The Gulf states of Qatar and the UAE have ordered banks in each country to stop issuing letters of credit (L/Cs) for trades with Iran.

The central banks of each country issued the order in what appeared to be a coordinated approach by the UAE and Qatari authorities.

This latest action against Iran cuts another source of credit for the country, which is already struggling under a welter of international sanctions imposed over its nuclear programme.

Trading roots

Trade between Iran and the Gulf has been buoyant for many years, and Dubai in particular has long and deep trade roots with the Islamic republic.

Thousands of Iranian traders do business out of Dubai. Some have historically re-exported to Iran goods that sanctions imposed over recent years have prevented being shipped directly to Iranian ports.

Under pressure

According to one Dubai banker, the Emirate's financial institutions were already under pressure to disclose their banking activities with Iran.

He told the Reuters news agency that before the L/C ban was imposed by the UAE central bank, it "regularly checked on trading with Iran and wanted to know of all dealings between the two countries."

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