DUBAI, Feb 2 (Reuters) - The central banks of UAE and
Qatar have told lenders to stop financing trade with Iran,
bankers said on Thursday, cutting another source of credit for a
country struggling under Western economic sanctions imposed over
its nuclear programme.
The Gulf has a long history of trade with Iran, especially
in Dubai where there is a large Iranian trading community, and
Gulf banks had been expected to fill a funding gap for the
import of grains left by European lenders banned from financing
trade by EU sanctions.
"Banks in Dubai were asked by the UAE central bank to stop
issuing letters of credit to finance trade with Iran. Before the
sanctions, the central bank regularly checked on trading with
Iran and wanted to know of all dealings between the two
countries," said a Dubai-based banker active in trade financing.
"Banks can't do this anymore."
About 8,000 Iranian traders are registered in Dubai, and
re-export trade between Iran and the UAE totalled 19.5 billion
dirhams ($5.32 billion) in the first half of 2011, according to
the latest figures from United Arab Emirates' customs authority.
Qatar's central bank also recently told banks to stop
providing credit for Iranian trade, according to a senior
Doha-based banker.
Iran is struggling under the weight of sanctions. Its
currency, the rial, has depreciated, there has been a run on its
banks and inflation is rising, U.S. intelligence chiefs have
said.
The United States imposed the harshest sanctions so far on
Iran, banning transactions involving Iran's central bank, and
the European Union has banned the import, purchase or transport
of Iranian oil, cutting off its main foreign currency earner.
The 27-member bloc also agreed in January to freeze the
assets of Iran's central bank to try to persuade Iran to stop
its nuclear programme, which the West says is aimed at producing
an atomic weapon.
Iran denies the charge.
The sanctions, which Western powers say are aimed only at
the Iranian administration, may be having unexpected
consequences.
SHIPMENTS STOP
Iran is heavily dependent on grain imports for animal feed,
but some 10 ships have been unable to deliver grain to Iran for
more than three weeks after banks refused to process payments,
or offer loans to, Iranian buyers.
On Thursday, up to five of those vessels may have been
diverted to new destinations, ship tracking data showed.
]
The United Arab Emirates' central bank ordered financial
institutions two years ago to freeze Iran-linked accounts
belonging to firms targeted by United Nations sanctions.
In Bahrain, which has traditionally had more limited trade
ties with Iran, there have been no guidelines.
"Business with Iranians flourished in the past but Bahrain
was never a trading hub like Dubai," one senior banker said.
"Financing export of goods through the ports wasn't really a
prime line of business."
Iranian trade with Dubai has flowed for decades, plied by
wooden dhows carrying household goods and basic commodities such
as grain, rice and sugar.
"Historically, grain came to Dubai from South America,
mainly Argentina, the USA and EU, mainly France and then
re-exported from Dubai to Iran," said the Dubai-based banker.
"That was very good business for Dubai which acted as a
trade hub."
(Additional reporting by Regan Doherty in Doha; Writing by
Amran Abocar; Editing by Elizabeth Piper, Richard Mably)