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United Arab Emirates (The Media Line) – As the West tightens the sanctions knot around Iran, the United Arab Emirates (UAE) is giving a significant extra pull by stemming its extensive trade and financial relations with its neighbor.

A major regional trade and finance entrepot, the UAE has long given Tehran breathing room by serving as a conduit for goods and money. But analysts say that the UAE has begun cracking down on the business as relations between Iran and Gulf Arab states grow more strained. The biggest change has occurred in Dubai, the UAE’s leading commercial center.

“You’ve seen in Dubai changes in its attitude toward Iranian banking and other activities,” Theodore Karasik, director of research at the Institute for Near East and Gulf Military Analysis, told The Media Line. “The Iranians in Dubai are starting to feel that pinch in a sharp drop in remittances transfers. No one wants to be associated with Iranians because it can raise a red flag and people don’t want to be investigated.”

A confederation of seven tiny emirates just across the Gulf from Iran, the UAE serves as one of the Islamic republic’s most important windows to the outside world. Iran is the UAE’s second-largest re-export market, accounting for about 17% of total volume, while the UAE is one of Iran’s top sources of imports, accounting for more than 15% of the total. Two-way trade between them reached $10.4 billion last year.

Just as importantly, banks and other financial service firms in the UAE have allegedly enabled Iran to circumvent financial sanctions. Bank Saderat and Bank Melli, two Iranian lenders flagged by the U.S. and the European Union as helping Iran’s nuclear program, both operate in the UAE.

Underscoring the UAE’s key role in enforcing the sanctions, David Cohen, the U.S. undersecretary for terrorism and financial intelligence, visited the confederation last week after a new round of tougher measures against Iran were announced by Western powers.

“Iranian businesses operating in Dubai and serving the Iranian market by routing business to Europe through Dubai are finding it difficult to get trade finance instruments such as letters of credit and guarantees. With the new round of sanctions, getting shipping insurance will be harder,” Ayesha Sabavala, UAE analyst for the Economist Intelligence Unit (EIU) in London, told The Media Line.

The Iran sanction regime is growing tougher, although it is being imposed on a one-by-one basis by mainly Western countries, rather than the United Nations, after the International Atomic Energy Agency last month released a damning report on Iranian nuclear ambitions.

Two weeks ago, the U.S., Britain and Canada announced a new round of sanctions on Iran’s energy and financial sectors. Britain went the extra mile, saying it would cut all financial ties with the central bank as well. Last week, the U.S. Senate defied the White House and passed legislation penalizing foreign financial institutions that do business with Iran’s central bank while the European Union added 180 Iranian officials and companies to their sanctions list and promised measures against Iranian oil exports, banks, transportation and the Revolutionary Guard Corps.

While the IAEA report and increased U.S. pressure have played a role, analysts say that heightening sectarian tensions in the Gulf may be the biggest factor of all.

They have caused the UAE and other Gulf Arab governments to look with increasing suspicion at the minority Shiite communities in their midst and begun to crack down on their activities, including commercial dealings with their co-religionists in Iran. Gulf leaders are convinced Iran in stirring up their Shiite populations. When a small explosion occurred near the British Embassy in the Bahraini capital of Manama on Sunday, the Interior Ministry was quick to blame it on “the inciting rhetoric in Iran.”

Bahrain called in Saudi and UAE security forces last spring to quell a largely Shiite rebellion against the Sunni royal family. Saudi Arabia, which in home to a substantial Shiite minority, has had to put down mass protests in a strategic eastern province. The UAE has been quiet, but some 450,000 Iranians or people of Iranian origin live among a population of just over five million and are responsible for most of the trade and financial ties with the country.

Analysts say another factor is the changing balance of power inside the UAE confederation since 2008. That was the year Dubai’s real estate-powered economic boom fizzled, prompting its wealthier, oil-rich neighbor to help bail it out with $10 billion in aid.

