Why doesn't the UAE freeze Iran's money?

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The United Arab Emirates is weighing freezing billions of dollars of Iranian assets held in the Gulf state, according to people familiar with the discussions, a move that could sever one of Tehran’s most important economic lifelines.

If the U.A.E. goes ahead, it would significantly curb Tehran’s access to foreign currency and global trade networks as its domestic economy, already buckling under inflation, is now engulfed in a military conflict.

Emirati officials have privately warned Iran—which has fired more than 1,000 drones and missiles at targets in the U.A.E.—of the possible action, people familiar with the warnings said. It isn’t clear when, or if, the Emirati government will decide to act.

The Emirati Foreign Ministry didn’t respond to a request for comment.

The U.A.E. has for years functioned as a financial hub for Iranian businesses and individuals seeking a haven from Western sanctions, according to analysts tracking Tehran’s activities and the U.S. Treasury. Iran’s sanctions-evasion infrastructure has allowed Tehran to keep selling oil abroad and use the proceeds to fund weapons programs and regional proxies, they say.

The U.A.E. has previously said it adheres to sanctions and has a strong commitment to protect the integrity of the global financial system.

Any move by the U.A.E. to limit Iranian financial activities there “would be very significant, because the U.A.E. is the most important conduit for Iran’s engagement with the global economy,” said Esfandyar Batmanghelidj, chief executive of Iran-focused think tank Bourse & Bazaar.

U.A.E. authorities are weighing several measures to dismantle illicit Iranian operations, officials familiar with the matter said. They range from freezing the assets of U.A.E.-based shadow companies used to mask trade to a sweeping financial crackdown on local currency exchanges which are used to move money outside of formal banking channels.

If the U.A.E. decides to move on Iran’s shadow-financing empire, a prime target would be accounts affiliated with the Islamic Revolutionary Guard Corps, the powerful group responsible for defending and perpetuating the regime, the officials familiar with the discussions said.

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