Oman traders in Musandam fear Iran strike

Sanctions on Iran have brought a windfall to many Omani traders but they fear their profitable business may vanish if Israel follows through with threats to attack Iran.

Iranian smugglers load goods at the Omani port of Khasab. Until recently the Iranian boats and their young skippers escorted several cargoes a day across the narrow Strait of Hormuz.

MUSCAT // The businessmen in Oman's Strait of Hormuz region of Musandam are nervous.

The US-backed sanctions on Iran have brought a windfall to many traders in the enclave as they continue to trade with the country that lies across the Arabian Gulf.

But they fear that their profitable business could vanish if Israel were to follow through with its threats to attack Iran over Tehran's controversial nuclear programme.

"If missiles fall in Iran that will put many out of work," said Ahmed Saif, an exporter and importer based in Musandam. "Traders benefiting from Iran's trade exchanges employ a lot of people."

Hassan Al Faraj, a retail businessman in Musandam's biggest town of Khasab, agreed.

"We heavily depend on exchange of goods between them [Iran] and us for our businesses," he said.

Forty per cent of the world's oil exports travel through the Strait of Hormuz, which separates Oman's Musandam area and the UAE on the Arabian peninsula from Iran.

Economists have warned that an attack on Iran could wreak havoc on the global oil market but the repercussions of such action could also ripple across the Middle East, putting Gulf trade, infrastructure and water security at risk.

Those risks raise difficult questions for the United States, where Iran has figured at the top of the presidential election campaign agenda.

Yet some of the US's strongest allies - countries such as Saudi Arabia and Kuwait - stand to suffer the most from a military strike.

Oman offers just a taste of the impact. Thousands of workers are employed by the trade between Oman Northern Province and Iran, which the office of the governor of Musandam estimates are worth about US$50 million (Dh183.5 million) a year. In addition to products sent towards Iran, return trips carry carpets, livestock, nuts, fruits and vegetables back to Musandam.

"The economic consequences of any strike would be a disaster not only to the individual Arab Gulf States, and the region but to the world as well," said Abdullah Toukan, chief executive of the Strategic Analysis and Global Risk Assessment institution in Abu Dhabi and co-author of a recent report on the effect of a strike on Iran.

"The lifeline of the region is the Gulf area, with its business opportunities, trade, as well as aid and investments to the regional countries."

A closure or disruption to shipping in the strait would have dire consequences for trade in Kuwait and Bahrain, which depend almost heavily on the waterway for exchange.

The UAE, meanwhile, is home to the region's busiest ports in Dubai. Jebel Ali alone serves a market of about 1.5 billion consumers with the exports that move through its ports.

Threats to infrastructure in any retaliatory operation from Iran are also a concern. Security analysts say that Iran's government could respond by attacking the US-allied Gulf countries, rather than to Israel directly, using ballistic missiles or unconventional warfare.

Ports, electrical grids, desalination plants and roads, and other vital urban projects would be at the greatest risk.

"Gulf governments realise that they don't have enough security for their infrastructure," said Ayham Kamel, an analyst at the Eurasia risk consultancy.

"There's a genuine fear that a military confrontation could get out of control and compromise investments in this infrastructure and hence the economic foundation."

Desalination plants supply water to millions of people in cities such as Dubai and Riyadh and damage to these facilities is another worry, said former US Central Intelligence Agency analyst Judith Yaphe, who is now a professor at the country's Washington-based National Defence University.

"Iran is clever and they have the assets to do the things [like this] that we don't think about," said Dr Yaphe.

Dr Toukan says that governments across the region are, like Oman's traders, increasingly nervous about the range of possible risks from military action in Iran.

"There is a lot of concern about a possible economic disturbance due to any irrational behaviour such as the closure of the Strait of Hormuz. You can feel it," he said.

"When you talk to high-level responsible people, not only do they not want to be taken by surprise, but are looking into minimising the consequences and risks that such actions could cause.

"They know their responsibility to the world economy and how much they have invested in their own economic development and infrastructure that they don't want to see damaged."