Uncovering the secret food trade that corrupts Iran’s neighbours

In the small town of Al Aweer, about 20km east of Dubai’s city centre, lorries full of fruit and vegetables approach, circle and pass each other, in a skilful dance. Think of it as a kind of bulk-trade ballet, set to a score of horns, beeps and roaring engines. At the back of warehouses, staff in branded polo shirts handle crates of fresh produce. At the front, wholesale shops entice customers from elsewhere in the United Arab Emirates (UAE) and beyond. The one-square-km market, already the largest such hub in the Middle East, plans to double in size to cater to the Gulf’s expanding population. It is one symbol of the region’s consumer appetites. It is also the secret theatre for smuggling on a grand scale—crushing local farmers, compromising supermarket supply chains and providing a lifeline to Iran.

The Islamic Republic, on the other side of the Gulf, is in a serious pickle. After its war with Israel, it is more isolated than ever. Its oil exports are still flowing, but it is struggling to collect the proceeds because America keeps cranking up sanctions on anyone helping it move money. Britain, France and Germany are threatening to restore their own embargoes unless it resumes nuclear negotiations in earnest. That is pushing Iran to find new ways to pay for the foreign goods it so desperately needs. Flooding the Gulf with fruit and veg is one of them. Iran now supplies nine out of ten cauliflowers, tomatoes and watermelons imported by the UAE, a near-monopoly built in just a few years.

That is a baffling phenomenon. Although Iran’s food exports are not under direct sanctions, most shippers, banks and retailers think the country is too risky to bother dealing with. That should make it impossible for its farm trade to thrive. And there is another puzzle. If you visit supermarkets in Dubai, you will see few obvious signs of Iran’s success. A paltry amount of shelf space is dedicated to Persian produce. So who is buying Iran’s booming food exports? And where do the groceries end up?

To find out, The Economist has talked to a range of farmers, wholesalers and retailers, as well as clandestine traders in Iranian goods. To confirm what they told us, we gathered proprietary trade data and corroborated it with official figures. Our investigation suggests groceries from Iran are being flogged in secret and en masse to unknowing customers across the Gulf—including countries that profess to import none, such as Saudi Arabia. The intricate supply chain reveals conflicts of interest at the highest levels. Middlemen make fortunes; local farmers get squeezed. Iran made perhaps $4bn-5bn from such exports in 2024. And it is just getting started.

Blessed with a varied climate, fertile soil and ample sunlight, Iran has the natural endowments to be an agricultural powerhouse. The industry, which provides a living for 23m Iranians and 80% of their food, already accounts for a fifth of non-oil exports. The government subsidises water, fertilisers and energy until they are virtually free. It also bankrolls farmers so they can afford the nifty technology, such as hydroponics, to grow high-value produce. Iran’s greenhouse cultivation has more than tripled in area since the early 2010s. Much of its modern irrigation equipment comes indirectly from Israel, a leader in the field. (It usually arrives as part of bigger packages of kit and services provided by companies based in friendlier countries, such as the Netherlands.) Lately a growing share of the equipment has also come from China and Russia.

The government bestows such largesse on farmers because their foreign sales are now so valuable to the country. Their exports are one of the few ways the country can obtain the imported goods it so desperately needs. Foreign currencies, such as dollars and dirhams, are vanishingly scarce and therefore exceedingly precious. Anything that eases this hard-currency constraint is worth lavishing with vast domestic resources.

Neither Iran nor the UAE release up-to-date, detailed trade figures. But we managed to gather private data, based on customs reports from third countries, which provide a fresh and comprehensive picture. Although the source wishes to remain anonymous, The Economist has cross-checked its figures with partial statistics released by the United Nations and other official bodies. The numbers suggest Iran’s strategy is proving wildly successful. It already dominates the market for 15 commodities in the UAE, from aubergines to melons. The story is similar, on a smaller scale, in Oman and Qatar. Volumes are soaring; quality is improving, too. Once limited to basic tomatoes on the vine, Iran now excels at the cherry variety, the trickiest kind. Sources say it is building strawberry farms which could crush the competition in two to three years.

To understand how Iran’s produce gets to market, start at the farm gate. Unlike oil, which is pumped by a state-owned monopoly, the country’s veggies are produced by 36,000 small growers. That output is bundled and stacked onto trailers, which are towed to Bandar Lengeh in the south of Iran. It is then loaded at dawn onto smallish ships, which ferry it to Sharjah, in the UAE’s north. The journey takes only six hours. Transporting a container of fruit from Iran’s farms to Emirati warehouses costs just 8,000 dirhams ($2,200). Shipping fruit from Egypt or Turkey costs four times as much.

Most of the Iranian produce coming into Sharjah is registered at customs. But then it has to be paid for. Doing so openly is hard, because Emirati banks are reluctant to process transactions involving Iran. The trade therefore relies on an informal payment system called hundi. It is run by tiny entities with offices across Dubai, which often feature “transportation”, “goods” and “services” in their company names. In the UAE, their agents collect dirhams from food importers, which they pass on to exporters of appliances, auto parts and machinery that Iran desperately needs. These goods are then shipped across the Gulf to Iran. Foodstuffs, priced in Iranian rials, flow one way. Vital manufactured goods, priced in dirhams or dollars, flow in the opposite direction. But dirhams need never be exchanged for rials.

