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While E.U. tries to bypass U.S. sanctions on Iran, Trump administration amps up pressure

Europe has set up a mechanism to keep trading with Iran, despite U.S. sanctions, but diplomats say only small, mostly humanitarian transactions can get through. (Video: Reuters)
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BERLIN — To be a European company with links to Iran in the age of American sanctions can mean dealing with challenges that, every day, verge on the existential.

Suppliers cut off their shipments with little warning. Phone lines get disconnected. Even having the elevators repaired can be an ordeal, with service contracts canceled.

It is all related to the Trump administration’s extraordinary campaign to choke off not only American trade with Iran, but European commerce with the Islamic republic as well. 

Since President Trump announced in May that he was pulling the United States out of the Iran nuclear deal, European governments have sought to keep the agreement on track by keeping their companies engaged in Iranian trade. Europe last week unveiled its most dramatic step to date, with the creation of a trading system that could be used to allow firms to skirt U.S. restrictions. 

But the European effort remains mild compared with the zeal with which the United States has been pressing the continent’s firms to get out, say industry associations, government officials, analysts and representatives of companies that have been targeted. 

In the struggle to determine whether the nuclear deal lives or dies, the United States has been willing to cross boundaries that Europe has, thus far, been reluctant to push. That has not been lost on authorities in Iran, where pressure is growing to abandon the deal in the face of American attempts to undermine it.

“There is more passion from our American friends to create problems,” said Michael Tockuss, general secretary of the German-Iranian Chamber of Commerce.

Under President Trump, United States-Iranian relations have taken a decisive turn for the worse. Here's a brief history of the tumultuous relationship. (Video: Joyce Lee/The Washington Post)

Those problems, Tockuss said, stem from direct pressure being applied on European firms by U.S. officials, as well as the ripple effects as word spreads of the lengths to which the Americans will go to force companies to rethink their plans.

“It’s intimidation,” he said. “They live on the fear.”

Tockuss, whose organization represents German firms that do a significant share of their business in Iran, said he knew of at least 20 members that had been personally visited by U.S. officials and urged to slow their operations in Iran. 

Some companies, he said, were offered a friendly pitch about their importance to the U.S.-German trade relationship. Others were threatened with economic consequences if they failed to comply.

He described the contact as inappropriate. 

“I don’t consider it the job of any diplomat to threaten a company,” he said. “They should not be treating companies in their host country this way.” 

But at the U.S. Embassy in Berlin — locus of an effort that spans the continent but is especially intense in Germany, Europe’s economic powerhouse — it is proudly described as the “maximum economic pressure campaign.” 

Secondary sanctions, as the U.S. efforts to constrain European firms are known, are not unusual. But it is unconventional for the United States to enforce them so vigorously on the home turf of its closest allies.

Richard Grenell, U.S. ambassador to Germany and a close Trump ally, began his tenure in May with a tweet urging that “German companies doing business in Iran should wind down operations immediately.” 

The comment earned him stinging criticism from German officials and commentators, who accused him of overreach. But Grenell has kept up his campaign, publicizing meetings with German companies to discuss Iran and celebrating each corporate departure with the hashtag #sanctionsareworking.

There have been many such announcements: Manufacturer Siemens, financial services company Allianz, and automakers Volkswagen and Daimler are among the German megafirms that have said they are getting out. 

But many other firms — particularly those that have a special focus on Iran or that don’t do significant business with the United States — have stayed. It is with some of those companies that the U.S. tactics appear to have been especially aggressive. 

In the fall, the Hamburg branch of the Iranian-owned Bank Melli, which is based in Germany, discovered how tough the United States can get when it received a letter from German communications giant Deutsche Telekom declaring that all phone and Internet services would be canceled. 

Deutsche Telekom told the bank that it would no longer be able to pay its bills because sanctions had disrupted financial links with Iran. But Bank Melli’s lawyer, Thomas Wülfing, said he believes that was just a pretext for Deutsche Telekom, a firm with significant U.S. financial interests because of its American subsidiary, T-Mobile. 

“It’s very clear that there must have been pressure from the Americans,” he said. “There’s no other explanation for it. They wouldn’t do this if they didn’t have to. Especially since they have been contractual partners with our clients for a long time without any problems.”

In Bank Melli’s case, Wülfing was able to obtain an immediate court injunction that blocked Deutsche Telekom’s attempt to cancel services. But he said that other Iranian-owned clients with operations in Europe have been without phone or Internet services for a week or more. He said his clients have also had service and leasing contracts unexpectedly canceled. 

The disruptions, he said, have been devastating in their impact.

After Bank Melli’s struggles came to light, the U.S. Embassy tweeted that the bank “funnels cash to terrorist groups working for the #Iranian regime,” adding the hashtag #thankyou­DeutscheTelekom.

The bank denies those allegations.

