Dubai: International sanctions imposed on Iran over its nuclear programme, coupled with high inflation, have pushed the Iranian rial to its lowest level against the dollar and sparked panic selling of the currency.
Economic sanctions have made it difficult for Iranian banks to do business with their western counterparts as transferring cash in and out of Iran is a difficult proposition. This has had a negative impact on the exchange rate of the rial.
On Tuesday, the exchange rate was 15,300 rials per dollar in the free market, from around 13,400 rials last week. The rial has lost over 50 per cent of its value against the dollar in the past few months.
A number of UAE-based banks told Gulf News yesterday that they have grown more cautious in their dealings with Iranian-owned businesses and with regard to financing imports and exports in the context of the sanctions.
"We strictly follow the Central Bank's instructions on financing Iranian entities and businesses, but some institutions implement additional restrictions as a matter of caution," said the treasury head of a leading local bank.
Some banks said they continue to finance businesses owned by Iranians in the UAE. "These businesses are legally recognised entities and have their assets in the UAE. If they have their accounts properly audited locally and if their balance sheets are in order we finance them," said a manager with a local bank.
The UAE is one of Iran's biggest trading partners and the biggest source of commodities that are essential to support its economy.
Despite various rounds of sanctions, trade between the two countries has thrived for many years. But Hamid Reza, Chairman of the Iranian Business Council in Dubai, said Iran's growing international isolation has made things difficult.
"Trade between Iran and Dubai, a key source of imports for the Islamic Republic, is being squeezed due to sanctions over Iran's nuclear programme," Reza said. "I can't estimate the loss in value of trade."
"Iranian businessmen facing serious obstacles in trade feel unfairly targeted by the West," he added.