Tuesday, February 27. 2007
WSJ: "How the EU subsidizes trade with Iran"
Posted by Joerg Wolf in International Economics, Transatlantic Relations on Tuesday, February 27. 2007
Government-backed export guarantees have fueled the expansion in trade. That, in turn, has boosted Iran's economy and--indirectly by filling government coffers with revenues--its nuclear program. The German record stands out. In its 2004 annual report on export guarantees, Berlin's Economics Ministry dedicated a special section to Iran that captures its giddy excitement about business with Tehran.The WSJ concludes:
"Federal Government export credit guarantees played a crucial role for German exports to Iran; the volume of coverage of Iranian buyers rose by a factor of almost 3.5 to some €2.3 billion compared to the previous year," the report said. "The Federal Government thus insured something like 65% of total German exports to the country. Iran lies second in the league of countries with the highest coverage in 2004, hot on the heels of China."
Iran tops Germany's list of countries with the largest outstanding export guarantees, totaling €5.5 billion. France's export guarantees to Iran amount to about €1 billion. Italy's come to €4.5 billion, accounting for 20% of Rome's overall guarantee portfolio. Little Austria had, at the end of 2005, €800 million of its exports to Iran covered by guarantees.
It's also hard not to see a connection between Europe's commercial interests and its lenient diplomacy. The U.N.'s December sanctions resolution orders countries to freeze the assets of only 10 specific companies and 12 individuals with ties to Iran's nuclear program. Europe's governments continue to resist U.S. calls for financial sanctions, and the German Chamber of Commerce recently estimated that tougher economic sanctions would cost 10,000 German jobs. (...) The EU continues to provide a shield for its business interests in Iran, and thus a lifeline to a regime that is unpopular at home and sponsors terror abroad.The WSJ does not mention that German-Iranian trade relations are on the decline since 2005. The German business daily Handelsblatt writes that Iran's trade with Russia and China increased lately, while Germany's exports to Iran decreased by 7.8% in 2006 to a total of 3.8 billion Euro. The granting of new Hermes export guarantees declined from 1,4 billion Euro in 2005 to 0.9 billion Euro in 2006.
I don't know but I assume that Germany first granted the export guarantees (Hermesbuergschaften) as part of the so-called "critical dialog" with Iran, which started in the early 90s. This "critical dialog" has not changed Iran's policy on human rights, Israel, and the nuclear program. Thus there does not seem to be any justification for continuing to grant any export guarantees to German companies making business with Iran.
• In 1995 Charles Lane wrote the Foreign Affairs article "Germany's New Ostpolitik: Changing Iran", which indicates that German-American disagreements over Iran date back a long time:
Iran is the one sore spot in an otherwise highly cooperative German-American relationship. The United States has sought to punish the Islamic state for sponsoring terrorism. Germany has tried to maintain a "critical dialogue" of limited diplomacy and commerce, much as its Ostpolitik tried to engage Soviet bloc nations during the Cold War. U.S. officials decry Germany's shady dealings and billions of dollars in loans and credits to Iran.
No nation has ever been forced to renounce nuclear weapons, but many have chosen to do so. The Iranians will not end their nuclear program because we threaten them and call them names. They will renounce nukes because we convince them that they will be safer and more prosperous if they do that than if they don't. This feat will take more than threats and insults. It will take skillful American diplomatic leadership. [url=http://www.washingtonpost.com/wp-dyn/content/article/2007/02/23/AR2007022301595.html]Bill Richardson[/url]
Bill Richardson:
I would like to be present in that room where you or some one like you will make that case to the representatives of a country which:
1 - Suffered an unprovoked attack by a neighbour
2- been the only country to suffer WMD attacks since Japan
3- WMD know-how & precursonrs was supplied by Germany and others in EU - your allies - to her enemy
4- Her complaint regarding the WMD case to UNSC was sabatoged by US & UK
5- US & EU were co-belligerents in that war by providing aid to the enemy both financial and military
6- Sits right next to another unstable Sunni extremist country armed with nuclear weapons.
The Iran-Iraq War cannot be ignored. Its effects are similar to WWI in Europe. Unless and until you can address what happened in that war to the satisfactions of the Iranians you will not make any progress. Specifically, you need to explain to them how Iraq raped the CWT with your approval and why things are different now.
"2- been the only country to suffer WMD attacks since Japan"
Japan has not developed nukes, despite Hiroshima and Nagasaki and being close to China and North Korea.
Why? Due to the US security guarantee? Perhaps the US could offer something similar to Iran as part of some [b]grand bargain[/b], which also involves an Iranian promise to stop the funding of terrorist groups and include the recognition of Israel...
In contrast to Iran, Japan has recently invested a lot of money into the economy. Japan's economy is doing much better now, while Iran's economy has more and more problems.
I think Iranians are more concerned about jobs than being nuked by Pakistan.
Iran has to make up its mind:
A) Develop nukes, which means more isolation and a deteriorating economy.
OR
B) Make a some compromise with the West and receive lots of economic aid and investments and better relations with the US.
Yes, I know, Japan is considering to develop nukes. If the US-North Korean agreement works out, then it won't develop nukes.
