DUBAI (Reuters) – Iran’s most powerful figure, clerical Supreme Leader Ayatollah Ali Khamenei, urged Iranians at the start of their New Year on Tuesday to buy domestically-made goods to defeat escalating trade sanctions imposed by the West.

The United States and its allies have expanded sanctions in recent months to force Tehran to shelve its uranium enrichment programme, which they suspect is meant to develop atomic bombs. Iran says it wants civilian nuclear energy only.

Sanctions have bitten deeply into Iran’s economy, causing a price spiral and a slump in the value of the rial currency. With the country’s hardline leadership continuing to reject all foreign pressure, Iranians increasingly fear military action by Israel or the United States to take out nuclear facilities.

“This year’s slogan is national production, supporting Iranian labour and investment. The Iranian people should consume domestic products and avoid using those produced overseas,” Khamenei said in a speech on state television.

“With such an approach, hopefully the nation will overcome the conspiracies of the enemies. We pray to God to help the Iranian nation,” he added.

Nowruz, the Iranian New Year, symbolises the coming of spring and a time when Iranians make a new start through traditions dating back millennia. This year, as the pressures grow, few hold out hope that life will improve.

Those who can afford it have taken the opportunity to escape the social and religious strictures of the Islamic Republic for the glitz and glamour of the nearby United Arab Emirates.

Every year, the sizable Iranian community in the UAE — by some estimates around 400,000 — swells by tens of thousands as Iranian tourists arrive in late March. It is a chance for the well-heeled to celebrate the holidays in style by going to concerts and clubs and shopping in Dubai’s sprawling malls.

“Iranians are flooding in from all over the country and most will stay for 10 to 12 days,” says Emirates-based Saeed Kaveh, the general manager of the Persian-language Ertebat Publishing.

PARTY TIME

In recent years Ertebat has produced a Nowruz guide in Farsi that lists events and attractions for seasonal holiday-makers.

“Iranians want to swim in the sea, to party and generally have fun,” said Kaveh. “These things are forbidden in Iran and that’s why they grab and absorb people.”

“The flight was jam-packed when I came over,” said Mohammad Hosseini, a Tehran-based Iranian as he sat in the lobby of one of Dubai’s luxury beachfront hotels.

“It’s always so great to get out of Tehran. It’s such a frustrating place to live,” said the 34-year-old businessman. “But the price has rocketed. Last year, it cost around $2,000 but this time it’s closer to $4,000.”

The value of the rial has plummeted over the past year in part because of expanding sanctions. These include a ban on dealings with Iranian banks that makes it hard to obtain credit to finance imports of key goods, as well as an embargo on Iranian oil by the EU to take full effect in July.

Elsewhere in Dubai, a 20-year-old Iranian woman on holiday, who named herself only as Saghi, hopped between designer shops in the crowded Mall of the Emirates but wasn’t buying much.

“It’s so expensive,” she said, standing outside Dolce&Gabbana and discussing the rial’s weakness with her friends. “I bought shoes and a wallet but that’s it,” she said.

“I cannot afford anything,” said a fellow student and regular visitor to Dubai, “but it’s wonderful to be here, to be able to wear shorts and feel free.”

Every year, Iranian visitors contribute billions of dollars to the UAE economy but there are concerns the tightening sanctions are reining in their spending in a big way. Trade between the UAE and Iran has seen a significant drop.

“In the past, there have been up to 100,000 Iranian visitors for Nowruz but this year it is reduced by around 50 percent,” said Morteza Masoumzadeh, a member of the executive board of the Iranian Business Council in Dubai.

The UAE has cooperated with the United States to impose harsh financial sanctions but even Emirati businessman are concerned the measures are detrimental to their own economy.

ECONOMIC HARDSHIP

Away from the ostentation of Dubai, millions of Iranians are struggling to afford the traditional foods and purchase of new clothes that are traditionally enjoyed at Nowruz.

With the rial sinking, inflation in Iran has soared, a trend that has been abetted by President Mahmoud Ahmadinejad’s cost-cutting economic reforms that dropped generous food and fuel subsidies Iranians have enjoyed for decades.

The government has set up local Nowruz markets in an effort to keep the prices of food steady for the holidays – welcome relief from hardships, 43-year-old Fatimeh, a restaurant cleaner, said by telephone from Tehran.

“Prices have drastically gone up so it was harder to buy new clothes for my children this year. But there are special Nowruz markets in southern Tehran where things are more affordable.”

Khamenei’s new year message proclaimed successes in industrial and technological fields. But that perception was not shared by many ordinary Iranians.

“There is the talk of war against us and many businesses are already struggling to survive with these sanctions imposed on us. I hope the situation gets better in the new year,” said 46-year-old Ali, who works in his family’s carpet export company. “I am afraid this year will be a bad year for my country.”

Over the last year, many thousands of workers have been laid off by businesses that have closed because of the dramatic increase in financial pressures. In many cases costs have shot up and orders have dwindled.

Struggling to improve their prospects, many Iranians dream of leaving the country for a better life elsewhere.

“I look around me and most of my friends have left the country. Life is only enjoyable when you are with your loved ones. Without them it is really like any other day,” said Neda, a 27-year-old art student.

“It doesn’t really feel like Nowruz this year.”

As he prepared for an afternoon on the beach in Dubai, Mohammad Hosseini said a point could come soon where he would have to lay off his 30 employees, shut down his transport business and leave Tehran.

“It’ll be very sad, very emotional but the option is on the table. We’re thinking about it seriously. This business is my baby. Eleven years of investment and hard work – I can’t believe we’re getting to this point.

“We have always tried to stay optimistic about the future but now I’m thinking may there isn’t a bright light at the end of the tunnel.”