No sooner made aware of this major geopolitical shift than the emir of Qatar, Hamad bin Khalifa al-Thani, about to host the 28th summit of the six-nation Gulf Cooperation Council, suggested to Saudi Arabia's King Abdullah that they invite Iran's Mahmoud Ahmadinejad. Deeply concerned about Iran's nuclear ambitions, they are even more fearful of war in the Gulf -- and of Iran's formidable retaliatory capabilities. Thus, Ahmadinejad, flanked by King Abdullah and Oman's Sultan Qaboos, entered the conference hall, the first Iranian leader to attend a conclave of the six Arab monarchies across the Gulf. He lost no time proposing "the conclusion of a mutual security pact."

The Arab-Persian conflict is as old as the history of this region of the world. GCC countries (Saudi Arabia, Kuwait, Qatar, Bahrain, United Arab Emirates, Oman) have more than 700 modern combat aircraft while Iran has two dozen barely serviceable old F-14 Tomcats, bought by the late Shah before the 1979 revolution. But Iran has developed thousands of rockets and missiles that can interdict oil shipments through the Strait of Hormuz. Around 90 percent of revenue in the six GCC countries comes from oil, priced in a sliding dollar. Currently under discussion is a plan to launch a single GCC currency by 2010 that would not be pegged to the dollar, but to a basket of different currencies.

Iran also has a vast array of assets in the United Arab Emirates, three of whose tiny islands in the Gulf were annexed by Shah in 1971 when the United Kingdom relinquished its security obligations "East of Suez." Now mounted with naval guns, Abu Musa, Greater Tunb and Lesser Tunb have a commanding view of the oil's jugular vein in the Strait.

Gulf Arabs have a healthy respect for Iran's military capacities. Iran was attacked by Iraq in 1980 and fought a superior Iraqi army to a standstill over eight years and about 1 million casualties on both sides. Iran's secret weapon were tens of thousands of young suicide "volunteers" who were marched across Iraqi minefields with a golden-colored key around their necks to enter paradise and claim the 72 virgins the scriptures promised.

Today, some 500,000 Iranians are residents of the United Arab Emirates; 400,000 in Dubai alone out of a population of more than 2 million. Many of them immigrated after the Iranian revolution when the Shah was overthrown, planning to continue to Europe and North America. But many were also taken by the relaxed Dubai lifestyle and incentives offered new residents. Iranian investments in Dubai recently topped $350 billion. Some 7,500 Iranian-owned companies operate out of Dubai.

A sleepy contraband port of 25,000 devoted to gold smuggling as recently as 1971, Dubai's tallest building then had three floors. It's now a booming city state that boasts the world's tallest skyscraper (still under construction); its tallest hotel in the shape of a giant sail headed into the Gulf; its most luxurious hotels (where some junior suites start at $5,000 a night and go up to $25,000); an 18-hole downtown golf course; an indoor ski slope with ski lift; and the world's largest theme park, Dubailand. Man-made islands in the shape of a palm tree, dotted with pricey villas, have quadrupled Dubai's 25-mile coastline. A 50-mile subway and a $33 billion Dubai World Central airport with six runways and a capacity of 100 million passengers per year are also under construction. And 55 double-decker Airbus 380 super jumbos are on order. Fifty percent of the world's cranes are now in action in Dubai; 25 percent in Shanghai; 25 percent in the rest of the world.

Some of Dubai's districts are known as "Little Tehran." Iranians have their own clubs and Iranian restaurants do a thriving business throughout the Emirates. Little understood among those advocating tighter economic sanctions against Iran is that the United Arab Emirates is Iran's first trading partner. Iran imports more than $10 billion from the United Arab Emirates and orders many embargoed items with documents that guarantee Dubai as their final destination. Heavy equipment, machines, mobile phones, auto parts, communication systems are all legal commerce.

Earlier this year the U.S. government gave the United Arab Emirates a list of a number of Iranian companies that it considers "bogus" that seek to violate the U.S. embargo on Tehran. Ties between the two sides of the Gulf in Dubai are tighter than between the city-state and Washington.

Dubai is to Iran's theocracy what British-ruled Hong Kong was to China's Communist overlords -- a gigantic entrepot. Dubai's Chamber of Commerce map of its trading relations runs South-South, from Morocco to Indonesia, thus erasing the traditional North-South divide between rich and poor.

Iranians in Dubai and the rest of the Emirates have no desire to move back to Iran. Many of them were born in Dubai but cannot become Emiratis. UAE citizenship is denied non-Arabs born there. Office and construction workers and domestic help are all foreign, mostly from India, Pakistan, Bangladesh, the Philippines and South Korea. Nationals make up about 80 percent of the federal and Emirate-level civil service, but they hold only 2 percent of jobs in the private sector, which provides 52 percent of the employment in the country.

Over half a million low-skilled and poorly paid South Asians work in the Emirates, without rights or recourse for alleged abuses. Political agitation among non-Emiratis is quietly deported. Iran's intelligence network does not agitate, but it's a safe assumption Dubai's vulnerabilities are well-known and would be endangered if the Emirates should agree to restrict trade with Iran.

Most "Gulfies" are careful not to offend Iran. Qatar allowed two large U.S. military facilities to be built for the 2003 invasion of Iraq, then Iran's arch-enemy: a $100 million forward CentCom base at Al-Sayliyah and a $1 billion air base at Al-Udeid. But Qatar also paid for the now world-famous al-Jazeera global television network that is not known for its pro-American views.

With Iran, one of the world's two largest natural gas producers, Qatar, with a population of half a million, has earmarked $100 billion a year for investments in other parts of the world.

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