Dubai's non-oil trade with Iran shrinks 12 pct in H1

DUBAI, Sept 12 (Reuters) - Dubai's non-oil trade with Iran shrank 12 percent in the first half of 2013, a sign that Western sanctions continue to inflict fresh damage on the Iranian economy, data showed on Thursday.

Dubai, across the Gulf from Iran and home to tens of thousands of ethnic Iranians, has long been a major commercial hub for the Iranian economy, re-exporting consumer goods from other countries to the Islamic republic.

This role suffered after U.S. financial sanctions, imposed in late 2011 over Iran's disputed nuclear programme, caused banks in Dubai and around the world to cut back sharply on Iran-related business.

Two-way trade between Dubai and Iran, excluding oil, fell to 10.8 billion dirhams ($2.9 billion) in January-June from 12.3 billion dirhams in the same period of 2012, the Dubai customs authority said in a written answer to Reuters questions.

The drop slowed from a 31 percent plunge to 25 billion dirhams in all of 2012. Partly because of the sanctions, the Iranian rial lost about two-thirds of its value against the U.S. dollar over the 18 months to late 2012, hurting Iran's ability to pay for imports, but the currency has since stabilised.

Iran now accounts for a mere 1.6 percent of Dubai's total non-oil trade.

Re-exports to Iran dropped 13.5 percent to 9.0 billion dirhams in the first six months of this year, while Dubai's exports were flat at 1.0 billion dirhams, the data showed.

Imports from Iran to Dubai, one of seven United Arab Emirates, fell to 766 million dirhams in January-June from 819 million dirhams a year earlier.

The vast majority of trade between Iran and Gulf Arab states is routed through Dubai. Traditional wooden boats, known as dhows, carry some consumer goods across the Gulf. In addition to its non-oil trade, Dubai has been importing significant amounts of oil from Iran.

The shrinking of its trade with Iran has had little effect on Dubai's strong economy. The emirate's total non-oil foreign trade increased 16 percent to 679 billion dirhams in the first half of this year, data showed this week. Re-exports to other countries grew 13 percent to 188 billion dirhams.