The latest sanctions on Iran will harm trade with the United Arab Emirates, an Iranian business official said on Tuesday, as UAE authorities said the embargo must not hurt legitimate commerce.

"The reality is that this kind of sanctions on Iran will have a negative impact on the trade in the UAE, particularly in Dubai -- there is no question about it," said Morteza Masoumzadeh, vice president of the Iranian Business Council in Dubai.

Because of the sanctions, "the cost of the business has gone up, the (shipping) insurance is a problem," he said.

Sanctions do not apply to various types of export cargo from Iran, Masoumzadeh said, but insurance companies will still "say that we cannot cover a ship to go to Iran for loading cargo from Iran to outside.

"The market, it's something like a panic when Iran and Iranian ports (are) coming into the picture," he said.

Iran is a significant UAE trading partner, with trade volume between it and the emirate of Dubai alone estimated at about 10 billion dollars a year, mostly imports from the Islamic republic.

"I think it is extremely important to have that balance right, between our international commitments on the one hand and... the fact that a lot of the transactions that we do have (with Iran) are legitimate," the UAE's minister of state for foreign affairs, Anwar Gargash, was quoted as saying in Gulf News.

Yousef al-Otaiba, the UAE's ambassador to the United States, made a similar remark in The National newspaper.

"We do a significant amount of trade with Iran. It cannot be all illicit and it can't be all illegal," Otaiba was quoted as saying.

"What we're trying to do is sift the good from the bad, and make sure nothing legitimate gets harmed by sanctions," he said.

However, the UAE is implementing the UN sanctions "very openly," said Otaiba.

"That is not something up for debate," added the envoy, who was speaking at a conference in the UAE capital Abu Dhabi.

Gargash said for his part that the United Arab Emirates was committed to "the global consensus that usually produces (UN) Security Council resolutions."

The UAE reportedly began taking steps to implement the latest UN sanctions against Iran in June.

The UAE central bank ordered the freezing of 41 bank accounts as a result of the sanctions on Iran, according to Emirates Business daily.

And the UAE business and aviation transport hub of Dubai also closed down the offices of 40 firms suspected of breaching the sanctions, Gulf News reported.

US Undersecretary of Treasury for Terrorism and Financial Intelligence Stuart Levey wrapped up a two-day trip to the UAE on Monday, the US embassy said.

Levey is on a tour of the UAE, Bahrain and Lebanon this week "to discuss the new UN Security Council Resolution last June imposing a fourth round of sanctions on Tehran," official WAM news quoted him as saying.

He warned that "as Iran becomes more isolated and is driven from other markets, there will be greater attempts to engage in evasive conduct and therefore simply keeping a steady vigilance is not good enough," WAM said.

The Security Council hit Iran with the fresh sanctions on June 9 over its controverisal nuclear programme.

The United States and European Union have since imposed even tougher punitive measures of their own, which contain provisions to penalise Tehran's trading partners.