Dubai in the eye of the storm ... Will Iran sacrifice the largest economic partner in the region?

Muhammad Afazaz

In the wake of the Iranian response to the killing of Quds Force Commander Qassem Soleimani in a US air strike last Friday, Iranian Revolutionary Guards said today, Wednesday, that if US aircraft depart from the Emirati base of Al Dhafra towards Iran, "Dubai should bid farewell to the economic recovery."

What are the implications for that? Could Iran overload Dubai, one of Tehran's biggest trading partners? The answers are monitored by numbers and opinions of analysts.

The UAE, and in particular the emirate of Dubai, is a prominent trade and economic partner of Iran, despite the tension between the two neighbors, for periods that cast a shadow over the common interests.

The UAE is the second largest exporter of goods to Iran, and Dubai is home to thousands of influential merchants and businessmen in its economy, which is currently groaning under the weight of a suffocating crisis in the real estate sector, one of the main tributaries of wealth in this emirate.

Dubai, whose economy is based primarily on the real estate, tourism, trade and investment sectors - unlike Abu Dhabi, which is scooping off oil revenues - may not be able to sustain more crises, and may not be ready for any escalation in the region against the background of tension in the relationship between the United States and Iran.

Capital is cowardly, escaping at the first signs of escalation and the possibility of instability.

Prosperity economy
Financial analyst Nidal Al-Khouly says that Dubai's economy - as is the case with a number of economies in the region - is based on prosperity and provides a safe environment to attract foreign investors and tourists, and that any tremor will cause panic among investors and residents alike.

Al-Khouli adds in an interview with Al-Jazeera Net that Dubai does not bear significant political, military or terrorist events, and that just a threat and not a war will have negative repercussions, not least of which is the flight of capital.

Today, Wednesday, the Revolutionary Guards launched dozens of missiles at Ain al-Assad base in Anbar, western Iraq, which includes American forces, as part of an operation called "Qasim Soleimani." He said he was monitoring 100 targets for America and its allies in the region, and threatened to hit these targets in the event of any American aggression, as he put it. .

The Revolutionary Guards also threatened US allies that receive American bases to target those bases if they launched an attack against Iranian sites. In this context, he threatened a third wave that would destroy Dubai and Haifa if Washington responded to the missile strikes.

The flight of investments
The trading director of the investment house company, Walid Faghahah, also says to Al Jazeera Net that he hopes that the Iranian-American escalation will not reach a state of war, because this will have dire economic repercussions.

He adds that more tension and escalation, or any targeting of American bases, will lead to the flight of investments from Dubai as well as the collapse of the markets.

He points out that even the oil prices that usually benefit from these tensions may not have a major impact on the supply of the UAE budget, along with Dubai and the countries of the region, because there are fears of declining supplies and hence a decrease in export volumes.

In early trading today, the market index lost 1.4% due to the Emirates NBD share declining 1.9% and Emaar Properties dropping 2%. The Abu Dhabi index fell 0.8%, after opening the shares of First Abu Dhabi Bank, down 1.1%, and Abu Dhabi Commercial Bank fell 1.8%.

Trade sheet and merchants
Walid jurists say that Iran has more than one tool to influence the economy of Dubai and the UAE, including trade exchange by reducing it to the lowest levels, and the paper that traders can flee Dubai towards new markets, but that such papers will remain deferred until a later stage, according to his opinion.

As for the analyst Nidal Al-Khouly, he believes that Iranian merchants in Dubai constitute an economic pressure card from Iran to influence the whole scene.

He says that there are large numbers of traders there for a long time in vital sectors such as real estate, trade and stock markets, and that any change in their behavior will be fully reflected on the market.

Here we monitor some figures and data that reflect the size of the Iranian influence on the economies of Dubai and the Emirates.

Iranian merchants
According to the official Iran newspaper, eight thousand Iranian businessmen are active on the Emirati scene through about six thousand companies registered there.

Some reports in Iran spoke of the suspension of about 80% of Iranian merchants, their activities in the Emirates and their tendency in recent years to other countries, against the background of the authorities closing their bank accounts, before talking later about a new return to these merchants.

Foreign investment
Some data from the Iranian business community indicate that Iranian capital makes up 10% of investments.

the trade exchange
The UAE ranks second as the largest exporter of goods to Iran after China. Iranian statistics talk about Tehran importing 10% of all its imports from the United Arab Emirates, while exporting about 15% of all its exports through the latter.

Some data indicate that the volume of trade exchange between Iran and the UAE amounted to 11 billion dollars in 2018, of which six billion dollars is Iran's exports to its southern neighbor, which is a much smaller volume than was the case before the imposition of the US sanctions and the developments of the Saudi-Emirati war in Yemen.

It is expected that the size of this exchange could reach between twenty and 25 billion dollars in the coming stage.

Successive crises
According to data reported by Reuters news agency, Dubai's economy grew 1.94% in 2018, the slowest pace since it contracted in 2009, when it was negatively affected by the debt crisis caused by a real estate collapse.

Dubai is facing a slowdown in the real estate market for most of the contract, with the exception of a brief recovery five years ago.

Excess house supplies have pushed prices down by at least a quarter since 2014.

According to official data, the Dubai economy will grow 3.2% in 2020, up from 2.1% in 2019, but it appears that this matter may be out of reach under the current conditions.