From Sharjah, local lorries pull the trailers to Al Aweer—which is where the real magic happens. The Gulf-wide trade in Iranian produce is run by the market’s wholesalers, according to interviews with direct witnesses. It is they who place orders with Iranian traders, find buyers in the UAE and beyond, and orchestrate logistics. They also feed intelligence back to Iran on the evolution of consumer demand, say two market participants. Emirati merchants are behind Iran’s novel push into strawberries, for example.

Wholesalers rarely import from Iran directly, preferring to source the goods via one or more intermediaries. That affords some deniability. In a message seen by The Economist, an executive at one such firm makes oblique references to his Iranian offerings, boasting about the big volumes he is able to secure. Most wholesalers of Iranian goods also hide their origin by mixing them with groceries from elsewhere. Camouflaging teams sometimes occupy a warehouse’s entire floor. One classic trick is to keep legitimate produce on the top layer of a box while swapping the rest for cheaper fruit. Sometimes the Iranian food is repackaged in fake versions of boxes from reputable brands, in the hope of deterring inspections.

These tactics shield wholesalers from unwanted scrutiny. Hiding Iranian fruit also helps them make a lot more money. On the day we visited one trader in Al Aweer, he had a container of cut-price Iranian broccoli just outside his office. In 2024, he said, an Iranian exporter offered him ten containers a day of tomatoes—equivalent to 200 tonnes—at the cost of 1 dirham per kg (including transport). Farmers in the UAE must typically charge 2 dirhams per kg to break even; Dutch supplies cost at least five times that. By pretending they are selling full boxes of this pricier fruit, without any cheap Iranian varieties in the mix, wholesalers inflate their margins.

The same goes for the supermarkets that buy their produce. Purchasing officers who turn a blind eye to the fraud often get a kickback from the wholesaler. It is not rare for managers of fruit-and-vegetable sections to do some blending themselves, too. They might mix Iranian tomatoes with Dutch varieties to make a bigger display. “Instead of 4-5 dirhams, they sell the lot for 20-25 dirhams” per kg, says an insider. There is a lot of money to be made. One local supermarket chain is known for flying its staff in business class and lodging them in five-star hotels. Other UAE supermarkets, which include the local franchises of European giants like Carrefour and Waitrose, try harder to root out the deception. That explains why many retailers replace their grocery chiefs nearly every year.

The UAE is also a base for shady re-exports. One insider reckons a third of the country’s imports of Iranian veggies end up in other countries. Much of this produce is smuggled. Saudi Arabia, for example, has long blocked fruit imports from Iran, a regional rival subject to Western sanctions that are tricky to navigate. The kingdom’s customs officers will reject an entire shipment if they find a lone box with Farsi writing or even Persian numbers. Its enforcers also require sanitary certificates for incoming cargo that specify where it is from. Yet fooling them is easy, says an Emirati trader who does it a lot. “We just put a sticker on the carton with a new origin: Azerbaijan, Turkey—anything but Iran.” To launder Iranian produce, traders also re-use paperwork issued for legitimate shipments: Italian kiwis and Spanish broccoli are frequent covers.

This kind of fruit impersonation annoys bona fide exporters. Diplomats from various European countries have complained about it, to no avail. The crushing dominance of Iranian produce, facilitated by local firms, also makes a mockery of government plans to revive homegrown agriculture. In its national economic strategy, the UAE aims to top the Global Food Security Index—a benchmark by Economist Impact, our sister company—by 2051. Dubai is building a two-square-km “Food Tech Valley”. Abu Dhabi is planning the world’s largest indoor farm, to grow 10,000 tonnes of greens a year. Sharjah is sowing 1,400 hectares with wheat. Such flashy ventures, backed by a who’s who of state funds and Western investors, are all meant to advance one goal: “enhancing local food production”.

In reality, local farms are withering. The UAE counts 35,000 estates, some of them large. One vegetable grower in Al Ain, the country’s farming hub, employs nearly 400 staff to cultivate an area equivalent to 100 football pitches. He says his production of tomatoes has plummeted because a glut in overall supply has dragged prices down. The government’s laissez-faire approach, he says, is “destroying local farmers”.

Emirati officials are aware of the problem. Their trade analysts have access to up-to-date data, says someone familiar with the country’s government. Last year the economy ministry launched an anti-dumping investigation into mushrooms exported from Iran, according to a poster seen by The Economist. But the trade continues apace. Adding a layer of intrigue, some of Al Aweer’s biggest wholesalers are controlled by people in power. Silal, an outfit founded to bolster food security during the covid-19 pandemic, belongs to ADQ, one of Abu Dhabi’s sovereign-wealth funds. NRTC, a 50-year-old trader with 1,000 staff, is 41% owned by IHC, a conglomerate run by an Emirati royal.

Why would the UAE—and other Gulf countries—tolerate Iran’s green invasion? Perhaps they hope cheap imports will keep inflation down. They may also think that appeasing Iran will reduce the chances it lashes out against them if Israel strikes again. Some even posit that some Gulf leaders are ready to sacrifice local farming to help save scarce groundwater in a notoriously dry part of the world. Whatever the reason, relying on Iran is hardly a safe choice. Should it be bombed again, trade may dwindle. More frequent droughts are making its output increasingly volatile anyway, exposing importers to price shocks. However tempting, bingeing on Iranian produce looks like a recipe for trouble. ■

Illustration: Carl Godfrey/Getty Images