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The Italo-German Double Game in Iran

Benjamin Weinthal
17th January 2011 - Wall Street Journal Europe

In 2010, Germany and Italy put themselves further on the wrong side of history. Although both countries agreed last summer to support new European Union sanctions against Iran, the latest data show that both countries have increased their trade with the Islamic Republic. As Tehran continues its illicit nuclear program, Berlin and Rome are extending a commercial life line to the regime.

Despite Chancellor Angela Merkel's repeated promises to reduce trade with the mullahs, German imports from Iran climbed to €690 million in the first 10 months of last year, surpassing by 28% the total 2009 import volume of €538 million, according to figures provided by the German Federal Statistics Office. German exports to Iran rose 5% to €3.164 billion between January and October 2010, compared to €3.013 billion during the same period in 2009.

Holger Beutel, a spokesman for the German Federal Office of Economics and Export Control (BAFA), told us in early January that his office last year had approved 16 dual-use deals to Iran. Among the products that his office green-lighted, and which can be used for both civilian and military purposes, were "replacement parts for rescue helicopters, valves for a steel work, a liquid jet vacuum pump for water treatment in connection with desalinization, and protective clothing for medical production."

The BAFA spokesman said that some of the merchandise—for example, the protective gear—would now be banned for export to Iran under new EU sanctions, because such clothing could be used in chemical-weapons facilities.

The Hamburg-based European-Iranian trade bank (EIH), which the U.S. Treasury has designated as a nuclear proliferator but which Mrs. Merkel refuses to shut down, just facilitated a transaction for Indian crude oil purchases from Iran. Last month, the Reserve Bank of India said all trade-related payments with Iran had to be processed outside the Asian Clearing House, making it harder for Indian companies to do business with Iran.

You'd think the recent European, not to mention U.N. and U.S. sanctions, would make German efforts to expand trade with Iran more of a risky prospect. Think again. Last November, the Marriott Hotel in Hamburg hosted the "Iran Business Forum," organized by the Berlin-based company IPC-GmbH, to jump-start "investment possibilities in the northwestern provinces of Iran." The program listed Iran's ambassador to Germany, Ali Reza Sheikh Attar, as the keynote speaker. This is the same Attar who, according to Iranian Kurds and human rights groups sanctioned a massacre of Iranian Kurds during his tenure as governor of the Kurdistan and West Azarbaijan provinces between 1980 to 1985.

Last week the Bayreuth Chamber of Commerce, with support from the German Economics Ministry, held two seminars addressing "Export control Iran" and "Inspection and certification for export to Iran, Saudi Arabia, Kuwait, Algeria and Syria." According to a description of the program, "Markets in the Middle East have enjoyed considerable growth in recent years and remain very interesting to German exporters." An additional series of seminars are planned this year to boost German exports to Iran.

Italians, too, are "having a wonderful boom in Iran," as Sandro Bonomi, the president of the Federation of the Italian Associations of Mechanical and Engineering Industries, told Italy's Il Sole 24 Ore last month. According to Mr. Bonomi's organization, Italian robotics exports to Iran jumped 384% in the first three quarters of 2010, while exports of steam turbines and thermic machines to Iran rose 236% and 106% respectively. The overall export of engineering products to Iran from Italy rose 50% to €258 million in the first three quarters of last year, from €172 millions in the same period of 2009.

Italian imports of Iranian goods had an even bigger boom. Italy bought €3.744 billion worth of Iranian goods in the first three quarters of 2010, according to the Italian Institute for Foreign Trade, up 167% from the €1.401 billion it imported in the same period of 2009. Italy's imports of Iranian oil ballooned by 90% last year, according to Unione Petrolifera, Italy's petroleum association. Meanwhile, Italy's energy giant Eni told Reuters last month that it will continue to receive Iranian crude for at least another three years, as Tehran still owes the company about $1 billion from previous deals.

If Italian Prime Minister Silvio Berlusconi is serious about his pledge to prevent Iran from obtaining nuclear weapons, he ought to find ways to help Italians buy oil from other sources. Iran's vulnerability centers on its oil profits, which serve as a crutch for its ailing economy.

But in October 2010, shortly before EU sanctions on Iran went into effect, Mr. Berlusconi himself undercut European resolve when he said, "I fear that sanctions will not bring success," and that "a gentle and circumspect approach would be more helpful." It's hard not to see the connection between Italy's commercial interests and its leniency toward the Iranian regime.

During a recent conference in Rome titled "Islamic Republic of Iran, Republic of Italy: Shared Responsibilities and Differences in an Evolving World," Italian Deputy Foreign Minister Stefania Craxi declared that "Iran has the right to possess and use nuclear energy." A few weeks earlier, former prime minister Romani Prodi paid a personal visit to the ayatollahs where he participated at a press conference with Iranian officials, including Alaeddin Boroujderdi, the president of Iran's committee on national security who a few days before Mr. Prodi's visit had threatened to "destroy Israel."

Italy's government has been generous in honoring its Iranian business partners. Last summer, Italian President Giorgio Napolitano, following the recommendation from the ministry for foreign affairs, knighted the former Iranian ambassador to Rome, Abolfazl Zohrevand, and the president and general secretary of the Iranian-Italian Chamber of Commerce, Mohammed Bekhish and Jamshid Haghoo. "Italy is Iran's front door to Europe," Mr. Bekhish declared at the ceremony where he was made a "Cavaliere"—the same title carried by Prime Minister Silvio Berlusconi.

Without the help of the two European economic powerhouses, Iran would have considerably less money with which to build nuclear weapons, and to finance terror groups like Hezbollah and Hamas. Unfortunately, it appears Mrs. Merkel and Mr. Berlusconi still consider their countries' combined €10 billion trade relationship with Iran to be more important than stopping a nuclear Iran.

Mr. Weinthal is a fellow at the Foundation for Defense of Democracies. Mr. Meotti, a journalist with Il Foglio, is the author of "A New Shoah" (Encounter, 2010).

Tags

germany, iran-sanctions, italy