- The Washington Times - Wednesday, July 14, 2010

Next week, when European foreign ministers meet to codify new sanctions against Iran, the world will be looking to the Islamic republic’s largest trading partner on the continent: Germany.

In the past three weeks, Germany has taken steps to close some Iranian banks operating in the country, according to a senior German government official who spoke with The Washington Times on the condition of anonymity because of the sensitivity of the topic.

Meanwhile, an analysis of Iran’s banking sector by former U.S. Treasury Department analyst Avi Jorisch found that five German banks continue to do business with Iranian entities that are designated by the most recent U.N. Security Council sanctions.

Mr. Jorisch also found that as of June 30, four major Iranian banks sanctioned by the Treasury Department or the U.N. Security Council continued to operate in Germany.

After trying for its first year in office to reach a diplomatic entente with Iran, the Obama administration has switched to a policy aimed at pressuring Tehran’s leaders to abandon its uranium-enrichment and nuclear programs.

The pressure track has several components that stem from U.N. Security Council Resolution 1929, a fourth sanctions resolution against Iran that designates banks, individuals and front companies associated with its nuclear program and support for terrorism.

Last month, President Obama signed legislation that threatens to bar foreign companies from the U.S. economy if they do significant business in Iran.

On July 26, the European Union’s foreign ministers will meet to discuss in detail new sanctions that could limit Iranian shipping lines and the insurance companies that underwrite Iranian exports.

“Concerning the activity of Iranian banks in Germany: Branches and subsidiaries of U.N.- and EU-designated Iranian banks are frozen and not operating,” a senior German government official said in an interview this week.

The official added that, specifically, the Frankfurt branch of Iran’s Bank Sepah is allowed to engage only in “activities related to the closure of its business, i.e. finishing its existing obligations. All the before-mentioned Iranian banks are submitted to strict monitoring; they cannot enter into any new business.”

Bank Sepah has been implicated in both the procurement of nuclear technology and the financing of terrorist organizations, Mr. Jorisch said.

“The closure of Bank Sepah is an important and significant first step,” Mr. Jorisch said. “But German authorities should shut down the designated Iranian branches operating in Germany and German financial institutions should cease providing financial services to designated Iranian banks.”

In addition to Bank Sepah, Mr. Jorisch identified in his recent research Bank Melli and Bank Saderat as having branches in Hamburg and Frankfurt.

Requests for comment from the Frankfurt branch of Bank Sepah went unanswered.

In addition to Iranian banking, Germany’s trade with Iran is big business.

German trade with Iran in the first four months of 2010 totaled $1.8 billion, according to the German-Iranian Chamber of Commerce in Hamburg. That figure increased by 20 percent from the same period in 2009.

In 2008, Germany was the second largest exporting nation to Iran, behind only China, doing $5.7 billion in trade with the Islamic republic that year. The volume of trade increased by 10.5 percent from 2007, according to official German statistics.

Matthias Kuntzel, a German political scientist who has closely watched Germany’s trade with Iran, said he was pleased that some Iranian banks would be closing their doors.

But he pointed out that some business between Germany and Iran continues.

“Commercial trade with Iran from Germany goes up and down,” he said. “In March, there was a remarkable increase in trade; in April there was a decline.

“We don’t have the figures yet, but it’s obvious there is a lot of business going on. To give an example, even the official foreign business agency of the German government is advertising industrial meetings with Iranians,” he said.

Mr. Kuntzel provided copies of announcements from the official export promotion newsletter of Germany’s ministry of economics and technology known as IXPOS. In August, there was an advertisement for a meeting in Hamburg about export credit guarantees for trade with Iran. In November, IXPOS advertised for a trade show on renewable energy in Iran.

“You have these announcements and they give the signals to exporters to Iran that nothing has changed,” Mr. Kuntzel said. “I would like there to be different signals.”

Holger Beutel, a spokesman for Germany’s Federal Office of Economics and Export Control (BAFA), said in an interview Wednesday that the IXPOS newsletters were not a statement of German policy.

“These are tools or a platform where foreign companies are looking for trade,” Mr. Beutel said of the announcements in the IXPOS newsletter. “It is not a statement of policy.”

Mr. Beutel, whose agency approves the dual-use contracts for German companies seeking trade with Iran, said the process for approving sensitive exports to Iran involved a strict risk assessment.

“From the legal perspective, it is rather strict, even though it is not a total embargo,” he said. “From that time, some dual-use exports are possible but only after a thorough risk assessment on our side.”

Dual-use exports are materials or technology that can have a civilian and military function.

Mario Mancuso, the former U.S. commerce undersecretary for industry and security between 2007 and January 2009, said in an interview, “I am very worried about some German companies.”

He added that German companies also have made progress in curbing sensitive trade to Iran.

“In the last year German companies have become more familiar with the breadth of dangers these regulations try to address. At the same time, the German technology industry is comprised of a large number of small- to midsized, often family, businesses that still don’t know about these regulations,” Mr. Mancuso said.

The German engineering giant Siemens announced this year that it would end new business with Iran. Last year, The Washington Times reported that a Siemens-Nokia joint venture sold Iran a sophisticated kind of electronic surveillance software and equipment known as a monitoring center.

“One of the problems with the international dual-use framework, while in principle there is agreement on what the items are, there is country-by-country difference in terms of the vigor with which those items are enforced,” Mr. Mancuso said.

The future of Germany’s trade with Iran likely will be set in meetings with European foreign ministers this month.

“Germany strictly implements all U.N. sanctions and has been one of the advocates for EU sanctions against Iran that go well beyond the U.N. sanctions already at present,” a senior German government official told The Washington Times.

“Furthermore, the government works on discouraging German companies to do business with Iran,” the official added. “Even though they cannot be prevented from doing business, as long as other sanctions are not place more and more companies, like for instance Siemens, have decided to do so.”

Mr. Kuntzel said he is taking a wait-and-see approach.

“Everything depends on which direction the German government will choose in preparation of the very important meeting of the European foreign ministers on July 26,” he said.

“Everything depends on the details. Now you could put on the breaks from the German side and continue business as usual, or you could do everything to isolate the Iranian regime and pressure it.”

• Eli Lake can be reached at elake@washingtontimes.com.

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