City of Gold: Dubai and the Dream of Capitalism (46 page)

A few months later, President Bush’s motorcade roared into Dubai. It was a rare gray drizzly afternoon. To locals who cherish the rain, it was a good omen. But to most folks, it looked like the black cloud shrouding the Bush administration had followed the U.S. president to Dubai.

To be safe, Sheikh Mohammed gave Dubaians a mandatory holiday. Businesses were shuttered and the main roads blocked. The titanic Sheikh Zayed Road sat unused all day, except for a single American motorcade traveling in tight formation. Sheikh Mohammed’s precautions probably stemmed from the real chance that something could happen to the U.S. President on Dubai’s anarchic roads and the thought of all the bad press that would ensue. Clearing them solved the matter. It also minimized distractions so that Bush got a full view of Dubai’s architectural marvels. The motorcade took the president through the forests of skyscrapers in the Dubai Marina, past the imitation Chrysler Buildings of Dubai Internet City, near the Burj Al Arab and the nearly finished Burj Dubai, and through the shimmering skyscraper corridor approaching the city center. By the time Bush reached Sheikh Mohammed’s ancestral home on the creek, the American president’s perceptions of the Middle East were soundly shaken.

“He was in awe of what Dubai had accomplished,” says Tarik Yousef, the forty-one-year-old dean of the Dubai School of Government, who was waiting in the home to greet the arriving president. “He didn’t expect it to be this developed. You could see that he was blown away.”

It was clear that Dubai’s creations couldn’t have been managed without stability and good governance. It was as if Bush’s focus on Iraq and terrorism had blinded him to the progress transforming other parts of the region, and that these changes had come with little or no effort from
Washington. “Dubai is a model,” Bush gushed to his hosts. “The sheikh is an inspiration. There is hope for the Middle East.”
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Bush took a seat in the old coral house and fielded questions from School of Government students. The questions had been prepared in advance and were easy softballs, eliciting feel-good responses. Sheikh Mohammed was annoyed. He wanted to put this controversial leader on the hot seat. He leaned over to Tarik Yousef and gave him an order:
“Inta es’aal!”
—You ask a question! Yousef whispered back that he hadn’t prepared anything. “Come up with something,” the Dubai leader demanded.

The Libyan American cleared his throat and piped up. “What’s your legacy going to be, Mr. President? It seems like you’ve spread yourself too thin. You’re not really going to accomplish anything. It’s all controversial and bloody in this region.”

“I don’t care about legacy,” Bush shot back. “I’ve always believed that a man’s best deeds will be talked about in the future, long after he’s gone.”

That’s exactly my point, Yousef thought to himself.

Dubai’s ties with Iran are warmer than those of any other of the Arab sheikhdoms. Dubai has capitalized on those ties, and Iran’s missteps, since at least 1900, when Sheikh Maktoum bin Hasher coaxed away the merchants of Bandar Lengeh.

The last Iranian shah, Reza Pahlavi, was a Dubai admirer, haranguing his engineers to build ports like Sheikh Rashid’s. In those days, people on the Arab side of the Gulf crossed to Iran for boozing and carousing. After the Islamic revolution that ousted the shah in 1979, the flow reversed. Iranians fled the stifling atmosphere in Tehran to let their hair down in Dubai.

“For Iranians, Dubai is the symbol of a well-balanced Islamic society,” says Saeed Leylaz, the editor of
Sarmayeh
, Tehran’s financial newspaper, and a leading commentator. “It’s an Islamic country, but nobody is forced to be Islamic.”

Dubai didn’t join Saudi Arabia, Iraq, and others who agitated against the ayatollahs. Sheikh Rashid and his sons still saw Iran as a lucrative trade partner. That won them Tehran’s respect. The little city-state across the Gulf came out a winner in the Iranian revolution. Nowadays, with
around four hundred thousand Iranian residents, Dubai is Iran’s lifeline to the world. American politicians like to bray about Iran’s ties to Syria, Iraq, and Lebanon’s Hezbollah, but it is Dubai that keeps the ostracized nation functioning.

“Dubai is the most important city on earth to the Islamic Republic of Iran, with the exception of Tehran,” says Leylaz.

