The ship’s captain asks if I’m looking to smuggle something. We’re standing alongside a busy stretch of Port Saeed, on Dubai Creek, which is not actually a creek but a mucky Palmolive-green waterway, trash-strewn and oily, that stretches about eight miles through a thicket of shiny skyscrapers before draining into the Persian Gulf. It’s March, the sun is blasting down; the air is redolent of diesel fuel. The captain’s name is Khaled, and he’s headed to Bandar Abbas, Iran—about 100 miles northeast, nine hours by sea. “We’re leaving in a week,” he says.

The question of smuggling isn’t so far-fetched. It comes up a lot as I walk around and talk to the sailors. There are rumors of captains moving weapons, cigarettes, drugs, even nuclear equipment. Khaled, an Iranian former taxi driver with a mashed nose and tobacco-stained teeth, points at his 60-foot dhow. It’s flat-bottomed and has a swooping bow, a glassed-in wheelhouse, and a bashed-up hull that gives it the appearance of having done battle. Dozens of others are moored four and five feet deep, mostly destined for Iran. The scene is chaotic, with swinging cranes, fast-moving cargo trucks, and hundreds of dockworkers handling mountains of boxes and household appliances. (View a pop-up graphic.)

Khaled moves in close and then makes a confession: “I have many American products on my boat,” he says. Of the dozens of boxes rising above the gunwales, he calculates, about half hold American goods—and all are headed to Iran, despite a firm U.S. trade embargo meant to choke the life out of the so-called rogue state.

Khaled’s cargo, however, is either unmarked or simply reads u.a.e.  His boss had the American goods repackaged when they arrived at the Dubai shipping terminals Jebel Ali and Port Rashid “to keep things quiet.” Other portside captains are less discreet. I see boxes of Carrier air-conditioning units and cartons of Crest toothpaste, and farther down the row are boxes labeled black & decker and coca-cola, along with stacks of Goodyear tires. I also spy a pallet of new Hewlett-Packard All-in-One printers, probably 200 of them, and another of Xerox copiers. When I ask a different Iranian captain about all these things going to America’s enemy, he responds, “It’s business, but please don’t tell your president.”

Despite sanctions aimed at stemming the sales of U.S. products to Iran, the goods are still getting there. U.S. sanctions were first imposed against Iran in 1979, during the hostage crisis. The current embargo dates back to 1987, though it has since been tightened, and U.N. sanctions have been added. U.S. companies are forbidden to sell goods to Iran or knowingly provide them to a company that will sell them to Iran, with a few exceptions, including medical supplies. The rules are enforced by the U.S. Treasury and Commerce Departments, and violations carry civil as well as criminal penalties. Although American companies aren’t allowed to send goods directly to Iran, the U.A.E. does not impose the same limitations on its local distributors. Over time, that loophole has spawned what many agree is a decidedly murky trade, operating mainly under the public’s radar. The business is estimated to be worth billions of dollars annually, much of which goes directly to the bottom line of American companies. Each year, the U.S. sends more goods to Dubai, and Dubai, in turn, sends more goods to Iran. But the scope of the business isn’t really clear without a trip to Iran.

Three days later, I’m in Tehran. Much of the time, the metropolis is shrouded in a steely haze produced by the horrendous and perpetual traffic jams that snarl the streets. One of my first stops is the Capital Computer Complex, in the affluent northern part of the city. The seven-floor mall is a warren of stores with wall-to-wall electronics, everything up-to-the-minute. Some of the products are from Japanese and Chinese manufacturers, but a lot of them are American: Dell laptops; Apple iPods, MacBooks, and iPhones; H.P. handhelds; Palm Pilots; Kodak cameras; Microsoft software; and Western Digital hard drives.

In other parts of the city are Black & Decker stores with signs in both English and Farsi and shops selling the same H.P. printers I saw in Dubai. There are pharmacies stocked with Head & Shoulders, the newest Gillette Fusion razor, and more flavors of Crest than I have seen in my neighborhood store in New York City.