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The new Casablanca: Why Dubai draws Iran, intrigue, and tusk smugglers

Dubai is known to be among the world's most freewheeling business environment – and one that is attractive to Iranian businesses looking to circumvent Iran sanctions.

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Dubai has long invited trade because it lacks the massive oil reserves that have made its Gulf neighbors rich.

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It began setting up free-trade zones in 1985 and slashed its import tax to 5 percent, a now-common standard in neighboring countries. It established a reputation for processing cargo quickly – a vital service for firms shipping goods via Dubai from, say, Sweden to Pakistan.

In 1979, Dubai opened the world's largest seaport – so big it can be seen from space. The port of Jebel Ali has been ranked the top seaport in the Middle East for 15 years in a row by trade publication Cargonews.

Next door is the Jebel Ali Free Zone (Jafza), a sort of duty-free megastore for the 6,500 firms that have set up shop. There, they can manage their shipments without paying tariffs and avoid UAE restrictions on foreign ownership and hiring. And, with so many firms, Jafza can meet most business needs – a synergy other nations in the region haven't matched.

"You can pretty much do your business without having to worry about who you have [available]," says Ali Talev, a Lebanese businessman who has worked in Dubai for 10 years. Transportation firms alone number around 200, which "allows you to move your product very fast."

Why firms ship goods 1,000 miles farther for Dubai's services

Dubai operates so quickly that it takes longer to ship goods directly from Europe to Saudi Arabia's western coast city of Jeddah than to sail an extra thousand miles past Jeddah, around the Arabian Peninsula to Dubai, process the goods here, and truck it back across Saudi Arabia to Jeddah, says Mark Woodcock of TNT, a major shipping company.

"Most of the goods we bring here today are available for entry into the country later today or tomorrow. In Jeddah it takes up to a week," he says. In other Gulf countries, the "paperwork is more restrictive than [in] the UAE."

Dubai has "solidified" its stance as the leading trade hub in the Gulf, says Dr. Yousef, who co-wrote the World Economic Forum's report on competitiveness in the Arab world. "There is no close second."

US scrutiny over Iran ties

Dubai's close trade ties with Iran have brought special scrutiny from the US, which sees strict enforcement of UN sanctions as key to pressuring Iran to cooperate more fully on nuclear inspections.

But despite US efforts to turn off this key spigot in recent years, trade between Dubai and Iran tripled from $4 billion in 2005 to $12 billion in 2009. Iran imports 50 percent more from the UAE than it does from China, its next-biggest trading partner, according to the most recent data from the CIA World Factbook.

The number of Iranian businesses based here has swelled to about 8,000, most of which operate legally. Some are run by the Revolutionary Guard – the corps President Mahmoud Ahmadinejad has used to tighten his grip on everything from security to Iran's oil industry.