Iran also keeps Dubai afloat. Iran is Dubai International Airport’s top destination, with more than three hundred flights per week. The UAE is Iran’s largest trading partner, responsible for about one-seventh of Iran’s $100 billion international trade.
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Dubai is also the main destination for capital flight from Iran, much of which has been plowed into real estate.

“You cannot imagine the number of ads for apartments in Dubai on the Persian satellite channels,” Leylaz says. “There is a constant stream of money flying from Tehran to Dubai.”

The price of Dubai’s friendship is high. Billions of dollars a year flow out of Iran and into Dubai. This is not a relationship that Dubai wants to halt, even at Washington’s request.

At the same time, Dubai is a key U.S. ally, a crucial Middle East base where American companies are extending their reach into the Arab world, central Asia, and Africa. Dubai has become so useful that in 2006, U.S. oil services giant Halliburton moved its CEO, Dave Lesar, to Dubai.

Ironically, Washington sees the UAE as the anti-Iran, says Afshin Molavi, a fellow at the New America Foundation in Washington. America and the UAE have signed agreements allowing U.S. companies to provide nuclear energy technology. The idea is to help the UAE get generating plants running quickly, demonstrating to Tehran that there is a right way to pursue nukes—and a wrong way.

Dubai is also an example of religious tolerance, clean government, capitalist success, and progressive attitudes toward women that the United States likes to tout to the Arab world. American diplomats say bluntly that Dubai is their model for a new Baghdad.

But the UAE also needs America, even more than it needs Iran. The country’s defense ties with America are nothing short of existential.

Without a protector, the UAE, with its oil riches and tiny native population, might be a tasty morsel to a larger neighbor. Cooperation with Washington comes readily. The UAE was the first Middle East country to adopt U.S. port security measures. UAE special forces work alongside NATO in Afghanistan. And Jebel Ali is the only Gulf port that can berth a carrier, and the only Middle East stop where U.S. sailors can take shore leave.

Dubai is also a U.S. spy center. America hasn’t had an embassy in Tehran since 1979. Dubai, with several hundred thousand Iranians, is the next best thing.

Picking up details on Iran is easy. Day after day, Iranians line up to spill their secrets to the U.S. government. How is this possible? Dubai and Abu Dhabi are the closest places that Iranians can apply for U.S. visas. The visa windows at the U.S. consulate and embassy are lucrative intelligence collection points. So lucrative, in fact, that the Central Intelligence Agency stepped in to save the Dubai consulate from closure. The State Department tried more than once to shutter the consulate, mainly for budget reasons. But with hundreds of Iranians coming every day to be monitored, interrogated, and, sometimes, recruited into spying on their own government, the CIA argued that cuts needed to come elsewhere.
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Iranians seeking U.S. visas are interviewed by Iran specialists, some of whom speak fluent Farsi. Those with interesting backgrounds find themselves in a long process. U.S. interviewers ask them to return time and again, pressing them to collect more and deeper details, and all the while holding out the possibility of a U.S. visa. In the 1980s, one of the more colorful spies working the rich fishing grounds in Dubai was none other than Gary Schroen, the veteran CIA operations officer later tapped to lead the first U.S. team inside Afghanistan after the September 11 attacks.
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The once tiny U.S. consulate—with just six American staffers—expanded, taking over multiple floors in the Dubai World Trade Centre. Intelligence collection became a priority.
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Washington sought to monitor Iranian banking, business, and trade. Besides the CIA, U.S. Customs monitored trade, and the U.S. Treasury sent people to watch for money laundering and suspicious cash flows. The U.S. military sent liaison officers as well,
including navy investigators whose job it is to collar drunken sailors in whorehouses and get them back on their ships.

In 2006 the State Department opened a new office in the consulate dealing solely with Iran: the Iran Regional Presence Office. It became the first U.S. diplomatic mission aimed at Iran since 1979, when revolutionaries seized control of the U.S. embassy in Tehran. The half dozen U.S. diplomats at the low-profile office appear to focus on the softer side of relations, attending cultural events in the Iranian community and leaving the nuclear confrontation to Washington.
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Washington isn’t the only government that spies in the rich grounds of Dubai. Iran also runs covert agents, many of whom operate Dubai branches of state-owned companies, including those owned by the hardline Revolutionary Guard Corps and the Iranian ministries of defense and intelligence.
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The Iranians aren’t in Dubai to collect information on the United States. There aren’t enough Americans to make that worthwhile. They’re there because even state-run companies find business easier in Dubai than in sanctions-hobbled Iran. Some state firms have used their Dubai offices to transfer to Iran nuclear technology banned under the UN and U.S. embargoes.