Abu Dhabi has traditionally taken a harder line on Iranian ambition compared to the business-minded Dubai. But, Karim Sadjadpour, a researcher at the Carnegie Endowment, said in a study The Battle of Dubai: The United Arab Emirates and the U.S.-Iran Cold War, Dubai’s financial woes have enabled Abu Dhabi to take firmer control of the combined UAE foreign policy and impose its views.

“The UAE has become an increasingly reliable partner for the United States, but both fear and economic expediency prevent it from taking a stronger public stand against Iran,” Sadjadpour wrote in the July report. “It has thus tried to walk a fine line between satisfying its ally and protector, the United States, and accommodating its looming neighbor, Iran.”

Since United Nations sanctions were first imposed in June 2010, the UAE has increased restrictions on Iran-related business with tighter custom inspections, freezing bank accounts and blacklisting of some Iranian banks. Fear of running afoul of the broadening U.S. restrictions, even indirectly through the UAE clearing system, often causes UAE banks to take even sterner measures on their own.

Tightening sanctions come at a challenging time for the UAE economy and its trade sector. The UAE’s purchasing managers’ index (PMI), a composite indicator of the performance of the non-oil private sector published by HSBC Holdings Plc and Markit Economics on Monday, declined in November, a sign they said that the economy is “struggling” to maintain momentum.

But Sabavala of the EIU said that tougher policies on Iran haven’t yet bitten into bilateral trade, which grew by more than a third in the first quarter of 2011 from a year earlier. She speculated that the rise was due to increasing small-scale trade in traditional dhows, which isn’t as closely monitored, as well as increased demand for consumer and other goods not covered by sanctions.

“Demand from Iran is still very, very strong,” she said. “There are a lot of high net worth individuals in Iran. Their spending power is tremendous. The economy in Iran for them is still quite strong. There is a lot of demand from them for consumer products.”

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New York, NY, United States (AHN) – One thing traders know for sure about the markets is to expect the unexpected.

So when the European Central Bank announced an unexpected rate cut Thursday, traders and investors were ready and reacted by pushing stocks sharply higher.

Just after the opening bell on Wall Street, the Dow Jones Industrial Average jumped 140 points, the Standard and Poor’s 500 Index rose 11 points, and the technology oriented NASDAQ climbed 18 points.

The European Central Bank cut interest rates by a quarter percentage point, helping markets both overseas and in the U.S. Also giving stocks a lift was expectations that the Greek referendum on the eurozone bailout would be abandoned.

Markets were thrown into turmoil Monday after a referendum proposal by Greece’s Prime Minister George Papandreou horrified the country’s international partners and creditors. It triggered market worries that Greece may default on its debts and exit the eurozone.

Giving U.S. stocks an added boost Thursday morning was better than expected jobs data that showed a modest decline in new claims for unemployment. Initial jobless claims fell by 9,000 to a seasonally adjusted 397,000 in the week ended Oct 29, the Labor Department reported.

Gold rallied to $30 to $1,760 a troy ounce and oil was up $1.23 to $93.75 a barrel.

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Charlotte, NC, United States (AHN) – Bank of America has announced it would slash 3,500 jobs in addition to the 2,500 it let go earlier this year.

The bank is under pressure from investors to increase profitability and analysts say that pressure will likely cause additional job cuts that could rise to 10,000 in all by the end of the year.

Charlotte, N.C.-based Bank of America (BAC, Fortune 500) says it plans to cut the 3,500 jobs during the third quarter. It will begin notifying affected employees soon. The cuts will occur across the company, including its international operations.

Company officials did not give specific reasons for the new cuts. However, some of the problems affecting the bank include revenue growth that was much slower than expected, low demand for loans and a portfolio full of bad mortgage loans from the U.S. subprime mortgage mess that accompanied the bubble-high real estate prices and resultant economic crash.

In addition, Bank of America is getting rid of some of its business to conform to international banking laws, which includes eliminating some credit card and life insurance portfolios.

Bank of America is the largest U.S. bank by assets.

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Dallas, TX, United States (AHN) – In the past 24 months from June 2009 to June 2011, Texas accounted for half of the 524,000 payroll gains of the U.S., data from the Federal Reserve Bank of Dallas and the Bureau of Labor Statistics said.

