Gulf Arabs left to fret as US ally takes on Iranians

One UAE member, Abu Dhabi, has a prolonged territorial dispute with Iran, but this has rarely disrupted the hum of Iranian commerce with another emirate, Dubai.

Those contradictions are becoming harder to sustain as the United States and its European allies impose unilateral sanctions over Iran's nuclear policy that go well beyond new measures decreed by the UN Security Council on 9 June.

The UAE has begun curbing Dubai's lucrative, free-wheeling role as a trading and financial lifeline for Iran, a policy that could prove costly for the Islamic Republic - and for an economy hit by debt woes and a burst property bubble.

The UAE Central Bank has told financial institutions to freeze the accounts of 40 entities and an individual blacklisted by the UN for assisting Iran's nuclear or missile programmes, a banking source in Abu Dhabi said this week.

Mounting pressure from the US, the UAE's main military ally and protector, may be one reason for the action.

"Now when the sanctions have been passed, US focus has turned towards implementation of sanctions with a specific focus on EU and UAE trade with Iran," said Trita Parsi, an Iran expert and public policy scholar at the Woodrow Wilson Centre.

"While the arm-twisting has yielded some results, there is also a risk tensions between the US and its allies will increase over the Iran policy."

Washington may have smoothed potential friction with the UAE by blessing the Gulf state's own nascent nuclear power plans.

Exasperation with Iran's occupation of three Gulf islands claimed by Abu Dhabi also underlies the stricter UAE stance.

"Abu Dhabi has been weighing down on Dubai to cut back on trade ties with Iran principally as a measure against that long- running sore," said Abu Dhabi-based economist Mohammed Shakeel.

"Dubai inevitably finds itself caught in the middle, unable to resist Iranian trade exchanges but also unable to fend off pressure from its economically more powerful Emirati neighbour."

Tens of thousands of Iranians live in Dubai, many of them involved in a re-export trade to Iran which grew to $5.8 billion last year as letters of credit from European banks dried up.

"Inevitably any slowdown in trade between the two will hurt Iran but also crucially hurt Dubai," Shakeel said.

The UAE has announced nothing publicly about how it is enforcing the latest UN sanctions - even Arab governments fearful of Iran are wary of showing enthusiasm for measures championed by Israel's key ally, the US.

The Sunni-ruled Gulf states face a long-standing dilemma over Shi'ite Iran, whose regional clout gained an unintended boost from the 2003 US-led war against its former foe Iraq.

"The Saudis in particular would dearly like to peg Iran's influence back across the region," said Shakeel, citing the popularity of Tehran's anti-US zeal and the implicit Iranian challenge to Saudi credentials as guardians of Islam.

"On the other hand, no one, repeat no one, wants another war in the region," he said, arguing that political and diplomatic animosity toward Iran did not translate into any demand by Gulf Arabs for the Americans to attack their turbulent neighbour.

The Saudi foreign minister has said sanctions won't work either in cramping Iranian nuclear work which the West believes has military aims, not just the peaceful ones stated by Tehran.

The Gulf Arabs have few ready alternatives, but fret that harsher sanctions may only spur on Iranian muscle-flexing.

"The Saudis are concerned that if you put more pressure on the Iranians they will play a more negative role, according to their definition, in the region - in Iraq, Lebanon and with the Palestinians," said Qatar-based analyst Mahjoob Zweiri. z

Instead, Saudi stresses the big picture, urging the US to work harder for Israeli-Palestinian peace to reduce tension, Islamist militancy and the appeal of non-Arab Iran as the defender of oppressed Arab and Muslims.

The Obama administration may in fact recognise some kind of link between Iran and the Israeli-Palestinian conflict, but simply lacks good options to achieve its goals on either.

Alistair Lyon