Iran and the UAE are Working Together to Outlast Trump
While President Trump struggles to end the war in the Persian Gulf, a "truce" between the UAE and Iran is boosting resilience in both countries.
By Esfandyar Batmanghelidj
Last week, the Financial Times published a major report that examined a new “truce” between the UAE and Iran, one that has spared Emirati cities and critical infrastructure from direct attacks even as Iran has sustained strikes on other Gulf states. According to the report, the deescalation began after direct contacts between senior Iranian and Emirati officials in mid-June. UAE officials pursued dialogue with Iran as part of a “suite of strategies to manage relations” in the face of ongoing instability in the region and the failure of the Trump administration to shield Gulf countries from the blowback of the U.S. and Israeli war.
According to a new Bloomberg report, the UAE managed to export more crude oil through the Strait of Hormuz than any other Gulf producer during the month of July. Several supertankers have managed to cross the strait without coming under attack from Iran after picking up oil from secondary terminals within the Persian Gulf, located at Zirku Island and Das Island. Smaller tankers have also crossed through the strait before undertaking ship-to-ship tankers off the coast of the UAE’s main oil terminal at Fujairah, located on the Gulf of Oman.
This uptick in UAE tanker traffic, which occurred before the recent progress in negotiations between Iran and Oman over a new traffic separation scheme in the strait, is a sign that what the Financial Times described as a “bold gamble” to seek a truce with Iran is paying off.
But what did Iran receive in return? Emirati officials continue to deny that any financial transfers were made to Iran. Reports that the UAE paid Iran “billions of dollars” to halt attacks are not credible. A large influx of hard currency would be immediately visible in Iran’s foreign exchange markets. In any case, Iran is unlikely to have asked for direct payment. During wartime, goods matter more than money. What Iran sought from the UAE were the logistical and financial channels necessary to procure those goods.
Over the last few weeks, UAE trade with Iran has accelerated. According to data from Kpler, over 50 container ships made the crossing between the UAE and Iran in July, approaching the pre-war tempo. These smaller container ships constitute feeder services between the Iranian ports of Bandar Lengeh and Bandar Abbas and the Emirati ports of Port Rashid and Jebel Ali, one of the world’s largest container ports. The ships arrive in the UAE mainly laden with fruits and vegetables and return to Iran carrying intermediate goods of critical importance for the Iranian industrial base.
Ironically, through the resumption of maritime trade with the UAE, Iran has indirectly benefited from Emirati efforts to bypass the Strait of Hormuz. The expansion of truck freight between the ports of Fujairah and Jebel Ali has given Iran a new corridor that can help compensate for the drop of container traffic through the strait itself, which stems from both Iran’s targeting of commercial vessels and the U.S. naval blockade.
The UAE has also helped Iran shore up its food security. Over the last week, at least eight bulk carriers have crossed the Strait of Hormuz and called at the port Bandar Imam Khomeini, Iran’s main terminal for soft commodities. These ships delivered grain and animal feed for the Iranian market, which depends on imports to meet the shortfall between food consumption and domestic agricultural output. The vessels are not owned by Iran—they are chartered from private fleets by the trading houses that sold the cargoes—and their safe transit would have been coordinated with Iranian authorities. But the UAE also played an important role in ensuring these essential commodities could reach Iran as the conflict with the U.S. persists.
Iranian imports of soft commodities are exempt from U.S. sanctions, but Iranian importers have historically struggled to access the dollar liquidity necessary to pay for cargoes. Iran was able to secure these cargoes by regaining access to dollar liquidity through the UAE financial system, an accommodation provided by Emirati authorities as part of deescalation efforts. This was an important reversal—Emirati authorities had instructed banks to block Iranian accounts in early March in retaliation for the first wave of Iranian drone and missile attacks on Dubai and Abu Dhabi.
The partial restoration of UAE-Iran logistics and financial channels cannot fully compensate for the significant disruptions caused by the continued closure of the Strait of Hormuz, which remains a major challenge for Iran, just as for the wider region. However, when considering the Trump administration’s hope that continued economic pressure and the naval blockade would leave Iran unable to sustain the war, the UAE appears to be directly undermining the U.S. strategy. Recent food deliveries and access to intermediate goods through the feeder trade will help stabilize the Iranian economy, at least for the coming weeks, forestalling a dramatic acceleration of the crisis in the country.
Some Western reporting on the UAE’s continued economic engagement with Iran has characterized the moves as a form of appeasement. But that is not what this trade represents.
Reports that Israeli Prime Minister Benjamin Netanyahu tried to convince President Trump to pursue a “land blockade” of Iran reflect this reality. The Israeli proposal would require convincing regional countries to close their border crossings (and ports) to Iran. But it is clear Iran’s neighbors will not take that step so long as their diplomatic outreach and economic engagements continue to offer a means of managing the insecurity created by the Trump administration’s oscillation between calls for a deal and threats of catastrophic airstrikes.
Some Western reporting on the UAE’s continued economic engagement with Iran has characterized the moves as a form of appeasement. But that is not what this trade represents. Rather, it is a reflection of the deep and long-standing interdependence between the the two countries. As the war dragged on, Emirati officials needed to mitigate harm to key parts of the economy, ranging from the oil industry to the tourism sector. Likewise, Iranian officials needed to restore critical supply chains, sustaining manufacturing output and safeguarding food security to maintain stability during the war.
Six months on, it is clear that the war has no military solution, only a diplomatic one. By restoring trade with its northern neighbor, the UAE is reprising the economic diplomacy and security coordination it first pursued with Iran beginning in 2019, when Trump’s “maximum pressure” campaign against the Islamic Republic first undermined the security environment in the Persian Gulf. Recognizing that the war will end with a negotiated outcome, Emirati officials are positioning themselves for the post-war settlement, restoring dialogue and rebuilding trust with Iran in a manner that will increase the UAE’s influence over Trump’s face-saving exit. Moreover, the UAE can better act to facilitate successful implementation of United States’ own economic commitments towards Iran, such as those outlined in the MOU signed in mid-June.
For now, Iran lacks the military means to decisively win the war and the UAE lacks the political influence to convince the Trump administration to end the fighting. Both countries have little choice but to wait until Trump and his advisors realize that it is in their best interest to simply walk away from this war. The wait could be long and Iran and its neighbors are facing acute pressures. It is therefore understandable that Iranian and Emirati officials would conclude that they should work together to outlast Trump.
Esfandyar Batmanghelidj is the Founder and CEO of the Bourse & Bazaar Foundation.
Section: (integrated-futures-initiative) Photo: Canva