Payrolls in the state went up 2.9 percent since the recession ended two years ago, which is third behind North Dakota and Alaska, but far larger than the national average growth rate of 0.4 percent. Texas has an 8.2 percent unemployment rate, which is better than the national average of 9.2 percent.

Economists explained the faster pace of jobs generation in the Lone Star state to high energy prices which resulted in more oil drilling activities, growing exports and the state’s conservative banking sector which protected Texas from a major housing crash.

According to the BLS, regional and state unemployment rates hardly changed last month, with 28 states and the District of Columbia registering hikes in unemployment rate. For June, Texas logged a 32,000 increase in its payroll, which is the largest among the states.

It was followed by California (28,000), Michigan (18,000) and Minnesota (13,200).

The biggest losers were Tennessee (18,900), Missouri (15,700), Virginia (14,600) and North Carolina (9,500).

Texas’ job creation performance works in favor of Gov. Rick Perry, who has indicated he may run for the Republication nomination for the presidency. Observers said that if he aims for higher office, Perry would likely cite his record in creating jobs in the state when other states are suffering from high unemployment rates as one of his achievements.

State officials pointed out that Texas’ higher-than-expected payroll gains is because of a pro-business climate that Perry created which drew companies from other states where the cost of doing business is much higher.

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Charlotte, NC, United States (AHN) – Bank of America on Wednesday announced it has agreed to pay $8.5 billion to settle a dispute with investors who lost money on mortgage-backed securities.

It is the largest settlement ever for a mortgage lender and ends a nine-month battle between the bank and 22 investors who held a combined total of more than $56 billion in mortgage-backed securities in the 2008 financial crisis after the housing market bubble burst.

Among the 22 investors were Prudential Financial Inc., MetLife and the Federal Reserve Bank of New York.

The investors bought the mortgage-backed securities from Countrywide Financial, which Bank of America acquired in 2008.

Investors allege that the securities were packed with bad mortgages, which was contrary to the information the investors were given about the quality of the debt and the collateral backing it, which they were purchasing. Moreover, the investors alleged that Countrywide and Bank of America failed to keep accurate records of the loans.

Company officials say the company will post a second-quarter net loss of around $9.1 billion, or 93 cents per share, because of the payment.

A court must approve the payout before it is made.

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Tel Aviv, Israel (TML) – Western powers and their allies in the Middle East hope to grease the wheels of democracy and political stability as they begin to release billions of dollars in loans and other financial aid to the region’s Arab Spring economies.

The economies of countries like Egypt, Tunisia and Jordan are facing a near-perfect storm of political unrest combined with negative growth and rising prices for imported energy and food. But the emerging aid pipeline may be clogged by domestic opposition inside donor countries. Recipients may balk at the conditions placed on much of the aid.

Aid could ease the way for Egypt and Tunisia to evolve into Western-friendly democracies as well as give a boost to beleaguered friends like Jordan’s King Abdullah. Without it, deteriorating economic conditions risk strengthening the hand of already powerful Islamic movements and undermining public confidence in the free markets and private business that economists say are needed to ensure long-term prosperity.

“These countries, particularly Egypt, face a financial hole and their economies have come to a standstill. The way out is to spend money which their governments don’t have,” said Paul Rivlin, author of Arab Economies in the Twenty-First Century. But the recipients will have to show they are taking the right political and economic measures. “The U.S wants to draw them back into a Western orientation. But the political systems in these countries may draw them elsewhere.”

Egypt, as the biggest of the Middle East’s troubled economies and the country most likely to set the direction of the region political, is the focus of the aid.

The International Monetary Fund (IMF) kicked off the effort May 12, saying it would respond to Egypt’s request for as much as $12 billion. That amount has since has been lowered to $4 billion. But in the meantime, U.S. President Barack Obama last week offered to forgive some $1 billion in Egyptian debt and. Egypt is reportedly close to an agreement with the World Bank to receive loans worth $2.2 billion.

