Lifting of Iran’s Sanctions Beneficial to UAE

PUBLICATIONS / Newsletters / 2015 / Newsletter December

Lifting of Iran’s Sanctions Beneficial to UAE

According to experts and analysts, the entry of Iran into the world’s oil market would benefit the UAE if the sanctions on the country over its nuclear programme are removed. Hussein Asrar Haghighi, vice-executive president of Iranian Business Council in Dubai, said if the talks yield positive results it would give a boost to trade ties between the UAE and Iran (gulfnews.com, 2015). Trade figures between the two countries stood at $8.5 billion (Dh31.19 billion) in 2013. The figure fell to $5 billion in 2014 due to sanctions. Bank accounts of a number of Iranian businessmen were closed.
As per the 2015 Property Report of Cluttons, a leading property consultancy, UAE-Iran cross-border trade stood at Dh62.4 billion last year, and that Iran’s government estimates that its oil and gas sector needs investment of Dh734bn over the next five years, as well as a Dh18bn requirement for aviation. Iranian businesses in Dubai are already gearing up for expansion (Property, 2015).

The head of research at Cluttons, Mr. Faisal Durrani, said “We have seen Iranian traders who have businesses in the UAE speculatively looking for more office space, retail space and industrial space,” he said. “We have also heard from our banking clients that Iranian clients are seeking loans to fund expansion”.

The expectation is that most of these required funds will flow through the UAE’s banking system, which will boost liquidity levels. This will have a positive impact on real estate market in general. Firms are looking for more space means more job opportunities and that will create demand for housing.
Hussein Asrar Haghighi said: “We might see  huge trade growth between the two countries. Trade figures would double and business relations would be strengthened. There would be an increase in the number of tourists visiting the UAE” (gulfnews.com, 2015).
Dubai’s strategic location would further help it since Dubai has been the traditional gateway for goods to reach Iran. Iran needs billions of dollars of investments to develop key infrastructure in an economy that has shrunk 35 per cent in the past four years to $340 billion. Much of the goods for the infrastructure developments will have to pass through neighboring hubs, such as the UAE’s shipping and aviation hubs, before reaching Iran.
Iran is a major trading partner of the UAE with non-oil export trade to Iran valued at $11.5 billion (Dh42.2 billion) in 2014, according to the National Bureau of Statistics. But under the sanctions UAE-Iran bilateral non-oil export trade dropped from 16 per cent of all non-oil export trade in 2011 to 11 per cent in 2014.

“We expect this ratio to significantly increase by [the] end of 2016,” Alp Eke, director, senior economist, economic department at the National Bank of Abu Dhabi (NBAD) (Gulf news website, 2015).

Iranian government and private investors are also likely to tap into a number of sectors in the UAE. Iranian nationals account for roughly 2.6 per cent of the Dubai real estate market in terms of value, according to the Real Estate Regulatory Authority (RERA), which is expected to increase after sanctions are lifted.

According to Alp Eke, director, senior economist, economic department at the National Bank of Abu Dhabi (NBAD) “Iran is estimated to have around $100 billion in net foreign assets, more than half are frozen. As Iran gradually acquires assets they will be looking for investment opportunities in the region. The UAE’s stock exchanges, real estate market and bilateral trade will most definitely benefit significantly” (Gulf news website, 2015).

To conclude, investors are watching the Iranian market closely and want to monitor how it develops.

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