Image: Tourists admire Iranian products
Aziz Shah  /  AP
Tourists admire Iranian products displayed at the Al Sabka Iranian market in Dubai, United Arab Emirates Tuesday, July 22.
updated 8/17/2008 7:30:20 PM ET 2008-08-17T23:30:20

At first, the differences between the United Arab Emirates two leading cities were merely cultural. Abu Dhabi built world-class museums as fast as Dubai put up extravagant shopping malls — one with a ski slope inside.

But the healthy competition that has helped transform them into two of the Middle East's most vibrant and bustling cities has soured as the tiny emirates grow increasingly divided over their relations with two other rivals — Iran and the United States.

Dubai's skyscrapers, American-style theme parks and sprawling beaches clashed with the more prim sophistication of Abu Dhabi, which is building a symphony orchestra and branches of the Guggenheim and Louvre museums.

Dubai's trade with Iran a liability
But now Dubai's massive trade with Iran and liberal Western outlook are becoming liabilities for the U.S.-friendly capital of the UAE, Abu Dhabi, which is under pressure from Washington to isolate the Islamic republic.

With half the population of Dubai's 1.2 million residents and much less glitz, Abu Dhabi is the richest of the seven city-states that make up the United Arab Emirates.

As the world's fourth largest exporter of oil, Abu Dhabi is also the main provider for the rest of the semi-independent states, including Dubai.

All of that wealth is owned by the ruling family in Abu Dhabi, giving it the power to force compliance with federal laws and rein in Dubai's at times murky commercial dealings with Iran.

Still, Abu Dhabi cannot afford to antagonize Iran, and so it treads a fine line.

Last year, the Bush administration asked Abu Dhabi to crack down on companies suspected of smuggling equipment to Iran to build explosive devices killing American soldiers in Iraq and Afghanistan.

White House concerns
The White House also expressed concerns about shipments to Iranian front companies operating in Dubai.

The UAE and other Sunni-ruled Arab states are suspicious of Shiite Iran, just a boat ride across the Gulf from Dubai. They share the West's concern over Iran's nuclear program and fear Tehran's growing ability to empower Shiites across the region, especially in Iraq.

Iran and the UAE have diplomatic ties and both benefit from their booming commerce. Thousands of Iranian business are based in Dubai, which also hosts the Arab world's largest Iranian expat community.

With U.S. sanctions against Iran already in place and Washington threatening new penalties for Tehran's failure to curb uranium enrichment, Dubai is finding it more difficult to defend its lucrative commercial dealings with Iran's ruling elite.

The UAE has been a loyal ally in America's war on terror. The U.S. has been allowed to operate in an airbase in the outskirts of Abu Dhabi and its warships regularly dock in Dubai's ports.

But Iranian investment in Dubai — about $14 billion each year — buoys a robust development plan largely financed with foreign cash. The trade is also huge boost to Tehran's confidence that it can survive Western-imposed sanctions.

Within days of the Bush administration's request to Abu Dhabi to crack down on companies suspected of helping Iran militarily, the UAE president announced a law to "ban or restrict imports, exports or passthrough shipments for reasons of health, safety, environmental concerns, national security or foreign affairs."

Authorities also said they were closing some companies, but it isn't clear how thoroughly the law has been enforced.

Dubai ignoring American pressure
Analysts say Dubai has largely ignored America's pressure to curb trade with Iran.

By continuing with business as usual, "Dubai has been jeopardizing Abu Dhabi's relationship with Washington," said Christopher Davidson, a UAE specialist and a lecturer at the U.K.'s Durham University.

Plus, Dubai's permissive ways to accommodate Western residents and tourists — by circumventing alcohol restrictions and other rules in the conservative Muslim country — have made the city-state a "liability for the federation, with its behavior," Davidson said.

So Abu Dhabi has stepped up its pressure, starting with delicate issues Dubai has trouble defending — nudity and excessive booze. Last month, Dubai obliged when Abu Dhabi questioned its neighbor's Islamic credentials.

Police detained almost 80 people over in a crackdown on public drinking, topless sunbathing and nudity on public beaches. Undercover policemen also rounded up 17 foreign men authorities accused of being gay.

Dubai's acting police chief vowed to detain all those suspected of acts "deemed offensive, immoral or disrespectful."

Limiting Iranian business tough task
But limiting Iranian business in Dubai is a tougher task, with few rewards for Abu Dhabi, analysts say.

"Neither of them wants to be too close to the U.S. nor too distant from Iran," said Abdulkhaleq Abdullah, political science professor at Emirates University.

The balancing act associated with trying to accommodate the U.S. and Iran has enabled Dubai and Abu Dhabi to "play good cop, bad cop," Seznec said.

But he said it was also possible Abu Dhabi doesn't truly want Dubai to stop being "the main transport hub for Iran."

The UAE capital looks after the interests of other Gulf states, who fear a U.S. recession and high inflation because their currencies are pegged to the dollar, Seznec said.

"And a bankrupt Iran is simply not in the Gulf's interest," he said.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments