International sanctions on Iran will have only a moderate impact on the country’s bilateral trade with Dubai, according to the Washington-headquartered IMF.

Both exports to Iran and their share of the Dubai’s total exports increased in 2011 driven by the increased importance of re-exports from the emirate, which make up more than 90 per cent of bilateral trade.

Sanctions were imposed against Iran in June 2010 over its controversial nuclear programme, but the EU and the US have this year agreed to tighten the trade restrictions.

The tightening is expected to have a “moderate” impact, as bilateral trade could be affected by reduced demand from Iran due to economic hardship and complications with trade finance and payment, the IMF said in its annual report on the UAE.

“As an illustrative scenario, we calculated that a 30 per cent decline in the bilateral trade with Iran would have an impact on the UAE GDP [gross domestic product] of around 0.3 percentage points,” said IMF mission chief to the UAE Harald Finger in a conference call.

The IMF expects the UAE’s real GDP growth to halve to 2.3 per cent this year, compared with 4.9 per cent in 2011, due to a forecast of zero growth for the country’s oil and gas economy.

Abu Dhabi’s hydrocarbons sector has little potential to boost production in 2012, while crude prices have slipped by 10 per cent over the last month. The IMF forecast 3.5 per cent growth in non-oil GDP.