Iran deal stirs wary optimism in Dubai trading hub


* Dubai is historic hub for Iran commerce

* Lower tensions should smooth business, trader says

* Payment problems hinder business

By Stephen Kalin

DUBAI, Nov 25 (Reuters) - The sheer complexity of theinterim Iranian nuclear deal and the expected slow pace ofimplementation tempered optimism among traders in the Gulfemirate of Dubai on Monday over the impact of up to $7 billionin sanctions relief.

But the expected concessions have been enough to give apsychological boost to the Iranian business community in Dubai,the main gateway into the economically isolated country.

Despite a decade of sanctions, Iran has managed to get mostof the commodities and goods it needs via Dubai's flourishingre-export market. But new embargoes imposed by the United Statesand its allies in late 2011 and early 2012 hit hard.

At Dubai Creek on Monday, Iranian labourers loaded washingmachines, televisions, mattresses and other goods onto smallwooden and steel ships destined for Iran, about 160 km (100miles) away.

The dozens of ships that line the docks here make theroughly 12-hour journey across the Strait of Hormuz a few timeseach month.

An Iranian trader named Reza, who has been exportingcosmetics products to Iran by boat for nearly ten years, toldReuters the deal constitutes "a positive step" but said he didnot expect it to generate benefits overnight.

"We're hoping that the tension between Iran and the Westwill be reduced, and that will result in a smoother businessrelationship because business has dropped dramatically in thelast two years," he said.

The vast majority of trade between Iran and its Gulf Arabneighbours is routed through Dubai, home to tens of thousands ofethnic Iranians and one of seven emirates making up the UnitedArab Emirates (UAE).

Two-way trade, excluding oil, between Iran and Dubai fell to10.8 billion dirhams ($2.9 billion) in January-June from 12.3billion dirhams in the same period of 2012.

That drop slowed from a 31 percent plunge to 25 billiondirhams in all of 2012.

Sanctions imposed by Western nations have damaged Iran'seconomy in the past two years by freezing its access to creditmarkets and preventing it from exporting oil, which was itsprincipal source of foreign reserves.


A tentative deal reached over the weekend offers the countrypotential access to $1.5 billion in trade in gold and preciousmetals and the suspension of some sanctions on its auto sectorand petrochemical exports in exchange for curbing its nuclearprogram. It will also give Iran access to some $4.2 billion insales from its reduced oil exports.

Many Iranian traders in the UAE are uncertain as yet how farthey will benefit from any extra trade generated by the deal,but they hope it will have a ripple effect by easing access tocredit markets, facilitating transportation and opening simplerways to send and receive payments.

A businessman who works for an Iranian food company based inDubai told Reuters he is waiting to see how far the deal willgo.

"The main issue we face is about payment," he said. "At themoment we have to use money traders and that is not ideal. So ifthat is sorted out, this deal will be very handy for us."

Such a development would help the emirate become the mainstaging post for an eventual return of foreign capital to Iran.

Dubai's Iranian Business Council has shrunk to about 200members from 600 as the sanctions caused businessmen to move tocountries such as Turkey and Malaysia, Hossein Asrar Haghighi, afounder of Dubai's Iranian Business Council, told Reuters inOctober.

The hope is that some of these council members will nowreturn.

The Iranian currency appreciated nearly four percent onSunday following news of the deal, and it sustained that levelon Monday, according to a local money changer.

Mehran Ershadifar, who runs a construction company in Dubaiand a trading company in Iran, has lived in the UAE for twodecades and says tighter restrictions the over past few yearshave made it increasingly difficult to conduct business.

The growth in trade created by the nuclear deal is small fornow, he said, but "the dam is broken."

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