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The Fletcher School Online Journal for issues related to Southwest Asia and Islamic Civilization Spring 2011 Sanctioning Iran The View from the United Arab Emirates Kosar Jahani Since its momentous formation in 1979, the Arab Emirates (UAE) Islamic Republic of Iran has perplexed the United and, in particular, its Iran and Dubai are so States and its policymakers. Sanctions have been a emirate of Dubai. Iran economically cornerstone of U.S. policy toward Iran throughout and Dubai are so intertwined that some this period, but have proven scarcely effective in economically analysts have dubbed changing Iran’s behavior on the key issues they intertwined that some the latter Iran’s Hong target: nuclear proliferation, sponsorship of analysts have dubbed terrorism, and human rights abuses. Yet, with the latter Iran’s Hong Kong. 1 every successive dispute, the United States has Kong. Seeing as expanded the breadth and depth of its sanctions. sanctions are only effective insofar as the nation(s) U.S. policy recently culminated in the July 2010 enforcing them has enough of an impact to make Comprehensive Iran Sanctions, Accountability, compliance worthwhile, and given the UAE’s and Divestment Act (CISADA), by far the most potential bearing on that impact, the question exhaustive measure of its kind. Like any sanctions arises: how likely is the UAE to implement regime, the effect of CISADA was enhanced by unilateral sanctions against Iran? In an effort to multilateral support: the United Nations Security answer this question, this paper delineates the Council, the European Union, Japan, South Korea, history and structure of Iran’s economic Norway, Canada, and Australia have imposed relationship with the UAE during three phases: unilateral sanctions as well. from the eighteenth century through the end of While the United States has succeeded in the Qajar dynasty, throughout the Pahlavi forming an ever-growing coalition of the willing monarchy, and since the inception of the Islamic against Iran, its efforts have failed to subscribe a Republic of Iran. This paper focuses on political critical actor to unilateral sanctions: the United issues only to the extent that they influence the aforementioned economic ties. Kosar Jahani , Fletcher MALD 2012, is a first-year Through an analysis of Iran’s economic student concentrating in International Negotiation relationship with the UAE during these three and Conflict Resolution, with a regional focus on the phases, this paper concludes that the UAE, Middle East. She received her B.A. in Business despite enjoying a strong bilateral security Administration from the University of California, relationship with the United States, is unlikely to Berkeley. adopt the kind of unilateral sanctions that the United States advocates. The UAE, which not only enables Iran economically but whose growth is © The Fletcher School – al Nakhlah – Tufts University 160 Packard Avenue – Medford, MA 02155-7082 USA – Tel: +1.617.627.3700 2 al Nakhlah also fueled by Iran, is in a unique position to take and their incompetence had far-reaching on a more direct role in U.S.-Iran diplomacy. The consequences for Persia’s trade with its maritime United States should leverage the UAE’s historic neighbors further south. In 1902, the reigning economic, religious, and cultural ties with Iran as Qajar king, Muzaffar al-Din Shah (1896–1907), a gateway to discussing the more consequential allowed for new, higher taxes on all imports and issue of regional security. exports passing through Persian ports, shifting the balance of power between the Persian ports of THE 18 TH CENTURY TO THE END OF THE Lingah, Bushehr, and their contenders on the QAJAR DYNASTY opposite side of the Gulf. Muzaffar al-Din Shah Although shortsighted analysis traces had been buoyed by the procurement of loans Dubai’s status as a commercial powerhouse to its from foreign benefactors, namely Russia. In 1900, less substantial oil reserves relative to Abu Dhabi, the Shah borrowed from the Russian government a more historic approach reveals that Dubai’s and the loan was secured by the expected current position stems from its geographic fortune revenues from Iranian port customs. The British, as well as centuries-old imperial and regional however, had managed to gain exemption for the 2 rivalries implicating the Persians. Along with Persian Gulf ports, which primarily transported Abu Dhabi, Ajman, Fujairah, Ras al-Khaimah, goods to and from colonial India. After using the Sharjah, and Umm al-Qaiwain, Dubai is one of the Russian loan to repay the balance of earlier loans seven semi-autonomous emirates that constitute incurred from the British and bureaucratic the United Arab Emirates. salaries, the Shah and his Situated between Abu Dhabi and Dubai’s ruling family, entourage used some of the loan Sharjah, Dubai, like most of its money to finance a trip to Europe. the Al Maktoums, When the Shah returned to Persia, neighbors, is a sheltered creek that strategically leveraged connects to the sea. But unlike its the