Now the US and Iran should make a similar agreement. That won't be perfect. It will not make all sides happy, but it is better than war.
pen name, it was the Soviet Union that motivated Iraq through diplomatic initiatives, economic contributions and arms sales, to attack Iran 1979. By the numbers, these contributions exceeded those from America by a factor >100.
One might think, America could make friends with Iran much easier than the Russians, but Iran stays on Russia's side today.
I don't think the mullahs in Tehran care much about the past, they are more rational than we think.
Manna?? Surely the WSJ means Mammon?
Odd to see such biblical illiteracy in a religionist newspaper.
On the general topic: there was a reform movement in Iran in the 1990s which held the previous presidency. The continuous efforts of Republicans to forestall support for this movement by the United States are surely part of the reason it lost momentum.
I thought it was a mistake and that they meant "Mammon."
I have now looked up "manna" at Wikipedia:
"According to the Bible, the mysterious substance which was provided miraculously by God to the Hebrews during their forty years in the desert descended by night like hoarfrost in the form of coriander seed of the color of bdellium (Book of Numbers 11:7). It was collected before sunrise, before it melted in the sun. The people ground it, or pounded it, and then baked it (Num. 11:8). A double portion was to be found on the day before the sabbath, when none was to be found. When the Hebrews arrived at Gilgal, on the 14th of Nisan, and began to eat the grain grown there, the manna ceased."
[url]http://en.wikipedia.org/wiki/Manna[/url]
So, the WSJ thinks we care more about some magic food rather than material wealth (mammon) or security.
Cool!
Perhaps we could also get the Holy Grail or Asterix' magic drink.
I think you have to understand it as an American idiom. Most of the time the use of manna is in the phrase that something in the future is hoped for as, "...manna from Heaven". Not using the phrase as magic food as in the foolishness of hoping that food will come without effort.
WSJ believes that Europe's increased coziness with Iran is in the nature of hoped for business in the future. That Iran will be so grateful that all it's business deals with multiply and fall like manna from Heaven.
I still find it irrational that some businesses in Germany, and at times the US, put other companies business dealings at risk. How many more Mercedes will be sold in the US than Iran? The core strategy of any successful business is create new customers but not at the risk of losing the old ones.
Maybe - just maybe german companies donīt expect to lose other customers by selling cars to people their old customers donīt like. God read again what you have just written. Do you seriously expect companies to ask every customer whom he doesnīt like and stop selling cars to them? My goodness, you canīt be serious..
@ Pat
"The core strategy of any successful business is create new customers but not at the risk of losing the old ones."
I guess the German companies doing business with Iran are not concerned about repercussions from American consumers and lawmakers.
This would be "irrational" as you claim, if US consumers have a record of boycotting shady firms.
I know that there is a divestment campaign because of Darfur:
[url]http://atlanticreview.org/archives/360-Sudan-Divestment.html[/url]
Siemens is one of the main targets. They also do a lot of business with Iran.
I am in favor of divestment campaigns and consumer boycotts, but I am not sure if enough US investors and consumers would participate in a campaign against German companies doing business with Iran.
The US has not decreased trade with Saudi Arabia after 9/11, I believe.
The US is importing more and more from China despite Beijing's support for Iran, Sudan etc.
Pat, or where you considering a new US law against companies doing business with Iran?
The US Congress has passed some sanctions against foreign companies investing in Iran many years ago. That was limited to the oil industry, I believe. Why is that?
Would more extensive sanctions violate some WTO rule, for instance sanctions against Siemens and Daimler-Chrysler?
Or Congress does not want to harm Chrysler?
"I am in favor of divestment campaigns and consumer boycotts"
You have already shown how "committed" you are regarding the german economy..^^
And you have already shown that you don't care about an arms race and another war in the Middle East.
You prefer Mammon and Manna for the short term.
The long-term effects of your suggestions could be very bad for our security and Mammon and Manna and Karma etc. ;-)
A few years of EU sanctions against Iran don't do much harm to the Germany economy. The Iranians will compromise and then trade continues again.
Besides, you exaggerate the importance of Iran for Germany's economy.
I simply donīt forget those companies and their employees for which Iran has great importance.
The long term effects are good for us as well. The fewer american influence, the better for us europeans.
"The long term effects are good for us as well. The fewer american influence, the better for us europeans."
Not if you exchange influence in Iran for influence in the US. Which is what you are doing, right now.....
Of course it helps - the more influence is diversificated, the easier it is for us to gain more of it. It is easier to deal with a number of manageable powers in a region rather than having a superpower in the way.
Oh and by the way: If the Iranians have learned one thing from North Korea, it is the fact that nothing else protects more from war than having nuclear weapons.
I was hoping my point would be taken to mean that some of the bigger companies might act, or probably are already, as counterweights to the companies pushing for relaxed handling of Iran's violations of the NPT and UN resolutions. I did not even hint that I thought that the US should or even that they would act legislatively against Germany. I see no interest in the US Congress to punish German companies though I also think those companies could endanger their sales in the US.
