- Associated Press - Tuesday, March 1, 2011

DUBAI, United Arab Emirates

The appeals from cash-starved businesses in Iran come in nearly every day at the small shipping office in Dubai.

Can they get goods on good-faith credit? Can the company help as economic sanctions on Iran cut off access to international banking and commercial markets?

“It’s almost always a negative answer from us,” said Ali Davani, whose family operates traditional wood-hulled ships that have ferried car parts, construction material and just about everything else between Dubai and Iran since the mid-1990s. “We know they are suffering in Iran, but so are we.”

Just a few years ago, the family’s Sky Star Co. could barely keep up with demand from Iranian businesses making orders via Dubai, one of the main transit points for consumer products and other goods heading for Iran.

Today, the company’s cargo ships spend as much time in drydock for overdue repairs as making the 150-mile journey to Iran’s chief Persian Gulf port, Bandar Abbas.

“We can hang on a couple of years like this,” said Mr. Davani. “But this cannot be sustained.”

The lean times at Sky Star are echoed by Iranian-linked businesses across Dubai. Their troubles offer a clearer look at how stronger economic sanctions are squeezing average commerce and Iran’s merchant middle class, who face a dwindling supply of business partners abroad and have been effectively blackballed from getting loans and credit on international markets.

Iranian officials give almost no reliable data to assess the effect from the array of sanctions - by the U.N., the United States, the European Union and others - over Iran’s refusal to halt uranium enrichment.

Iran again rebuffed U.N.-drafted proposals at talks on its nuclear program in Istanbul in January, leading to speculation that more economic pressures could be imposed.

Much of the Western calculations on the fallout from sanctions come from tallying up the companies leaving the Iranian market and anecdotal evidence such as the slowdowns from bellwether places such as Dubai - home to one of the world’s largest concentrations of businesses doing trade with Iran.

Dubai serves mostly as an important way station. Goods purchased by Iranian firms often move through Dubai ports for re-export to Iran, with trade valued at more than $600 million a month until recently.

The almost nonstop transit had been seen by the U.S. and others as a weak link in enforcing sanctions, but United Arab Emirates officials have sharply stepped up controls in shipping and banking sectors since the latest round of sanctions last year.

In June, the UAE’s central bank ordered financial institutions to freeze accounts linked to dozens of firms named in U.N. sanctions. UAE officials also significantly boosted scrutiny on money transfers to Iranian banks such as Bank Sepah, which has ties to Iran’s Revolutionary Guard.

During a visit to the Persian Gulf last month, Secretary of State Hillary Rodham Clinton urged the UAE and other nations to “do everything within reason” to implement the sanctions.

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