Iran Tensions Rise as UAE Suspends All Trade Ties With Tehran
Iran tensions have escalated as the United Arab Emirates announced it is suspending trade with Iran, citing regional escalations, at the same time the US declared economic warfare on Tehran. The move comes amid ongoing Iran tensions that include Iranian attacks on Emirati tankers in the Strait of Hormuz.
UAE Suspends Trade Ties With Iran
The UAE this week announced suspending trade with Iran, heaping pressure on its major trading partner at the same time that the US declared "economic warfare" on Tehran. [1] It is unclear when the ban came into place and what has prompted it, with the UAE citing "regional escalations". [1] Experts have said that the UAE is sending a message to Iran, which has ramped up attacks on Emirati tankers in the Strait of Hormuz, while also signalling alignment with the United States. [1]
Scale of UAE-Iran Trade Relations
The United Arab Emirates is a significant trading partner for Iran and its top import country. [1] In the 10 months preceding the war, Iran's trade with the UAE totalled $21 billion according to official Iranian figures. [1] In 2024, Iran relied on the UAE for 30.6 percent of its imports totalling roughly $21 billion according to the World Trade Organization. [1] The UAE is also Iran's third largest export destination, making up 12 percent of its exports, totalling more than $7 billion. [1] The vast majority of UAE trade with Iran consists in re-exports, according to official Emirati data, including everything from phones to meat and other food. [1] These figures do not take into account smuggling and illicit flows, which are difficult to assess. [1]
Limited Effect on Iran's Sanctions Evasion
Halting licit flows may have little impact on Iran's sanctions evasion network. [1] Experts have said that Iran uses UAE banks and its financial system to access the world economy through illicit, often murky transactions. [1] "Billions of dollars of the regime's sanctioned oil revenue moves through UAE by way of opaque shell companies based in China/Hong Kong," according to Max Meizlish, a researcher at the Foundation for Defense of Democracies (FDD) think tank. [1] He formerly worked for the US Department of the Treasury's Office of Foreign Assets Control (OFAC), responsible for sanctions. [1] "That means halting all direct trade, commercial exchange, and financial transactions with Iran may still allow billions in oil revenue to reach the regime indirectly," he said. [1] "UAE deserves credit for this long overdue move, but the US needs to keep up the pressure and ensure banks in the Emirates apply enhanced due diligence on transactions for which there is reason to suspect possible Iranian sanctions evasion/shadow banking." [1]
Timing and Iranian Attacks on Shipping
The UAE took a hawkish stance on Iran in the early weeks of the war, recalling its ambassador in Tehran and shutting schools and hospitals linked to the Iranian state that it said violated its laws. [1] But since the signing of a memorandum of understanding between the United States and Iran in June, an understanding appeared to take shape. [1] Iran, which had unleashed the bulk of its wrath on the UAE in the first round of war, did not launch attacks aimed at the country since May. [1] The UAE announcement coincided with a campaign by its US ally to inflict economic pain on Iran as the war nears its sixth month with no immediate diplomatic or military off-ramp in sight. [1] One day after the UAE announcement, US President Donald Trump said he was launching a major new campaign to target Iran's economy. [1] For Esfandyar Batmanghelidj, who heads the Bourse & Bazaar Foundation, the UAE has not changed its Iran strategy, but it is under US pressure to contribute to the US economic sanctions campaign. [1] Their statement is a way of "publicly signalling that there is no daylight between the US and UAE positions". [1] Iran has also been hitting ADNOC tankers repeatedly in the past weeks and the UAE recently reported Iranian missiles targeting shipping that fell in the water, after earlier saying they were directed at the country. [1] For Emirati researcher Mohammed Baharoon, who heads the Dubai Public Policy Research Center, the UAE move comes "after various attempts to reconnect Iran after the war". [1] "This is not about joining the US sanction (effort) but about re-establishing the basis of the relationship. Iran can't ask for connectivity while they are blocking it," he added, in reference to their attacks on Emirati tankers. [1]
Iran's Diplomatic Push in Iraq Amid Hormuz Crisis
