[A-List] Europe Resists U.S. Push to Curb Iran Ties

["Yoshie Furuhashi" <critical.montages@xxxxxxxxx>]

The headline is better than the story in this case, alas. -- Yoshie

<http://www.nytimes.com/2007/01/30/washington/30iran.html>
January 30, 2007
Europe Resists U.S. Push to Curb Iran Ties
By STEVEN R. WEISMAN

WASHINGTON, Jan. 29 — European governments are resisting Bush
administration demands that they curtail support for exports to Iran
and that they block transactions and freeze assets of some Iranian
companies, officials on both sides say. The resistance threatens to
open a new rift between Europe and the United States over Iran.

Administration officials say a new American drive to reduce exports to
Iran and cut off its financial transactions is intended to further
isolate Iran commercially amid the first signs that global pressure
has hurt Iran's oil production and its economy. There are also reports
of rising political dissent in Iran.

In December, Iran's refusal to give up its nuclear program led the
United Nations Security Council to impose economic sanctions. Iran's
rebuff is based on its contention that its nuclear program is civilian
in nature, while the United States and other countries believe Iran
plans to make weapons.

At issue now is how the resolution is to be carried out, with
Europeans resisting American appeals for quick action, citing
technical and political problems related to the heavy European
economic ties to Iran and its oil industry.

"We are telling the Europeans that they need to go way beyond what
they've done to maximize pressure on Iran," said a senior
administration official. "The European response on the economic side
has been pretty weak." The American demands and European responses
were provided by 10 different officials, including both supporters and
critics of the American approach.

One irony of the latest pressure, European and American officials say,
is that on their own, many European banks have begun to cut back their
transactions with Iran, partly because of a Treasury Department ban on
using dollars in deals involving two leading Iranian banks.

American pressure on European governments, as opposed to banks, has
been less successful, administration and European officials say.

The main targets are Italy, Germany, France, Spain, Austria, the
Netherlands, Sweden and Britain, all with extensive business dealings
with Iran, particularly in energy. Administration officials say,
however, that Chancellor Angela Merkel of Germany, the current head of
the European Union, has been responsive.

Europe has more commercial and economic ties with Iran than does the
United States, which severed relations with Iran after the revolution
and seizure of hostages in 1979.

The administration says that European governments provided $18 billion
in government loan guarantees for Iran in 2005. The numbers have gone
down in the last year, but not by much, American and European
officials say.

American officials say that European governments may have facilitated
illicit business and that European governments must do more to stop
such transactions. Treasury Secretary Henry M. Paulson Jr. has said
the United States has shared with Europeans the names of at least 30
front companies involved in terrorism or weapons programs.

"They've told us they don't have the tools," said a senior American
official. "Our answer is: get them."

"We want to squeeze the Iranians," said a European official. "But
there are varying degrees of political will in Europe about turning
the thumbscrews. It's not straightforward for the European Union to do
what the United States wants."

Another European official said: "We are going to be very cautious
about what the Treasury Department wants us to do. We can see that
banks are slowing their business with Iran. But because there are huge
European business interests involved, we have to be very careful."

European officials argue that beyond the political and business
interests in Europe are legal problems, because European governments
lack the tools used by the Treasury Department under various American
statutes to freeze assets or block transactions based on secret
intelligence information.

A week ago, on Jan. 22, European foreign ministers met in Brussels and
adopted a measure that might lead to laws similar to the economic
sanctions, laws and presidential directives used in the United States,
various officials say. But it is not clear how far those laws will
reach once they are adopted.

The American effort to press Iran economically is of a piece with its
other forms of pressure on Iran, including the arrest of Iranian
operatives in Iraq and sending American naval vessels to the Persian
Gulf.

American officials refuse to rule out military action. On Monday,
President Bush said in an interview with National Public Radio that
the United States would "respond firmly" if Iran engages in violence
in Iraq, but that he did not mean "that we're going to invade Iran."

Several European officials said in interviews that they believe that
the United States and Saudi Arabia have an unwritten deal to keep oil
production up, and prices down, to further squeeze Iran, which is
dependent on oil for its economic solvency. No official has confirmed
that such a deal exists.

The Bush administration has called on Europe to do more economically
as part of a two-year-old trans-Atlantic agreement in which the United
States agreed to support European efforts to negotiate a resolution of
the crisis over Iran's nuclear program.

Typically, American officials say, European companies that do business
with Iran get loans from European banks and then get European
government guarantees for the loans on the ground that such
transactions are risky in nature.

According to a document used in the discussions between Europe and the
United States, which cites the International Union of Credit and
Investment Insurers, the largest providers of such credits in Europe
in 2005 were Italy, at $6.2 billion; Germany, at $5.4 billion; France,
at $1.4 billion; and Spain and Austria, at $1 billion each.

In addition to buying oil from Iran, European countries export
machinery, industrial equipment and commodities, which they say have
no military application. Europeans also say that courts have
overturned past efforts to stop business dealings based on secret
information.

At least five Iranian banks have branches in Europe that have engaged
in transactions with European banks, American and European officials
say.

The five include Bank Saderat, cited last year by the United States as
being involved in financing terrorism by Hezbollah and others, and
Bank Sepah, cited this month as involved in ballistic missile
programs.

A directory of the American Bankers Association lists Bank Sepah as
having $10 billion in assets and equity of $1 billion in 2004. It has
branches in Frankfurt, Paris, London and Rome. The United States
Embassy in Rome has called it the preferred bank of Iran's ballistic
missile program, with a record of transactions involving Italian and
other banks.

Bank Saderat had assets of $18 billion and equity of $1 billion in
2004, according to the American Bankers directory. Three other Iranian
banks — Bank Mellat, Bank Melli and Bank Tejarat — have not been cited
as involved in any illicit activities, but many European officials say
they expect the Treasury Department to move against them eventually.

European officials say that the European Commission will meet in
mid-February and approve a measure paving the way for freezing assets
and blocking bank transactions for the 10 Iranian companies and 12
individuals cited in an appendix of Security Council Resolution 1737,
adopted in December.

--
Yoshie
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