But the biggest largesse of them all may come from Saudi Arabia, which on Saturday pledged $4 billion in the form of soft loans, deposits and grants, the Egyptian Middle East News Agency (MENA) reported, citing Field Marshal Mohamed Hussein Tantawi, the head of Egypt’s ruling military council, as saying.

Egypt won’t be the only beneficiary of international aid.

On Saturday, the European Bank for Reconstruction and Development (EBRD), which was formed to smooth eastern Europe’s transition to free market democracies, is working on a program that may eventually lead to investment of as much as 2.5 billion euros ($3.5 billion) a year in the Middle East. The EBRD said it is considering a request by Egypt to become a country of operations. Morocco, another EBRD shareholder, has also expressed an interest in qualifying, it said.

On Monday, the Group of Eight (G-8) – a forum for many of the world’s biggest economies – will discuss how they can contribute to modernizing the economies of the Middle East, without pledging dollar amounts for assistance. A special session will be devoted to Tunisia and Egypt.

Tunisia plans to attract $5 billion a year in foreign aid, loans and private investments over the next five years during meetings at the G-8 summit, Finance Minister Jelloul Ayed said in an interview with The Wall Street Journal Friday. Tunisia would apply for a $500 million standby loan, possibly from the World Bank.

Obama told a visiting King Abdullah that he would provide Jordan with several hundred millions of dollars in aid, channeled through the Overseas Private Investment Corp. (OPIC). Obama said the funds would “leverage ultimately about $1 billion for economic development in Jordan.”

Rivlin said Washington will lead the aid drive and should America judge that the Arab Spring economies aren’t meeting its conditions it “will be difficult” for Europe and international institutions to provide it either.

The Arab Spring economies are in bad shape by almost every measure. The five countries hit hardest by turmoil will show a combined drop in economic output of about 2.3% this year, according to figures based on a forecast by the Institute for International Finance (IIF) released in early May.

Egyptian Finance Minister Samir Radwan estimates his country’s budget deficit will top 10% of gross domestic product in the coming fiscal year, up from a previous forecast of 7.9% and has to borrow to cover the gap. Its official foreign currency reserves have fallen to $28 billion, but some economists think the drop is bigger than being report.

Uri Dadush and Marwan Muasher, from the Carnegie Endowment for International Peace, expressed concern that it will be difficult to convince the leaders of Egypt and other recipient countries to undertake the economic reforms needed to rekindle economic growth and enable them to eventually get off aid.

So far, the transitional governments of the region, as well as veteran leaders trying to retain power, have increased subsidies for consumer goods and promised to create jobs, all at a cost to badly strained budgets and economic efficiency. But Dadush and Muasher add that the bigger problem may be convincing Arab public opinion that free markets are beneficial.

“Change in the Middle East is about refusing an autocratic political system and calling for democracy – without a clear vision for what economic system should be put in place,” they wrote in the National Interest on April 13. “There is a significant possibility that the governments that ultimately emerge out of this crisis will renounce previous economic reforms as misguided.”

Indeed, many analysts think Egypt won’t agree to the economic reforms the IMF typically demands in exchange for its aid, such as subsidy cuts, for fear that they will spark another round of mass protests like the kind that brought down President Husni Mubarak in February.

“For understandable political reasons, the Egyptian government says that it is unthinkable to cut subsidies for food or energy. But can the IMF simply extend a loan without any conditionality? I doubt it,” Gideon Rachman wrote in the Financial Times last week.

Back at home, both American and European leaders will have to make a case for sending billions of dollars overseas at a time when they are experiencing severe economic difficulties of their own. Europe is trying to put out debt fires in Greece, Portugal and Ireland.

In the U.S., President Barack Obama is battling Congress over increasing the country’s debt ceiling. He faces opposition from a Republic-controlled House of Representatives to helping countries whose allegiance to America is more in doubt as long-time pro-Western despots are replaced by governments whose views are yet to be fully articulated.

