Meanwhile, in a footnote to its most recent annual report, Xerox states that it terminated business ties with Iran in 2006 but still maintains local “legacy obligations.” The profits from the business, while declining, are robust—$7.7 million in 2007, down from $9.6 million the year before.

American firms, even those using proxies, don’t want to talk or even speculate about how their products traveled from Dubai to Iran, but the merchants I meet in Tehran are more open. At the Capital Computer Complex, a man who sells only Dell laptops and whose store has Dell boxes piled on the floor and stuffed onto shelves, admits that he ordered everything from Dell’s distributor in Dubai. Another man selling almost exclusively H.P. products tells me he did business through an office in Jebel Ali, while a man selling Apple iPhones, MacBooks, and iPods will say only that he has “relationships” in Dubai. (An Apple spokesperson says the company obeys U.S. laws.)

For the most part, American goods in Tehran are 20 to 40 percent more expensive than they are in America. An 8-gigabyte first-generation iPhone, for example, cost $400 in New York; at the Capital Computer Complex, after some haggling, it can be had for $700. A new Dell XPS 1M330 sells for $1,800, about $300 more than in the U.S.

The Iranian merchants say that most U.S. products land in Iran either at Tehran’s Imam Khomeini International Airport or at Bandar Abbas, the biggest port city in southern Iran and the destination of many of the creek dhows. Bandar Abbas is a hot, flat, salty place that wouldn’t be much if it weren’t for the port and the Iranian naval base. From a boat in the Strait of Hormuz, I watch the dhows and tankers streaming in and out. At one point, I meet a captain whose ship, just in from Dubai, carries a half-dozen new American vehicles, including two Chevy Blazers.

It isn’t the volume of boats or the number of boxes piled on their decks that surprises me. It is the visible Iranian military presence. The port, tucked away in an inlet, is fortresslike, bristling with defenses. Double-engine speedboats buzz back and forth constantly, and armed men patrol the port entrance. We stare at the port for only a couple of minutes before our captain tells us we are being watched. “It’s time to go,” he says. “We are much too close.”

Although a shared culture and history connect the U.A.E. to Iran, the two countries are not natural partners. While Iran is Persian and its religion is primarily Shia Islam, the U.A.E. is predominantly Arab and Sunni and is closer in outlook to Saudi Arabia. In addition, Iran has a long-running dispute with the U.A.E. over three islands that Iran occupies.

The ruling sheiks of the U.A.E. are allies of both Iran and the U.S. They have said publicly that they support peace in the Middle East, but not everyone I speak to in Iran really believes that the sheiks want to end the contretemps, let alone seriously lobby the White House for U.S.-Iran rapprochement. The strife has been bad for Iran but very good for the emirates.

Yet as O’Brien notes, “The U.A.E. walks a fine line.” For years, it hadn’t had to make much of a political commitment to either country, priding itself on being politically agnostic and strictly focused on business. In the spring of 2006, however, its comfortable middle ground began to be threatened. Discussions between the U.A.E. and U.S. about the emirates’ trade with Iran led to heated public statements and threats of intervention from Washington. As tension between Iran and the U.S. flared in the spring of 2007, the U.A.E. promised to impose its own version of export controls, focused mainly on intercepting sensitive materials. The sheiks instituted the new law in August and, as if to demonstrate its commitment, 40 local companies said to be involved in illegal exports were shuttered and an Iran-bound freighter carrying “hazardous chemicals” was impounded.

It’s uncertain how much has actually changed. The Commerce Department notes that it is optimistic about the new controls, though it wouldn’t comment about its most recent inspections. Hashem­pour, however, says trading continues as usual. “If people want it, the goods will go to Iran.”

  Even if Dubai does focus on sensitive goods, the broader issue remains unresolved. The sheikdom appears to avoid the conversation, and dealing with the question in the future may prove complicated. Some blame the U.S. for not taking a more punitive stance toward its own companies. The Treasury and Commerce Departments have each sent only one inspector to the U.A.E. And while penalties have increased for businesses discovered to be dealing directly or indirectly with Iran—with fines of up to $1 million for companies and potential prison time for individuals—proving guilt is particularly difficult. Which companies have shipped products knowing that they would end up in Iran, and which really have no idea?

It is an especially tough question to answer, with so many levels of middlemen and more than 700 American companies now operating in the emirates.

Between the two agencies, about two dozen cases were successfully prosecuted in the U.S. in 2007, but these certainly don’t appear to have offered a compelling reason for other companies to pull back.

This is Dubai’s conundrum. “If the U.S. is serious about shutting this business down and making sanctions effective,” the Eurasia Group’s Younsi says, it is “going to have to devote a lot more resources to this—not just enforcement and staff—but more diplomatic leverage on the U.A.E., pushing hard to get them to do this.”

Which raises a larger question: Does the U.S. really care about goods going to Iran? Is overlooking this trade a way of repaying Dubai for its friendship?

In February, Sheik Mohammed climbed into his private jet and headed to Iran. After meeting with the emir, Iranian President Mahmoud Ahmadinejad declared that “the U.A.E. prime minister’s visit is proof that U.S. policies will not have any impact in the region,” according to the Asia Times. It was as though the sheik had not yet decided exactly how far the U.A.E. would take its promised reforms when it comes to trade with Iran.

In one of my last days in Dubai, I walk along the creek looking for anything suggesting that life in Dubai has altered, that the middlemen have been scared off, that U.S. companies have slowed shipments, or that anything has curtailed the trade.

I wander around in the sun for a while, hunting for a customs office, trying not to get taken out by trucks and men running around with boxes, some with American brand names and logos on their sides. Boxes are all over the place, mountains of them, and the dhows brim with sailors and workers. The first customs booth is locked and abandoned, but the second has some activity. Two men are washing two white S.U.V.’s, while two other men in immaculate white robes look on. One of the S.U.V.’s has a sticker reading v.i.p. on its rear window.

“It’s a beautiful day,” Ibrahim al-Rubati, the head of the station, observes as the port buzzes behind him. I say that they look busy, and he laughs. We talk about the hundreds of ships that come and go, to Somalia and to Iran. I mention all of the U.S. products flowing northeasterly. He nods, and his associate alerts the car washer to a smudge on a window.

“We make everything easy here,” Rubati says finally. “Things come and go fast.”

I ask if anything has changed as far as policy at the creek in the past year or so. He shakes his head. “Not here.”

It looks chaotic, I say. He nods again. “I don’t understand the political situation with U.S. and Iran. It is a sad time,” he says. “But we just make things easy, and the money comes from that. Whatever is happening outside of this country does not matter to us. This is Dubai.”