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Right Turn
Posted at 04:55 PM ET, 04/12/2011

Germany, Iran and the problem with sanctions

The Wall Street Journal reports:

Germany is resisting international pressure to freeze the activities of an Iranian-owned bank based in Hamburg that U.S. officials say provides the financial lifeblood for some of Iran’s blacklisted companies.

U.S. and European Union officials in recent months have stepped up pressure on Germany to close down the European-Iranian Trade Bank AG — including sending a Feb. 2 letter from 11 U.S. senators to German Foreign Minister Guido Westerwelle that urged immediate action. The U.S. says the German-licensed bank, known as EIH Bank for its German initials, has become a major financial conduit for Iranian companies involved in weapons proliferation. Last September, it added EIH to its own blacklist of entities banned from the U.S. financial system.

Germany has rebuffed such appeals, arguing that it has no proof of illegal activity. In February, it also blocked a French proposal presented in Brussels to designate EIH for EU sanctions, two diplomats familiar with the meetings say.

In a statement, EIH says its activities are legal and that it continues to operate under a German license.

I spoke this morning with a key Senate aide on the topic of Iran sanctions. He told me, “This is an infuriating problem.” He observed that the sanctions law passed last year “makes clear that anyone who does business with designated entities like EIH Bank runs the risk of themselves being sanctioned. If domestic political and economic considerations prevent the German government from shutting down EIH — as other European governments, the U.S. and Israel have been urging for months — the Treasury Department should use [the law] to impose sanctions on any entities that are doing business with EIH, including any German banks that have correspondent relationships with EIH.”

Well, this doesn’t seem to be in the cards. For one thing, as the aide points out, “It is not in our interest to have this become a circular firing squad in which we are in a financial war with the largest economy in Europe and an ally, and whose cooperation against Iran is absolutely critical.”

It seems we are down to a combination of public and private pressure. The aide said that the administrations needs “to ratchet up the pressure on the Germans to do the right thing.” Perhaps there are discussions behind the scenes. But frankly, unless the U.S. is prepared to start sanctioning German banks and other transgressors, or at least to threaten to do so, the sanctions will be revealed to be entirely ineffective.

For over two years the administration has tried engagement and then sanctions. But the mullahs won’t be engaged and seem to be winning at the “whack the mole” game of sanctions enforcement (e.g., countries violate the sanctions and we chase after them). It is time, it would seem, to look for other means of pressuring the regime, or better yet, to put our energies into changing the regime.

By  |  04:55 PM ET, 04/12/2011

Categories:  Iran

 
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