Saturday 21 Jul 2018 | 14:11 | SYDNEY
Saturday 21 Jul 2018 | 14:11 | SYDNEY

Iran sanctions: How tight is watertight?

31 March 2008 13:27

Guest blogger: Rodger Shanahan (pictured), the Lowy Institute's new Army Fellow.

Economic sanctions can certainly hurt targeted economies, but their effects are rarely absolute and they take years to produce results, with the challenge of maintaining multilateral unity over that time. 

Hamish McDonald, writing in the SMH on the weekend, dismissed the possibility that Gulf states might not support US financial sanctions because the ‘Gulf sheikhdoms are all US protectorates heavily dependent on American goodwill’. But economic links between modern-day Iran and many of the GCC countries date back centuries, and significant expatriate Iran populations exist in many of the states. The case of the UAE in particular highlights the difficulties facing the US in building a watertight financial sanctions regime.

Despite being a close ally of the West and involved in a decades-old territorial dispute with Iran over the so-called ‘three islands’, hundreds of thousands of Iranians live in Dubai, thousands of Iranian firms operate there with investments in the UAE worth billions of dollars. The UAE is Iran’s largest bilateral trading partner, with Emirati exports to Iran totaling $9.8 billion last year, a 33% increase on 2006. The Dubai Ports World fiasco of 2006 demonstrated to the UAE that in business there are no allies, so it is little surprise that a senior UAE official’s view on the likelihood of private Emirati banks applying US financial sanctions against Iran is that 'it is not for the UAE government to tell private companies what to do'.