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Midnight at the OasisDubai's visionary rulers have avoided political controversy, but that will likely end in 2007.

By Ian BremmerPosted Wednesday, Jan. 10, 2007, at 2:57 PM ET

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Seth Stevenson visited Dubai to figure out "what sort of mania drives this small, lonely desert outpost to begin construction on the tallest skyscraper in the world?"

The controversy over Dubai Ports World's failed bid to acquire operations at several U.S. ports may have been largely forgotten in the United States, but it's alive and well in the Gulf. The Emirates were taken completely by surprise by the ports uproar in February 2006, and the sense of grievance in Dubai lies just beneath the surface of any conversation on U.S. policy.

But the greatest source of pessimism in the region centers on Tehran. The most provocative speech during the forum came from Ali Larijani, Iran's top national-security official and lead nuclear negotiator, who pointedly rejected the prospect of talks with the United States until Washington renounces its "unilateralist policy" in the region and completely withdraws U.S. troops. (He was deliberately vague on whether he meant from Iraq or the entire Middle East.)

Without so much as perfunctory mention of the importance of diplomacy, Larijani complained that the United States wants Iranians to "spend their time producing mineral water and tomato paste" and asserted that under no circumstances would Iran renounce its right to a nuclear program. He then called on his visibly uneasy Arab audience to develop nuclear programs of their own and to join Iran in the creation of a nuclear OPEC.

This is where Middle East politics crashes the gates of Dubai's prosperous isolation. What local officials (and investors) don't yet seem to realize is that, as the international conflict over Iran's nuclear program comes to a head, Dubai will become increasingly (and directly) involved.

The U.S. Treasury Department is now pressing a number of states to freeze the assets held in their banks of high-ranking Iranian officials with connections to the country's nuclear program. Dubai is the primary conduit for Iranian capital flows. That's a primary reason why President George W. Bush, Vice President Dick Cheney, and former Defense Secretary Donald Rumsfeld passionately, though unsuccessfully, defended Dubai Ports World during the controversy last year. Still, U.S. ties with Dubai are strong—and U.S. pressure for Sheik Mohammed's assistance on Iran will continue.

Iran still has plenty of influence with Dubai's leadership, as well. Tehran recently filed a formal protest with the Emirates government over a decision to allow an Iranian dissident to speak there, quickly winning a government reversal on the issue. Iranian President Mahmoud Ahmadinejad has complained directly to the sheik about his willingness to allow U.S. troops to train on his territory. Anxious as ever to ensure politics does not interfere with business, Sheik Mohammed's government would very much like to avoid even the appearance of choosing sides. In 2007, that will no longer be possible.