nine months of 2011.

 

“Reputational and regulatory pressures will compel companies to minimize trade dealings with Iran as a result of the new sanctions,” said Patrick Murphy, senior associate at Clyde & Co.

 

“Individuals and firms should look to carry out their due diligence and evaluate their existing relations, to ensure that they are not engaging in illegal activity that exposes them to potential liability.”

 

“It is absolutely vital that individuals are not only aware of regulations in the UAE, which comply with UN sanctions, but members of the expatriate community can be exposed to criminal prosecution in their home countries,” said Christopher Mills, Partner Clyde & Co.

 

Sanctions regimes have been evolving very quickly in a rapidly changing environment. The scope and complexity of regulation in this area is increasingly meaning that multinational businesses are faced with the challenge of assessing a number of sanction regimes.

 

Clyde & Co have recently advised clients on the imposition of trade sanctions against Iran, Syria and Libya by the U.S. and the EU, and the actions of the Arab League and Turkey. 
 

(Source: agencies)