Business chiefs from the UAE hope a framework nuclear deal with Iran could grow the nearly Dh100 billion in trade between the two countries.
A preliminary accord struck on Thursday could lead to sanctions being lifted in exchange for curbs to Iran’s nuclear programme.
The Iranian president, Hassan Rouhani, said in a televised speech that the country had taken a step towards preserving its nuclear rights and the removal of sanctions.
The UAE is already Iran’s biggest non-oil trading partner. It is also Iran’s biggest source of imported goods, worth €23.37 billion (Dh93.51bn) in 2013. In turn, it exported goods valued at €907 million to the Emirates, placing the UAE in eighth place among its export markets.
The easing or removal of sanctions could spur export growth to Iran while at the same time support domestic consumption.
In a 2012 consultation paper, the IMF estimated that a 30 per cent reduction in UAE exports to Iran as a result of the increased sanctions introduced during that year would knock about 0.3 per cent off the UAE’s GDP.
“An increase in trade that might result from the latest deal could have a similarly positive effect over time, with the benefits particularly accruing to Dubai,” said Tim Fox, the head of research and the chief economist at Emirates NBD.
The country’s relatively untapped consumer market is a growth opportunity for UAE companies such as Rotana, RAK Ceramics and Bin Hendi.
Analysts predict a normalisation of international trade relations with the country could bring an economic windfall to the UAE as multinationals use the Emirates as a base to target the country.
Renault, the French car maker with its Middle East headquarters in Dubai’s Jebel Ali Free Zone, said in January it had resumed shipments to Iran after a temporary easing of sanctions.
“If Iran opens up, Dubai will have another big boost to its economy,” Ashok Aram, the chief executive of Mena Deutsche Bank, told a conference in Dubai last year.
“A lot of European, American, Chinese and Japanese companies are planning to invest using Dubai as a gateway to Africa. They’re all factoring in the possibility that another economy [Iran] will open up.”
The property industry, where Iranians have been among the top buyers in the past by nationality, also stands to benefit from a relaxation of banking restrictions that could encourage investors from the country back to the market.
“The positive steps towards Iran would potentially bring a return to the market of investors who historically have been very keen on the Dubai market, which would potentially act as a good counterbalance to the decline from Russia,” said Simon Townsend, the regional head of capital markets at the property consultancy DTZ.
At the same time, several UAE corporations plan to roll out investments across the country.
The Abu Dhabi-based hotel operator Rotana says it will go ahead with its expansion plans in Iran, according to Omer Kaddouri, the company’s president and chief executive. It expects to open four properties under its alcohol-free brand Rayhaan Hotels and Resorts. The first two hotels will open in the pilgrimage city of Mashhad – a 362-room hotel in 2017 and a 275-room hotel in 2018. In Tehran Rotana will manage two properties by 2018 – a five-star, 194-room hotel and a four-star, 210-room property.
Rotana hopes to be the first international hotel chain to open in the country since the 1979 revolution removed operators such as InterContinental, Hilton, Sheraton and Hyatt.
Abdallah Massaad, the chief executive of RAK Ceramics, which has a plant in Iran, said: “We have big capacity there, with good raw materials, cheap labour costs and a big domestic market. Because of sanctions we have reduced our operations to a minimum, but now we will wait and see. It is potentially a good place to be.”
Husam Hourani, the managing partner at Al Tamimi & Co, one of the UAE’s leading law firms, said that the firm had been planning to launch an Iran desk based in their offices in DIFC as a prelude to opening an office in the country.
“Iran has been of interest to us and our clients for some time now, and the deal reached on Thursday is very much a green light for us to move ahead with our plans,” he added.
As Iranian visitors poured into UAE shopping malls last week for the Iranian New Year holidays, UAE retailers also see an opportunity presented by the country’s under-served retail sector.
“Why wouldn’t I go where there are 80 million people?” said Mohi-Din BinHendi, the founder and president of the BinHendi luxury goods group.
However, some analysts warned of the inevitable delays of any resumption to normal business relations with Iran.
George Booth, a London energy expert at the law firm Pinsent Masons, which has a big presence in the GCC, said: “Sanctions will not simply vanish even if an agreement to lift them is reached. This is just the start of the process and it will take time to unravel the complex web of restrictions on trade. Breaches can still be penalised in the transition phase and people need to be alive to that.”
While any easing of sanctions is a positive for overall trade, some UAE businesses could lose market share to returning competitors from Europe and elsewhere.
“We will lose some European origin shipments and they will plan or move their items directly,” said Amin Mahdavi, the managing director of Dubai-based Parthia Cargo, a freight handler.
“However, the increase in the size of the Iranian market will offset that loss,” said Mr Mahdavi, an Iranian who has been living in Dubai since 2002.
Despite the imposition of sanctions, trade between the UAE and Iran has remained strong.
On the bustling Dubai Creek wharfage, dhows are piled high with consumer goods from mobile phones to washing machines – part of a busy trade between the emirate and the Iranian port of Bandar Abbas.
But banking restrictions have made it challenging for traders to receive payment, with many Iranian exporters resorting to barter to circumvent sanctions.
While the framework deal was met with a rapturous response in Iran on Friday as people flooded on to the streets of Tehran to celebrate the news, it was tempered with concerns over whether the accord would lead to a binding deal.
“There is big uncertainty,” said one Iranian Dubai resident visiting Tehran this weekend.
“Once the negotiators go home they still need to sit with their leaders. What comes out of that nobody really knows yet.”
With reporting by LeAnne Graves, Sananda Sahoo, Lucy Barnard and Dania Al Saadi
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