Germany Gets Serious About Squeezing Iran

Give Angela Merkel credit. For all her rhetoric to the contrary, Germany’s Chancellor has not always been an ardent supporter of international pressure on Iran. In fact, over the past half-decade, her government has perpetuated Germany’s historic Janus-faced policy toward the Islamic Republic, supporting UN and European sanctions against Iran’s ayatollahs while simultaneously nurturing a thriving economic partnership with them. Of late, however, Merkel and her administration seem to have had a change of heart. In recent days, Germany has signaled its willingness to sign on to a European Union effort to sanction the European-Iranian Trade Bank, or EIH. (A formal designation by the EUis expected on Monday).

The move is deeply significant. The Iranian-controlled, Hamburg-based bank is widely known to be a key financial conduit for the Islamic Republic, facilitating billions of dollars in trade between Iran and Europe—and contributing substantially to Iran’s nuclear and ballistic missile programs in the process. According to U.S. and international intelligence assessments, EIH serves as a pass-through for arms deals involving Iran’s acquisition of WMD-related components; as a financial lifeline for Iran’s feared clerical army, the Iranian Revolutionary Guard Corps; and as an economic conduit which has facilitated the transfer of millions of dollars in ballistic missile technology to the Islamic Republic in recent years. This role led the U.S. Treasury Department to formally blacklist EIH in September of 2010.

Until recently, however, Germany has been reluctant to follow America’s lead. For years, the Merkel government has dragged its feet on similarly proscribing EIH, citing its potential financial liability to investors that could be disadvantaged if the bank were shuttered. It has also nixed proposals to do so put forth by other nations; as recently as February, Berlin reportedly blocked a French bid to designate EIH as a potential target for future EU sanctions.

The hesitance is understandable. The partnership that has developed between Berlin and Tehran over the past three decades isn’t just politically expedient, it’s highly lucrative. Germany represents Iran’s top trade partner in the European Union. And, according to official data from the German Federal Statistics Office, bilateral trade between Berlin and Tehran last year actually rose by some five percent (to just over $4.17 billion), despite multilateral efforts to economically isolate the Islamic Republic. German firms have gotten the message; although some (like Siemens) have at least pledged to curtail their trade with Iran, a great many—including ThyussenKrupp and Daimler—still do a booming business with, and within, the Islamic Republic.

Germany is helping Iran in other ways as well. By some estimates, the country provides as much as 60 percent of the critical technology used by Iran to exploit its massive natural gas reserves. With U.S. sanctions now beginning to squeeze Iran’s oil industry, such assistance is nothing short of a lifeline for Iran’s beleaguered energy economy. It also puts Berlin very much on the wrong side of the widening international effort to derail Iran’s march toward the bomb.

Perhaps this realization has contributed to the Merkel government’s more critical stance. But timing likely plays a large role as well. Germany’s hardening of policy against EIH comes amid new movement within the European Union for sanctions aimed both at Iran’s atomic endeavor and its repressive domestic conduct. And it precedes Merkel’s early-June visit to Washington, where the global drive to frustrate Iran’s nuclear ambitions is sure to take center stage in her discussions with White House officials.

Still, the German-Iranian alliance is liable to prove resilient. The economic bonds between Berlin and Tehran run deep, and there is bound to be no shortage of German companies agitating for a return to “business as usual” in bilateral trade with the Islamic Republic in the months ahead. Indeed, Germany’s recent (and distinctly unhelpful) role in temporarily helping India circumvent international restrictions on oil trade with Iran suggests that its status as an enabler of the Iranian regime is far from a thing from the past.

Nevertheless, Germany’s support of sanctions against EIH should be seen for what it is: a significant evolution in Berlin’s Iran policy, and a major step forward for international efforts to cut off a critical conduit for Iran’s burgeoning strategic arsenal. When she comes to Washington, American policymakers should commend Chancellor Merkel for facilitating both. But they also should make clear that they expect these changes to be more than simply temporary.

This article by Forbes brings up many a good point. It identifies a Germany that falls in line with the most recent UNSC resolution provisions (1929) put toward the Iranian regime and their belligerent nuclear development activities, yet also a Germany that is still itching to do business with the country. The author strikes a chord when he comments,

It also puts Berlin very much on the wrong side of the widening international effort to derail Iran’s march toward the bomb.

Perhaps this realization has contributed to the Merkel government’s more critical stance. But timing likely plays a large role as well. Germany’s hardening of policy against EIH comes amid new movement within the European Union for sanctions aimed both at Iran’s atomic endeavor and its repressive domestic conduct.

The recent trend of increasing international isolation on the intolerable and damaging acts of the Iranian regime are not just from European nations but also South Korea, Australia, Canada and Japan, just to name to a few. The overall effect of these sanctions is to demonstrate that Iran can be a viable and respected player within the global market if it chooses to play by the rules all other civilized and developed nations adhere to. The international community wishes Iran to be the valuable and necessary international partner that it has the potential to be, yet it chooses a path of deception, and armament build ups.

Merkel I believe is finally capturing the true essence of the situation and falling in line with many of her European as well as international counterparts in pursuing what is the most non-lethal, yet aggressive and assertive policy toward the belligerent Iranian regime. Germany has helped the Iranian natural gas trade in years past however this is relatively minor in the grand scheme of things, especially if Germany does not allow the Iranian natural gas extraction capabilities to exceed a dangerous amount that would put them at a more economic competitive edge.

As the article’s author suggests, this is a good move toward a more stable and secure international community of the future, and Merkel should be praised for her recent efforts in helping to rid the Iranian regime of all its belligerent and destructive habits.

Brief Overview of Iranian Energy Sector:

The UNSC resolution sanctions target their energy sector, which in turns effects their economy at large with the overall goal of not allow Iran the necessary revenue to advance their secretive nuclear development program further and faster than current levels. Their natural gas infrastructure is severely limited and all of the natural gas being extracted goes to powering the Iranian petroleum production. Due to the effectiveness of the sanctions, Iran uses a substantial portion of its extracted petroleum on powering its own country’s energy needs. Iran overall produces a mere 5 billion barrels of oil per day and the cost to produce each barrel is staggering compared to other nations like Saudi Arabia. For example, what costs the Wahhabis $2 to $3 per barrel costs the Iranians roughly $15 to $17 dollars. The Iranians then are left with no option but to sell whatever is left over for export at market prices, creating a severe loss and usually the reason why Iran always demands OPEC increase the price of oil.

This policy in the recent months has shown to work and has caused immense pressure on the Iranian regime to follow policies that are more conducive toward global economic and security cooperation and nothing to the contrary.

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