Iran May Lose Its Back Door for Beating Sanctions
Dubai's financial meltdown has enormous political and military potential for turning around a major international crisis, DEBKA-Net-Weekly's Gulf sources report. It offers Washington its first chance in a decade to really hurt Iran by sanctions without their teeth being blunted by the high wall protecting the Iranian economy from outside punishment.
That wall is provided by Dubai's three import-export facilities which Iran is at liberty to use at will.
1. Port Rashid and Jebel Ali port, which is the biggest man-made harbor facility in the world;
2. Al Maktoum international airport, the largest aviation hub in the Middle East and Africa and home to Dubai's and UAE's international airlines: in 2009, it was the 6th busiest airport in the world for passenger traffic and the 11th largest for cargoes;
3. The Jebel Ali Free Zone, whose eye-catching towers house business centers and offices, warehouses, factories, one-stop shopping, company registration and the issue and sponsorship of work permits.
JAFZA is part of the Dubai state-owned Economic Zones World, one of the world's biggest developers of Economic Zones.
Without those facilities Iran would be shorn of its primary conduits for beating sanctions, an eventuality that the emirate's financial breakdown has made real: The ruling family of Sheikh Ahmed bin Saeed al-Maktoum who, regardless of protests, has given Iran the unrestricted use of Dubai's air and sea ports and free trade zone, may lose control of those facilities to a fellow-member of the United Arab Emirates.
Once they pass out of the Dubai ruler's hands, the US and the West will have their first chance to cut off – or at least reduce – a sanctions-blighted Iranian regime's key life-support system.
Without Dubai, sanctions can shut off Iran's life-support lines
Until now, Iran's Revolutionary Guards Corps and its infamous al Qods Brigades external terrorist-intelligence branch have been impervious to efforts to damage their financial infrastructure thanks to the ready availability of Dubai's trade and transport facilities.
Out of reach too was the cash river reaching al Qaeda from 9/11. Most of these funds are funneled through Dubai, the primary hub of informal hawala remittance networks in the Muslim world. This alternative system carries vast sums to and from the Middle East, North Africa and South Asia, both in its traditional roles and for financing illegal and terrorist activities. In recent years, Tehran has turned to hawala for transferring and receiving funds when Western banks increasingly refused to do business with Iran's banking institutions as a result of direct American action.
DEBKA-Net-Weekly's Iranian sources report that Tehran also counted on Dubai's air and sea ports as insurance against a threatened UN Security Council embargo on sales of gasoline, diesel and refined petrol products and a possible US and Western blockade of its ports. Iran's international oil and shipping experts, working around the clock for ways and means for overcoming these measures, had begun organizing new infrastructure to accommodate sanctions-busting imports at these ports.
Those plans are in abeyance since Dubai crashed.
Abu Dhabi has big plans to buy Dubai out, make its ruler a puppet
Oil-less Dubai's misfortune may be oil-rich Abu Dhabi's leg up to pre-eminence in the United Arab Emirates and a place as the second richest and most powerful nation in the oil-rich Persian Gulf after Saudi Arabia.
The Supreme Council, which is made up of the seven UAE rulers of Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Quwain, Ras al-Khaimah and Fujairah, is the UAE federation's highest authority. Votes on "substantive" issues need to be endorsed by Dubai and Abu Dhabi, giving them both veto power over council decisions.
Dubai's ruler is on tenterhooks for a decision by his far more conservative fellow-ruler, Abu Dhabi's Sheikh Khalifa bin Zayed al-Nahayan, about a bailout. If the sheikh decides to pull the emirate's ailing economy out of the abyss, Dubai's rulers, the al-Maktoum family, would pay the price of forfeiting their veto power, leaving the al-Nahayans in unchallenged control of the Supreme Council.
Abu Dhabi's terms are stiff enough to rate as a cleanout rather than a bailout. In political terms they amount to virtual annexation.
According to DEBKA-Net-Weekly's Gulf sources, al-Nahayan is demanding the transfer of both Dubai's ports, Port Rashid and Jebel Ali, to Abu Dhabi, that is to say, his own family, as well as Jebel Ali Free Zone and the al-Maktoum international airport, with Dubai's national Etihad Airways thrown in.
Al-Nahayan also covets the assets of DP World, a subsidiary of the Dubai World holding company owned by the government of Dubai, which operates important port facilities in New York, New Jersey, Philadelphia, Baltimore, New Orleans, and Miami. It also runs port facilities in 15 countries world wide, including Saudi Arabia, China, Russia, India, Argentina, Venezuela, Hong Kong, Pakistan and South Korea.
By this issue's closing, Dubai's ruling sheikh was still waiting for an answer.
Al-Nahayan pledges to toe Western line on Iran
But before even scooping up Dubai's rich assets, Abu Dhabi wants to impose its fiscal and monetary laws and regulations on its beleaguered neighbor, a form of annexation that would end the al-Maktoum's economic independence.
Sheikh Nahayan is also demanding that all seven UAR member-states accept constitutional reform for extending the powers of the federal authority, i.e. the Supreme Council which is dominated by the Abu Dhabi ruler. The smaller emirates are amenable, leaving Mouktam isolated as the only hold-out.
According to our Gulf sources, Sheikh Khalifa al-Nahayan does not want to depose the al-Maktoum family in Dubai, but "only" make them his puppets and grab their wealth. He is offering a bit over 50 billion dollars for stripping them of their main assets and leaving them lumbered with 30 to 40 billion dollars in debt. This would keep Dubai's rulers scrambling to cover their debts, too busy to compete with the al-Nahayans for international influence and in no position to dream of a worldwide financial empire.
The Abu Dhabi ruler's plan has drawn quiet encouragement in Washington and Riyadh. The US was won over by his promise to withhold Dubai's amenities from Tehran if he took over and block its escape hatch from sanctions.
The Saudis hope al-Nahayan, after he is enriched by Dubai's acquisition, will toe Riyadh's line in the Arabian Peninsula and the Persian Gulf and give the kingdom a helping hand in its conflict with the Iranian-backed Yemen rebels. In six weeks of fierce combat, the Saudi army has failed to end a Yemeni Houthi rebel incursion of the south, even after Jordanian special forces took a hand in the fighting.
Abu Dhabi has provided a token force, but the Saudi rulers need more substantial military assistance to break the deadlock.
Riyadh has therefore strong motives for terminating Dubai's role as Iran's logistical and financial gateway.
The emirate's rulers have asked for six months' grace to get a grip on their mountainous indebtedness. This gives the al-Nahayan and al-Maktoub families six months to discuss terms.
DEBKA-Net-Weekly sources expect a deal to be clinched much sooner.