The U.S. budget is weighed down by $14 trillion in debt as the White House and Congress fight over raising the national debt ceiling.

“Considering our own national debt, we cannot afford to forgive up to $1 billion of Egypt’s debt,” Elena Ros-Lehtinen, the chairwoman of the House Foreign Affairs Committee, said last Thursday. “The U.S. should only provide assistance to Egypt after we know that Egypt’s new government will not include the Muslim Brotherhood and will be democratic, pro-American and committed to abiding by peace agreements with Israel.”

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The World Bank has asked African governments to urgently tackle youth unemployment and inequality among different population groups to avoid losing economic gains.

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Manila, Metro Manila, Philippines (AHN) – The Philippine Central Bank said Monday it may reduce remittance forecasts for 2011 because of the political developments in the Middle East and the natural calamity in Japan that would impact the ability of overseas Filipino workers to send money home.

Prior to these developments, the Central Bank estimated remittances by overseas worksers would grow by 8 percent this year to reach $20 billion.

The bank also predicted a record $68 to $70 billion level in gross international reserves and $6 to $8 billion balance of payments surplus.

For several years, the OFW remittances had been growing annually as more Filipinos opt to work overseas where the pay is several times over local wages. Despite the global financial crisis in 2008, the remittances were not affected.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the central bank will review in April the GIR and BOP projections, factoring in the developments in the Middle East and Japan.

There are millions of Filipino workers in the Middle East, but the bulk of them (or more than 2 million) are in Saudi Arabia, where the civil unrest contagion has not yet reached crisis level. There are more than 350,000 Filipinos in Japan, including children of Japanese-Filipino unions.

OFW remittances have propped up the Philippine economy since the country started to send workers to the Middle East in the mid-1970s. The workers’ remittances account for at least 10 percent of the Philippine gross domestic product.

Middle East-based OFWs contributed 16 percent of $18.76-billion total remittances in 2010, which was up from $17.35 billion in 2009. Remittances from Japan topped the money sent by Filipino workers from Asian nations, which comprised 12 percent of the 2010 total. Money from Japan reached $883 million last year.

Tetangco said the central bank will consider current and future trends, including impact of the higher oil prices.

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Washington, D.C., United States (AHN) – The hacker group Anonymous published internal emails between Bank of America staff that indicated improper lending procedures. The emails were leaked by a former BofA employee.

According to the emails, an employee of Balboa Insurance – a BofA subsidiary – discussed the removal of details from loan records to hide improper home foreclosures from U.S. authorities.

The move involved the removal of document tracking numbers from about 100 properties loaned by mortgage lender GMAC.

The employee warned in an email that the removal of tracking numbers may raise red flags by auditors.

A Bank of America spokesman said the emails were filched by a former Balboa staff, but maintained it is not related to home repossessions.

BofA purchased Balboa Insurance in 2008 when it bought Countrywide Financial.

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London, England, United Kingdom (AHN) – The Bank of England’s Monetary Policy Committee opted Thursday to keep the country’s key lending rate at the record-low 0.5 percent. It has retained the benchmark interest rate at that level for 25 straight months.

The MPC decision was made despite inflation rate hitting 4 percent, which is twice the Bank of England’s target. Some members of the MPC, though, had previously been pushing for a rate increase.

One board member called for the addition of $75 billion (GBP 50 billion) in Britain’s quantitative easing program, but the MPC retained the current level of QE of $300 billion (GBP 200 billion).

At 0.5 percent, Britain’s key lending rate since March 2009, is the third lowest in the world. Japan has the lowest at 0.05 percent, followed by the U.S. at 0.25 percent. The rest of Europe has a 1 percent interest rate.

In last month’s MPC’s rate-setting meeting, one member pushed for a half-point increase in rates, two others voted for a quarter-point hike.

Another member favored a higher QE, but the rest of the nine-member board voted for no changes in key lending rate and QE policies.

The Bank of England will publish the minutes of the MPC Thursday meeting in about two weeks. The minutes will show if the board members have changed their votes from last month’s meeting or not.

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