Companies might not directly ask their customer "whom he doesn't like and stop selling cars to them", but they have shown sensitivities to such concerns in the past. How many German and Japanese firms wouldn't sell to Israel because of an Arab boycott in the 70's and 80's? That seems like an example of catering to the whims of the larger customer.
Just a few years ago McDonnell-Douglas, before its absortion by Boeing and imminent insolvency, tried to sell part of itself to a Chinese government corporation. There was a huge public outcry that lead to California's senators and congressmen introducing several bills to block the sale.
Most Americans would probably not participate in a boycott on a national level, most have failed or are still ongoing with no success, but then again several companies with sterling reputations have seen their sales evaporate in the US as the result of any number of individual blunders. Audi sales dropped over 50% in the 80's as the result of perceived safety issues. Many Taco Bell restaurants in the East are currently closed and probably will not reopen because of an E. Coli scare. Dubai Ports lost several lucrative contracts in the US for the simple reason that they were owned by Arabs firms. Disinvestment by the US in South Africa was one of several reasons apartheid was ended in that country years ago.
The last example would be the difficulty Germany had in joining the UN because of unpaid insurance policies left over from the San Francisco Earthquake in 1906. In this case it was one lawsuit in federal courts by a handful of survivor families. My point is that it wouldn't take much to cripple a company in the US without even the slightest official reaction from any arm of the US government.
I don't see any sympathy for any major boycott or disinvestment campaign against German firms but I definitely would not be surprised if one of the companies because of adverse publicity would find a certain figurative part of its business "stuck in the wringer." Another American idiom.
Daimler-Chrysler is already bleeding out from several self-inflicted woulds, so no, I don't see any action against them. Probably the reverse!
Pat
> I was hoping my point would be taken to mean that some of the
> bigger companies might act, or probably are already, as
> counterweights to the companies pushing for relaxed handling
> of Iran's violations of the NPT and UN resolutions.
Sorry, I still don't get it. You expect some big companies to be concerned with Iran's policies and then lobby for some stricter policy towards Iran?
> How many
> German and Japanese firms wouldn't sell to Israel because of
> an Arab boycott in the 70's and 80's?
I can't think of any.
Got any names?
All:
Security always beats Hope.
Never again shall we let our country be attacked by WMD.
If that is only achievable by exiting NPT - so be it.
We will be more isolated and perhaps poorer - but we will be alive.
And EU can take her toys and go play elsewhere.
And - USSR did not instigate the War against Iran by Iraq - your allies did that.
And when gas is cut from the East again and you are shiverung - consider all the gas in Iran waiting for you.
Yes, I am from Iran.
Here are some more thoughts:
If you are interested in helping Afghanistan and Iraq you will help strengthen Iran.
If you are interested in the spread of representative government in Muslim countries, you will have to support the Islamic Republic of Iran to the hilt.
If you are interested in helping Muslim women reach and maintain a higher social status then you will need to be there in Iran helping that polity.
Make no mistakes - if you want to diminish the Iranian power (for a variety of misguided and fatutous excuses) then you will have to write off both Iraq and Afghanistan. Your projects there will be kaput, finished. That means you will condemns the 50 million inhabitants of those two countries to decades more of chaos and death because of your obdurance.
I will gladly say that German auto companies did not honor the Arab League boycott of Israel. In fact Israel threatened to boycott Volkswagen for tardy reparations for the use of slave labor during the war.
The Japanese however did honor the boycott, specifically the auto companies of Honda, Nissan, Mazda and Toyota. That Mazda honored the boycott caused no end of problems for Ford, as a partial owner.
Yes, I would expect larger companies to lobby for their own self-interest especially if their competitors lobbying is damaging to the larger companies main markets.
"Iran is the one sore spot in an otherwise highly cooperative German-American relationship"
That was 1995, and even then I think the cracks were beginning to show for those with the perceptuion and the eyes to see. Not in governmental relations but in interpersonal and business relations. I worked for 3 months in Stuttgart on behalf of a Canadian company in early 1999 and the contempt of certain Germans for myself (as an american) was obvious. It was not universal but alas not limited to a single individual.
It seems to me highly significant that these people felt able to express their contempt openly and that the management of this huge European multinational did nothing to stop it.
Joerg, if you ever wonder where my current dislike of many Germans and things German stems from - consider yourself answered. 18 months before the 2000 election and more than two years prior to 9/11 the problem was clearly visible to a working visitor to Germany.....
Well what happened for example? What was most striking?
I'm not going to give chapter and verse, Zyme, because the other parties aren't here to rebut. It was done in a meeting in front of a number of German and other work colleagues. Quite contempuous - on the lines that 'Americans lie a lot'.
I saw no rebuke from management and percieved no change in behavior from the individual(s) to indicate that such was done in private. I needed information from this person but in the end had to get it from some of the Eastern Europeans on the team. Not all the Germans were insulting - most of them weren't. But all of them were deeply reserved and uncommunicative, except for one German intern who was nice. Thank god for diversity.
It was George Bush's fault, or course.
The comment "It is easier to deal with a number of manageable powers in a region than having a super power in the way," sounds suspiciously like a description of Europe in August 1914.
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