The Iranian presence in Dubai has brought heavy U.S. government pressure on the UAE. Even American Jewish groups have harangued the sheikhs to trim relations with Iran.

When the Clinton administration enacted U.S. sanctions in 1995—under pressure from the Israel lobby—the UAE initially ignored them. It was, in effect, like Spain asking Texas to cut ties with Mexico. U.S. laws don’t apply in the UAE, of course, and Dubai’s merchant families—who still speak Farsi and stay in touch with relatives in Iran—weren’t about to shrink their businesses on a foreign government’s say-so. Trade with Iran is one of the key underpinnings of Dubai’s prosperity. Cutting it off is shooting yourself in the leg.

But over the years, the UAE’s resolve buckled somewhat. The UN began levying sanctions in 2006 after Ahmadinejad revived Iran’s nuclear enrichment program. The UAE observed the UN’s mild sanctions, as it must under its treaty obligations. By this time, U.S. pressure had grown
so intense that the UAE quietly began cutting its thousand-year ties with Iran.

The UAE imposed export restrictions in 2007, and customs authorities stepped up inspections of Iran-bound cargo. Shipments that used to get turned around within hours now sit for days or weeks. Suspicious cargoes are impounded, even seized, as was a 530-pound shipment of zirconium—a metal used in nuclear reactors—found in 2007 on an Iran-bound ship at Jebel Ali. That shipment violated UN sanctions, but UAE officials went beyond the UN mandate by shuttering forty Iranian companies.

The government effectively froze the growth of Dubai’s Iranian community at the behest of the United States. Iranians now find it more difficult to travel to Dubai. Newly arriving Iranian businessmen find themselves unable to open UAE branches of their firms. Dubai-based companies can no longer get visas to bring in new employees from Iran. Dubai branches of international banks like HSBC, StandardChartered, and Citibank have asked Iranian customers to withdraw their deposits because their accounts were being closed.
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These actions appear driven by U.S. sanctions, not the UN’s. Dubai’s vaunted neutrality is slipping.

The clampdown is blatant discrimination, says Nasser Hashempour, the deputy director of the Dubai-based Iranian Business Council. Expatriate Iranians with no ties to Iran’s nuclear program found themselves in U.S. crosshairs, and now Dubai’s. Business is suffering. Hashempour, like many Iranians, once held the United States in great esteem. In the 1980s, he and two friends made a glorious two-week road trip from Los Angeles to New York. That esteem evaporated as Washington began to thwart his livelihood. And now Dubai, a city practically built by Iranians, is doing the work of America and Israel.

“Why should they make life hard for Iranians? We helped this place develop from the very beginning,” he says. “If they pressure Iranians, a lot of Iranians will take their assets to a country where we’re welcome. A lot of non-Iranians will lose confidence in Dubai.”

The tip of the American spear is a guy named Stuart Levey, the U.S. undersecretary for terrorism and financial intelligence. Levey is a fixture at international business conferences, where he tells people to stop dealing with Iran. His logic is effective: If the United States finds you’ve traded, even unknowingly, with an Iranian government entity—even if disguised as a shell company—you’ll be hit by the full force of U.S. law.

The upshot is that companies must choose between doing business in Iran or America. Given the size of the U.S. market, most heed Levey’s advice. His talks have cast a chill of paranoia over Dubai’s banks and exporters.

“The world’s top financial institutions and corporations are reevaluating their business with Iran because they are worried about the risk and their reputations,” Levey told two hundred bankers gathering in Dubai. “You should worry too. Be especially cautious when it comes to doing business with Iran.”
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Hashempour finds it galling. Iran and Dubai have hundreds of years of ties, through marriage, shared cuisine, traditions, and religion. The Arabic spoken in Dubai has a Persian inflection. Neighborhoods and families are named after towns in Iran. And a minor functionary from halfway around the world tells people to break those ties—at great personal cost—and they do what he says.