US sanctions help Omani fishermen survive as smugglers

Black market trade is backbone of Musandam economy traders follow US threats of stepped-up sanctions against Iran closely, anticipating greater demand for goods.

KHASAB, OMAN // Many traders in the peninsular governorate of Musandam are closely following US threats of stepped-up sanctions against Iran, anticipating greater demand for goods that they can smuggle into the Islamic republic and sell for vastly inflated prices. Existing US-backed sanctions against Iran have brought windfall profits to many Omani traders, who fill their fishing boats with everything from medicines to video-game consoles before setting off across the Strait of Hormuz - under the cover of darkness to avoid police boat patrols - and offloading them in southern Iran.

The traders say they smuggle out of economic necessity rather than profiteering. "We have to sell our goods to Iran because we cannot survive from our own market here with local people doing their shopping outside Musandam," Jaalan Hadhrami, a goods distributor in Khasab, the main town in Musandam, said outside his 2,000-sqm warehouse. According to Mr Hadhrami, most locals eschew Musandam's traders and shop in bulk in Dubai and Sohar, 200km north of Muscat, because goods are cheaper there.

Musandam, the smallest of the five regions in Oman with a population of about 29,000 people, is cut off from the rest of the country by the UAE and entry through both borders is time consuming, making the transport of goods costly and their shelf prices inflated. A vehicle trailer unloading at Mr Hadhrami's warehouse is one in an endless convoy that arrives in Musandam each day from Dubai and Sohar. Mr Hadhrami said he distributes 30 per cent of the goods to the local market and the rest are destined for Iran, shipped in 30-metre fishing trawlers or small speedboats.

The journey across the Hormuz takes about 45 minutes and diesel for the boats is cheap. Chocolates, cigarettes and electronic appliances are in high demand in Iran, as are a variety of medicines, fruit juices and diapers. According to locals, the black market trade with Iran is the backbone of Musandam's economy. Oman recorded about US$2.5 billion (Dh9bn) worth of non-oil re-export trade with Iran in 2008.

Traders say Omani marine police are well aware of the smuggling, but often look the other way because the trade is of both historical significance and great economic importance. "Our great-great-grandfathers used dhows to sail on the water taking and bringing goods from Iran," Mr Hadhrami said. A police inspector in Musandam, who declined to be identified, said it was hard to patrol the Hormuz. "The movements of the oil tankers, restrictions of the US naval ships and fishermen operating there make the task difficult to stop boats and make inspections," he said.

About 18 million barrels of oil pass through the Strait of Hormuz each day, and the US Fifth Fleet, based in Bahrain, patrols the waters, making sure the oil cargoes move out of the channel safely. Iran has repeatedly threatened to attack the oil tankers should the US strike the Islamic republic. On the Iranian side, traders say, they have to bribe Iranian police about $150 (Dh550) to allow a speedboat to pass through. It costs $300 for a trawler. Each sum allows an unlimited number of journeys back and forth before sunrise.

It is not just Omanis who smuggle goods over to Iran. The marketplace in Khasab is frequented by Iranians posing as fishermen who pile up vans on shore with items the UN prohibits from entering the Iran. Many business partnerships have been struck between Omanis and Iranians. Juma'a Ramadhan, 37, a Musandam resident who has been speeding to Iran across the Strait of Hormuz for 20 years, bought a trawler with an Iranian partner last year. Typically in such partnerships the Iranian will distribute the goods once they have been smuggled into Iran.

"I used to do three quick trips a night, from dusk to dawn, five days a week. I used to make 25 rials (Dh245) a trip. Now I make four times that much with the trawler," Mr Ramadhan said. The average salary of a civil servant in Musandam is 750 rials a month, meaning smugglers such Mr Ramadhan earn the same amount in just 10 days of shuttling across the Hormuz. But the illegal trade between Musandam and Iran may be coming to an end as Omani officials say they are planning to develop legitimate trade and other economic activities in Musandam, with a tax-free zone, a sea port and an airport all in the pipeline for the governorate.

"We are not talking about the alleged illegal business but the legitimate one and the planned infrastructure will hopefully phase out any unlawful trade," said Aiman al Soudi, head of maritime affairs at the ministry of transport. @Email:[e-mail]