“If the legislation is passed and sanctions are put in place by the US, we would comply and ensure underwriters in Lloyd’s were compliant, although we would not want the compliance burden to be disproportionate,” said Sean McGovern, general counsel for Lloyd’s.

Lloyd’s is telling underwriters they would be wise to review their contracts to look for ships heading to Iran. Mr McGovern said it was possible that underwriters would be compelled to ensure that a ship they had covered would not be going to Iran.

This could take the form of inserting exclusion clauses in contracts, specifying that ships would not be covered if they carried goods to Iran. Such changes would be likely, at the least, to make insurance for ships serving Iranian ports harder to obtain and more expensive. They could also reduce the supply of refined oil for Tehran.

Meanwhile, Abdulrahim Al Awadi, an official at the UAE’s central  bank has said that it “will implement any UN resolutions without reservations on any countries, including Iran.”  The article went on to link the issue of Emirati sanctions enforcement to the question of the UAE being placed on an international money laundering blacklist:

When asked whether the U.A.E. is worried about IRGC money being funneled through U.A.E. banks, Al Awadi refused to answer the question, but stressed on the U.A.E.’s compliance with FATF standards.

A new FATF list of countries that are considered to be lax in combatting terrorism financing and money laundering will be released after the conference, which ends Feb. 19, Al Awadi said. The list is called the International Cooperation Review Group, or ICRG.

Al Awadi added the U.A.E. is confident that it will not be placed on the list.

“Our (anti-money laundering and financial terrorism) laws are strong and there are no loop holes,” he said.

The key distinction here is that Lloyds will comply with unilateral U.S. sanctions, while the UAE seems to require multilateral sanctions approved by the UN to act– measures that Russia and China are now working to delay and dilute, according to a new report by ICG, and others.  Does Al Awadi’s statement reflect a newfound Emirati resistance to go along with informal U.S. sanctions of the sort arranged by Stuart Levey at the U.S. Treasury?  There’s not enough evidence here to tell, but an issue to watch closely as the sanctions game picks up.  -WW

David Roberts at The Gulf Blog has been tracking other recent Iran-Qatar deals that include cooperation on energy, tourism and defense, that were signed on Qatari Crown Prince Tamim bin Hamad Al Thani’s first visit to Tehran earlier in February.

The warship episode is further evidence of Qatar’s savvy foreign policy of pursuing warm bilateral relations with the powers that be in the Gulf.  These ties could position  Doha to act as a much-needed interlocutor and translator between Washington and Tehran.  -WW (Hat Tip Uskowi on Iran)

Iran’s Revolutionary Guards have won a $2.5bn tender to build a railway route linking the south-eastern port of Chabahar to Iran’s rail network.

Transport minister Hamid Behbahani said it was part of a transit route for goods from Chabahar to the north-eastern border town of Sarakhs.

The Guards’ engineering wing, Khatam-ol-Anbia, has been awarded government contracts worth billions of dollars.

The BBC article puts the rail contract in context of the IRGC’s increasing influence in Iran’s economy and politics.  Certainly a valid angle, but there is a bit more to the story.  Chabahar is one of Iran’s coastal free zones, meant both to create Iranian jobs and to boost Iranian trade with Central Asia.  The port was reinvigorated in 2004 and has been financed almost entirely by India, as a rival to Pakistan’s nearby Gwadar port (Registan has a useful backgrounder on the two ports here).  The railroad in question will link Chabahar to the Turkmen border, thus giving India a trade route to Central Asia that bypasses Pakistan.  The original article (Farsi) makes no mention of any Indian financing for the deal, but given the gobs of money they’ve spent on developing Chabahar I wouldn’t be surprised if they are paying for the rails too.

