The central banks of UAE and Qatar have told lenders to stop financing trade with Iran, bankers said on Thursday, cutting another source of credit for a country struggling under Western economic sanctions imposed over its nuclear programme.
The Gulf has a long history of trade with Iran, especially in Dubai where there is a large Iranian trading community, and Gulf banks had been expected to fill a funding gap for the import of grains left by European lenders banned from financing trade by EU sanctions.
"Banks in Dubai were asked by the UAE central bank to stop issuing letters of credit to finance trade with Iran. Before the sanctions, the central bank regularly checked on trading with Iran and wanted to know of all dealings between the two countries," said a Dubai-based banker active in trade financing. "Banks can't do this anymore." About 8,000 Iranian traders are registered in Dubai, and re-export trade between Iran and the UAE totalled 19.5 billion dirhams ($5.32 billion) in the first half of 2011, according to the latest figures from United Arab Emirates' customs authority.
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