March 14 (Bloomberg) -- At the Dubai Creek port, sailors bound for Iran say they are loading their dhows with food, instead of their usual cargos of electronics and home appliances, as international sanctions lift prices.
“Everything is more expensive these days and ordinary people, even merchants, won’t buy expensive goods,” said Reza Esmaeili, a 44-year-old Iranian sailor. “Food is different because it’s essential to our lives.” He said typical cargoes include rice, tea, cooking oil and sugar.
Restrictions on trade with Iran, imposed by the U.S. and European Union this year on the grounds they are required to curb the Islamic republic’s nuclear program, are hurting its economy. The rial has dropped 9.2 percent against the dollar at official rates this year, and posted steeper losses on the black market as Iranians rushed to buy hard currency and the government imposed exchange controls.
That has increased the price Iranians pay for goods bought in Dubai and loaded onto some 2,000 ships that regularly ply the route across the Persian Gulf. Esmaeili said purchases in Dubai include rice and tea from India and Pakistan, and sugar from Germany and Italy. He said his cargo will cost 500 million rials ($41,000) and earn him a profit of 150 million rials.
Iran was Dubai’s second-biggest market for re-exports after India in the third quarter of 2011. Sales of 8.8 billion dirhams ($2.4 billion) to the Islamic republic accounted for more than one fifth of the total, Dubai Statistics Centre data show.
‘Worse Than Wartime’
Economic conditions in Iran are “worse than wartime,” said Abdolreza Ebrahimi, a 60-year-old captain, who is shipping spare parts for automobiles to Bushehr province in 12 40-foot (12-meter) containers. Inflation is above 20 percent, according to central bank figures.
Iran’s customs authorities have lowered tariffs on food to encourage imports, while banning the import of U.S.-made goods, Ebrahaimi and other sailors said. Ebrahimi said that selling soft drinks such as Pepsi and Coca Cola in large quantities is becoming difficult as prices increase and similar drinks are made locally. Chinese products are also being substituted for European and U.S.-made goods.
The creek, which divides Dubai in two, is one of the emirate’s oldest trading harbors and the birthplace of its pearl-fishing industry a century ago. There are historical roots to the Iranian presence in the bustling waterway and the old city that surrounds it.
Nearby is Dubai’s old Gold Souq, where Iranian traders compete with Arabs, Indians and Afghanis selling precious metal and diamonds, as well as counterfeit Gucci and Louis Vuitton bags. A few steps away in the Spice Market, predominantly Iranian sellers showcase a variety of herbs and seasoning imported from the Islamic republic.
Bank Melli Iran, among the financial institutions targeted by U.S. and EU sanctions, has offices overlooking the creek, though restrictions on its operations are tightening. Dubai-based Noor Islamic Bank, whose Chairman Mohammed Bin Rashid Al Maktoum is the son of Dubai’s ruler, said last month that it cut off relations with Iranian banks in December in compliance with international sanctions.
Transferring money through Iranian banks in the emirate is becoming more difficult, hurting business and forcing merchants to seek the help of Iranian businessmen or “connections” in the city to receive the funds, said Esmaeili.
‘Defend Our Country’
The Iran-bound ships typically carry televisions, computers, air-conditioning units and mobile phones, the sailors said. They are insured by Iran’s government for about 2 billion rials each, with additional coverage of 800 million rials for each of at least six sailors aboard, they said.
Israel and the U.S. haven’t ruled out military strikes on Iran to halt its nuclear program, which the Iranian government said is for peaceful purposes only. The outbreak of war wouldn’t stop the maritime trade, said Mohammad Jafari, a white-bearded sailor.
“We can continue our shipments even if there is war, as we did last time during the war with Iraq,” he said. In the case of an Israeli attack though, “we will go to the front to defend our country,” he said, as other sailors nodded agreement.
To contact the reporter on this story: Tamara Walid in Abu Dhabi at email@example.com.