German firms feel US heat on trade with Iran

Oct 30, 2007, 11:52 GMT

Berlin - German companies have taken note of stern warnings that if they trade with Iran they will face unpleasant repercussions in the US.

'From our perspective it's very important that, if you're going to do business with Iran, you're going to have problems doing business in the United States,' Vice President Dick Cheney said last Friday.

Major German banks halted dealings with financial houses in Tehran after US government representatives visited their Frankfurt headquarters in July.

The message, delivered behind closed doors by US Under Secretary for Terrorism and Financial Intelligence Stuart Levy, to Deutsche Bank, Commerzbank and others was clear: wind down your business, and quickly.

The banks had been placed on a list of institutions doing business with rogue states compiled by the US Securities and Exchange Commission (SEC). BASF and Siemens were also on the list.

Despite mutterings of 'blackmail,' the banks complied, although they are now openly pressuring the government for German or European guidelines to head off US pressure in the future.

Germany's Sueddeutsche newspaper reported Tuesday German government officials had complained to administration officials in Washington about the pressure, noting that it was not covered by US sanctions legislation.

The German Office for Foreign Trade (BFAI) said Tuesday exports to Iran over the first seven months of this year had declined by 18 per cent compared with the same period last year.

Urging German companies to check whether their dealing were in conflict with strict new US sanctions imposed last week, the BFAI noted that 'the withdrawal of European banks is partly responsible for the strongly declining trend in exports to Iran.'

The German government has wound down its Hermes export credit guarantees. The BFAI noted that Hermes credits were being granted only under more restrictive conditions and that their costs had risen.

Hermes cover for exports to Iran had fallen by a third over 2006, it said.

Nevertheless, German companies turned over some 4.12 billion euros (5.9 billion dollars) in exports to Iran last year, and even a drop by a fifth would mean exports of well above 3 billion euros this year.

The German attitude to sanctions on Iran is at best ambiguous. Looking ahead in optimism, the BFAI says in a recent economic trends survey: 'If there is a relaxation of tensions, new projects could be financed that would lead to large projects and foreign investments.'

It noted that German products enjoyed a good reputation in the region for quality and reliability.

European countries are awaiting the report on Iran's uranium enrichment programme by the International Atomic Energy Agency (IAEA) due in November before deciding how to proceed.

Europe holds key cards in making sanctions on Tehran effective.

European companies have delivered much of the engineering technology Iran uses to extract and process its vast natural resources.

Countries like China and Russia would not be able to provide the spare parts necessary to keep the machinery running.

The frustration at this German ambiguity is palpable in the US and in Israel.

The Sueddeutsche reported the Israeli embassy in Berlin saw as 'counterproductive' events like a recent business gathering near Frankfurt on marketing opportunities for German exporters in Iran.

Mistrust over the issue was growing on both sides of the Atlantic it said.

Karl-Theodor zu Guttenberg, a nuclear proliferation expert who sits for Chancellor Angela Merkel's Christian Democrats (CDU) in the Bundestag, warned the latest salvo from Washington was intended 'to prepare for a military strike' on Iran.