German government officials have, at least in public, been restrained in their responses to U.S. tactics, opting not to further strain an alliance that is already badly tattered. 

They also have been guarded in their assessments of whether the Iran deal can be saved.

“We are trying to preserve the [deal] because we believe it can still be seen as an improvement” over what came before it, Peter Altmaier, Germany’s minister of economic affairs, said in a recent interview. “And at the same time, nobody knows whether the agreement will continue to properly function under the American sanctions regime.”

The 2015 Iran deal, formally known as the JCPOA, was a landmark agreement between the Islamic republic and the world’s great powers, the United States included. The basic idea was to take Iran off a path that Western intelligence officials feared was leading to a nuclear weapon in exchange for an end to crippling sanctions. 

But when Trump, a fierce critic of the agreement, opted last year to pull the United States out, the burden fell on Europe to continue to make it worth Iran’s while to stay in.

The Iranian government remains officially committed to the nuclear deal, and President Hassan Rouhani has continued to push for better relations with Europe. But Rouhani’s government has also grown impatient with what it perceives as the bloc’s inability to stand up to the United States and protect commercial trade with Iran.

Last week’s announcement of a European platform for handling financial transactions outside the current U.S.-dominated system was intended to reassure Iran of the continent’s commitment.

European leaders have struggled to find a way to bolster faltering trade with Iran, given fears in small nations that if they get involved in any project, they could find themselves in the crosshairs of U.S. sanctions. 

Britain, France and Germany — which were also signers of the nuclear deal — agreed to share the responsibility to register a company that intends to blunt the U.S. measures. The goal is to make it possible to barter goods and services between Europe and Iran without sending money between the two, which would risk entangling the banks in U.S. sanctions.

A German official will run the company, which is being registered in France and is known by an unwieldy name: Instrument in Support of Trade Exchanges. Britain, France and Germany will be stakeholders in the project, which is being done with the blessing of the European Union, another signatory to the Iran deal.

Officials involved in the European planning acknowledge that the impact of the company, also known as the “special purpose vehicle,” may be minor at first, and that alone it will probably not be a deciding factor in Iran’s determination about whether it will continue to adhere to the deal. 

At first, the company will focus on the trade of food and medicine, which are not subject to U.S. sanctions. But experts say the trade channel could be the first crack in the U.S. dominance of the global financial system, which has for decades turbocharged Washington’s ability to impose sanctions on anyone who wants to zip dollars around the world.

The Trump administration does not appear to be especially threatened by the arrangement. The U.S. Embassy in Berlin said in a statement that it did not expect the platform to “in any way impact” efforts to enforce secondary sanctions.

Iran welcomed Europe’s announcement, while noting that it was just “the first set of commitments to Iran that the Europeans must fulfill.” Iran’s state broadcaster also quoted Deputy Foreign Minister Abbas Araghchi as saying the payment system would only “fully meet” Iran’s needs once it is open to non-European firms and countries.

Iran’s hard-line conservatives, many of whom oppose relations with the West, have called for Rouhani to abandon the nuclear pact. Europe is feckless in the face of U.S. pressure, they say, and Iran is wasting its time with negotiations. 

“Some imagined that they could rely on the Europeans when the U.S. withdrew from the JCPOA,” said Ayatollah Ahmad Jannati, chairman of Iran’s powerful Assembly of Experts, state media reported last month. 

“The Europeans, however, are dragging their feet and [will] do nothing in our interest,” Jannati said. “The Europeans are worse than the Americans.”

“The question for Iran’s leadership is not so much whether Europe wishes to maintain the JCPOA, but whether Europe has the capacity to do so,” said Esfandyar Batmanghelidj, founder of the Europe-Iran Forum, which promotes business ties.

There have been other tensions in the relationship between Europe and Iran in recent months, including over Tehran’s ballistic missile tests and its alleged spy activities on European soil.

The E.U. last month announced targeted sanctions against a unit of Iran’s Intelligence Ministry over an alleged plot to stage assassinations in European capitals. The move drew praise from U.S. officials who have urged Europe to take a harder line against a government that Washington regards as a state sponsor of terrorism.

Europe is eager to show the United States that it can be tough on Iran on certain issues, said Ellie Geranmayeh, a senior policy fellow at the European Council on Foreign Relations. But “the Europeans don’t agree with the Americans that the answer to the problem is sanctions on every single issue.”

The U.S. sanctions have already hit Iran’s economy hard, driving up prices and hampering imports. If conditions deteriorate further, the basic calculus for Iran could change.

“There is this consensus [in Iran] that the security and political dimensions of the deal are important enough and serve Iran’s national security interests,” Geranmayeh said. “But if the economic hit is so significant . . . this may not be the position Iran is in six months from now.” 

Cunningham reported from Istanbul. Michael Birnbaum in Brussels and Luisa Beck in Berlin contributed to this report.

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