Iranian Parliament Speaker Mohammad Bagher Ghalibaf traveled to Iraq on Wednesday for a three-day visit amid growing tensions over the September 30 deadline for militia disarmament and as Iraq grapples with a severe economic crisis stemming from the prolonged closure of the Strait of Hormuz. [5] Upon his arrival, he insisted that the two countries needed to strengthen a "new regional order" and denounced "foreign interference." [5] On Thursday, he met with the President of the Supreme Judicial Council of Iraq, Faiq Zidan, to discuss "mutual interests," following talks on Wednesday with senior Iraqi officials on issues including "strengthening bilateral relations, border security, the fight against terrorism, expanding economic cooperation and implementing joint agreements," according to Iran’s Tasnim news agency. [5] Iraq’s economy remains heavily reliant on oil, which accounts for 90% of government revenue, 95% of export earnings, and more than 53% of the country’s gross domestic product. [5] Iraq's oil-dependent economy faces crisis amid Hormuz closure as the government depends on that, and salaries are being delayed because of it. [5] This is a crisis that is still ongoing and might undermine the state if it continues. [5] Iraq’s monthly oil revenues fell from around $7–$8 billion down to $1.2–$1.9 billion. [5] The issue was raised by Iraq’s own parliament speaker, Haibat al-Halbousi, on Wednesday, who asked Ghalibaf for Iraqi oil exports to be given a special exemption to safely cross through the Strait of Hormuz, according to a statement from his office. [5] The visit, and any prospective economic agreement with Baghdad, would suggest “Iran is trying to do its best, first of all, to quiet the voices criticizing it for the devastating consequences of the Hormuz crisis and, secondly, to use all of its assets in Iraq to counter this new policy of dismantling and disarming the militias,” said Dr. Yaron Schneider, a researcher at the Institute for National Security Studies (INSS) specializing in Iran-backed Popular Mobilization Forces (PMF). [5]
Iranian Warnings on Potential European Targets
Iranian diplomatic sources said Thursday that Cyprus faces no threat as long as British bases on the island are not used in operations against the Islamic Republic. [4] The official comments, made to daily Politis, came a day after the Financial Times cited Iranian “insiders” as saying Tehran is considering scenarios that could extend a future conflict beyond the Middle East to European territory used against Iran, including Cyprus. [4] According to the FT, Iranian forces have assessed options for striking US military targets in south-eastern Europe as part of preparations for a possible renewed US offensive. [4] Two people described by the newspaper as regime insiders said Bulgaria was among the countries considered, after Sofia approved the use of Bezmer air base by US refuelling aircraft last month. [4] One of the sources told the FT that Cyprus was also among potential targets for retaliation. [4] Later on Wednesday, Cypriot government sources downplayed the story, telling the Cyprus Mail the island is not a target for Iran. [4] Sources at the foreign ministry said similar reports and claims had emerged in the past, adding that Nicosia remains in communication with Tehran. [4] On Thursday, Iranian diplomatic sources sought to reassure Cyprus that the island is not at risk of Iranian strikes, provided that the British Sovereign Base Areas are not used against Iran. [4] The sources confirmed that diplomatic channels between Nicosia and Tehran remain “open and active”. [4] Asked about the FT report specifically, the same sources said statements attributed to Iranian insiders “are not always reliable and often reflect speculation or reactions to threats from other parties”. [4] They said Iranian authorities are aware of concerns expressed by the Cypriot side regarding residents and employees living within the boundaries of the British bases. [4] But they added that Iranian concerns, and the risk to Iranian lives from acts of aggression, should also be understood. [4] A geopolitical analyst told the Cyprus Mail that it appears to be a case of signaling. [4] “To me it looks like signaling from within Iran, for deterrence, rather than an actual credible threat,” said Zenonas Tziarras, lecturer in the Department of Turkish and Middle Eastern Studies at the University of Cyprus. [4] “It’s intended to increase the pressure on the Americans via pressure on third parties. The message is: if you [the United States] continue doing this, we will raise the cost for you.” [4] Tziarras noted that the sources speaking to the FT appear to have an agenda, but they do not necessarily reflect the official position of Tehran. [4] “More likely, it’s part of psychological warfare.” [4]
What to watch next: The UAE announcement coincided with a campaign by its US ally to inflict economic pain on Iran as the war nears its sixth month, while Iranian Parliament Speaker Mohammad Bagher Ghalibaf’s visit to Iraq comes amid growing tensions over the September 30 deadline for militia disarmament.
