Via Portfolio Magazine, an interesting look at how U.S. companies are using Dubai as an illegal conduit into Iran.

“…Despite sanctions aimed at stemming the sales of U.S. products to Iran, the goods are still getting there. U.S. sanctions were first imposed against Iran in 1979, during the hostage crisis. The current embargo dates back to 1987, though it has since been tightened, and U.N. sanctions have been added. U.S. companies are forbidden to sell goods to Iran or knowingly provide them to a company that will sell them to Iran, with a few exceptions, including medical supplies. The rules are enforced by the U.S. Treasury and Commerce Departments, and violations carry civil as well as criminal penalties. Although American companies aren’t allowed to send goods directly to Iran, the U.A.E. does not impose the same limitations on its local distributors. Over time, that loophole has spawned what many agree is a decidedly murky trade, operating mainly under the public’s radar. The business is estimated to be worth billions of dollars annually, much of which goes directly to the bottom line of American companies. Each year, the U.S. sends more goods to Dubai, and Dubai, in turn, sends more goods to Iran. But the scope of the business isn’t really clear without a trip to Iran.

…Dubai, one of seven emirates, sits in a particularly fractious part of the Middle Eastern sandbox, with Iran, Iraq, and Saudi Arabia nearby. But when you’re in Dubai, it doesn’t feel at all like you’re in one of the world’s most dangerous regions. That’s part of the reason for its success. In a few short decades, the rulers of the sheikdom—the Maktoum family, now led by Sheik Mohammed bin Rashid al-Maktoum, who is both ruler of Dubai and prime minister of the United Arab Emirates—have transformed what was essentially a vast, windswept desert into a major commercial entrepôt and financial hub that the world can’t stop talking about.

…But the most astonishing secret, the one that Dubai would most like to keep under wraps, is how the emirate has transformed itself into the chief transit point for American goods entering Iran, allowing some of America’s best-known companies to skirt the U.S. embargo by routing their goods through the emirate’s ports.

…Last year, the U.S. shipped almost $11.6 billion worth of goods to the U.A.E., the bulk of which went to Dubai. That’s a 230 percent increase over the past five years. Experts estimate that between 30 and 40 percent of those goods—$3 billion to $5 billion worth—are then exported, though there are no official numbers. Iran, meanwhile, has become the U.A.E.’s No. 1 trading partner.

…Although a shared culture and history connect the U.A.E. to Iran, the two countries are not natural partners. While Iran is Persian and its religion is primarily Shia Islam, the U.A.E. is predominantly Arab and Sunni and is closer in outlook to Saudi Arabia. In addition, Iran has a long-running dispute with the U.A.E. over three islands that Iran occupies.

The ruling sheiks of the U.A.E. are allies of both Iran and the U.S. They have said publicly that they support peace in the Middle East, but not everyone I speak to in Iran really believes that the sheiks want to end the contretemps, let alone seriously lobby the White House for U.S.-Iran rapprochement. The strife has been bad for Iran but very good for the emirates…”