-WW

The story alleges that one connected individual got his job as Director of AFZ Flight Operations based on ‘exaggerated reports’ of his work experience, limited to “purchasing buses and setting up coolers.” Further, the brother in law of one of President Ahmediejad’s ‘best buddies’ was allegedly promoted to the post of the Director of Free Zone Investments immediately after Ahmedinejad was confirmed in his second term. In a third case, a scandal following the appointment of a son of the Chief of Staff of defeated Presidential candidate Mir Hussain Musavi to another high FZ appointment caused the relevant department the Free Zone to be quietly ‘neutralised.’ President Ahmedinejad, asked on a recent tour of the area where the Zone’s revenues were coming from, allegedly replied “I’ll look into it.”

The piece ends by questioning whether one of Iran’s high profile free zones have become simply a pass through for temporary directors, friends of those in high places and those looking for experience in the “Pistachio” business (a clear reference to the basis for former President Ayatollah Rafsanjani’s vast wealth). Arvand Free Zone was the subject of some controversy in 2005, after the British Ahwazi Friendship Society published documents it alleges shows the Iranian regime’s plan to relocate thousands if not hundreds of thousands of ethnic Arab Ahwazis from Arvand to make room for a 5000 sq km demilitarized zone, which it additionally alleged would facilitate Iran’s ‘de facto’ annexation of Basra–which its report notes is ‘literally a stone’s throw’ from the Zone in places (23 Teer 1388).

–EDC

Slackman’s piece supports points we’ve been making for some time, i.e., 1.) There are clear limits to the pressure the Arab states are willing and/or able to exert on their Northern neighbor (as well as limits to the pressure they’re willing to take from the West) 2.) There are many in the region who feel Iran’s acquisition of nuclear weapons is not the paramount to threat to security in the region [see Chorin's article "US Unwise to Deny Iran's Role in the Gulf" in the FT last year] and 3.) It’s largely about trade–the farther east one goes within the Gulf, the more dependent local economies are (and will be) on Iran for future energy needs and economic growth. See previous postings for details on the history of Iran-Oman trade since 2006. –EDC

During the visit, Larijani and senior Omani officials praised expanded Omani-Iranian political, cultural and economic cooperation, in particular the Iran-Omani “Kish field” gas deal. The agreement, signed in December of 2008, would in its first phase deliver 1 b. cubic feet of natural gas per day to Oman, through a pipeline linking the underwater field to Oman’s Musandam Peninsula. An extension would carry gas on to the city of Sohar, on Oman’s Batinah coast, West of Muscat. In its final phase, the pipeline is expected to deliver 3 b. cubic feet per day. If Iranian gas were to be re-exported, neighboring countries experiencing severe energy shortages would stand to benefit.

Oman agreed to cover the entire 12 billion US development cost, but has been having some difficulties raising the required capital. An anonymous source told Reuters last week that the global economic crisis would delay completion by a year, to 2013. Larijani’s trip coincided with an official visit to the Sultanate by the head of Hamas’ political directorate Khaled Mishal.The ex-“Enriched Iranium” blog detailed Oman’s growing ties with Iran 2007-2008, including agreements to trade Omani investment in newly-privatized Iranian companies for technical assistance and investment in Omani ports. –EDC

For the best outline of the program, I’d refer you to Robin Wright’s article from a few months back. At the time I wrote a post on my objections to it, namely that (among other things) it empowers Iran’s Revolutionary Guards to take on a bigger role in the economy since they can muster state resources to do things like smuggle goods, set up front companies and launder money.

Others no doubt celebrating the move are the smugglers, hawala operators, and countless other individuals who take part in the massive informal trade between the UAE and Iran. I can almost hear the champagne corks popping from Cairo.

The theory behind sanctions, both the formal kind and the informal sort spearheaded by Levey, is that business interests will pressure the government to change its naughty ways. That pressure no doubt exists to some extent. But I am constantly surprised that policymakers rarely take into account (at least publically) the knock on effects that sanctions have within the targeted societies and their economic neighborhoods. For me, the interesting question is who benefits from the re-channeled economic activity shaped by sanctions. A lot of this happens across the Gulf, and is something we should be thinking about more carefully.