remaining loan funds had neighbors’, Dubai’s creek reaches increasing tariffs in been squandered and he, once further inland, making it an Lingah and Bushehr to again, resorted to Russian excellent harbor. The benefits of direct the Gulf’s trade financing. This time around the this natural endowment, however, to their port. Shah agreed to accept a Russian- remained unutilized by its mandated revision to Iran’s original inhabitants, such that for customs system to ensure loan most of the eighteenth and nineteenth centuries repayment: the Persian Gulf ports were now also 3 Dubai was nothing more than a fishing village. subject to a five percent customs tax. Dubai’s subsequent economic flourishing Dubai’s ruling family, the Al Maktoums, was shaped largely in response to the Anglo- strategically leveraged increasing tariffs in Lingah Russian imperial rivalries being played out across and Bushehr to direct the Gulf’s trade to their the Gulf on the Persian stage. Both Britain and port. While tariffs on the Persian coast increased Russia sought to control Persia’s tariff schemes in at the start of the twentieth century, the prescient order to, among other things, flood its markets Maktoum bin Hashar (1894–1906), abolished the with the surpluses of their burgeoning industrial existing five percent customs duty in Dubai. 4 revolution capacities. In outbidding one Dubai’s laxity towards tariffs and taxation was another, the British and the Russians intertwined not unprecedented; the region had hosted a manipulations of domestic economic policy with number of pearling boats in the mid-nineteenth century that were also exempt from paying taxes. forced concessions and aggressive loan 5 mongering, a combination that effectively Thus, commerce that had been traditionally resigned Persia’s trade policies to their conducted in the Persian port of Lingah now administration. migrated south to the duty-free zone of Dubai. The inept members of Persia’s ruling Qajar Dissatisfaction with the tariffs caused serious riots in Persia, but those only garnered stricter tariff dynasty did very little to curb foreign influence, 6 enforcement by foreign administrators. © The Fletcher School – al Nakhlah – Tufts University Spring 2011 3 In addition to eliminating tariffs, Hashar all existing agreements, including those to 11 offered Persian merchants a number of other capitulations. incentives to redirect their business to Dubai, The 1928 change in tariffs motivated another including financing for trade. As a result, Dubai wave of Persian immigration and trade to Dubai. became a critical entry point for distribution of Furthermore, the fact that the tariffs showed no goods further inland on the Arabian Peninsula, as signs of abetting encouraged the previous wave of well as a re-export hub where Indian goods were transitory Persian immigrants to accept Dubai’s 7 re-directed to Persia. A number of merchants, overtures for permanent residency. Not only did some of Persian heritage, welcomed Hashar’s Dubai’s ruling family extend residency to the incentives and moved to Dubai in response, while Persians, it also donated land to incentivize their 12 still maintaining ties with their previous clients, move. This group of immigrants was much ensuring that goods reached them despite the more inclined to permanent residency in Dubai as financial obstacles. Although essential to trade its members were now moving with their entire into Persia, this group of migrants was by no families as opposed to partially residing in that means the dominant merchant class in Dubai. The emirate individually, as they had done in the past. most eminent merchants were still Arab or Indian, The migrants of the 1920s were also strongly as a significant community of Indians had settled motivated by religion, as exemplified by the case 13 in the ports of Lingah, Bandar Abbas, and of the inhabitants of Persia’s Bastak region. 8 Bushehr. Although this initial wave of Persian When the historically Sunni Muslim population of immigrants to Dubai was small in scale, it set the Iran was converted to Shi’a Islam by the Safavids precedent for more substantial immigration and in the early sixteenth century, the people of Bastak trade in the coming decades. had been able to withstand forced conversion by Following World War I, a number of policies taking refuge in the Zagros Mountains. Following were introduced to decrease British and Russian the Battle of Chaldiran, they reemerged to the dominance over Iran’s internal affairs, including foothills of the Zagros in a region they now called significant changes to its tariff schemes. Political “Bastak,” meaning barrier, implicitly in reference stalemate coupled with Qajar impotence had to the Safavids they had just evaded. The people paved the way for substantial regime change in of Bastak were thus particularly well-suited in Persia. In 1921, Colonel Reza Khan (1925–1941) terms of religious synchronization to integrate accompanied by Sayyid Zia al-Din led a coup with the Sunni population of Dubai.

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