BERLIN – Diplomatic fissures between Israel and Germany over Berlin’s pro-Iran trade and bank policies, peace talks with the Palestinians, and Germany’s endorsement of an anti-Israel UN resolution will animate Prime Minister Binyamin Netanyahu’s meeting on Thursday with German Chancellor Angela Merkel.

The first Berlin-based meeting of 2011 between the two leaders will also involve a request by Netanyahu to acquire a sixth German-made Dolphin-class submarine to ratchet up Israel’s security against rising threats in the region.

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Netanyahu will ask the Merkel administration to sell Israel a sixth submarine at deep discount, an official said. Talks on the Dolphin deal stalled last year after the Germans declined to underwrite it, as they had done with previous purchases. Israel sought up to a third off the $500 million-to-$700m. price for the new vessel.


“We’re still hoping for a discount, and the prime minister will raise this matter” in his meeting with Merkel, an Israeli official said without elaborating.

The diesel-powered submarines are widely regarded as an Israeli vanguard against foes like Iran. Israel has three Dolphins in service, and two on order from Germany with delivery expected within two years.

The sale of a reduced fee Dolphin submarine – a vessel that could have second-strike nuclear capability – would certainly help compensate for a series of German diplomatic and legislative moves that have, at the very least, not served Israel’s security interests.

Last year, for instance, Merkel stood by as members of her governing coalition voted unanimously in the Bundestag to smack Israel with a resolution for “violating the principle of proportionality” by employing self-defense measures against the radical activists aboard the Mavi Marmara.

Merkel’s stance on the resolution – which blasted a naval interception that was deemed vital by Israel to prevent a violation of its blockade of Gaza – was regarded by some as undermining her pledge to the Knesset in 2008 that the Jewish state’s security interests are integral to Germany’s national security.

Furthermore, WikiLeaks revealed that Christoph Heusgen, Merkel’s main Mideast adviser, attempted in 2009 to spur the Americans in the UN to use the anti- Israel Goldstone Report as a bludgeon to force Jerusalem to freeze construction of settlements. Both the Merkel administration and the German Foreign Ministry declined at a press conference earlier this week in Berlin to backpedal from their seeming endorsement of the Goldstone findings.

Andreas Peschke, the Foreign Ministry spokesman, deferred Goldstone’s recent “reconsideration” of his report’s key accusation – he indicated in a Washington Post op-ed last week that he no longer believed Israel deliberately sought to kill Gaza civilians – to the UN Human Right Council in Geneva, and refused to provide an assessment of Goldstone’s reversal. While Goldstone wrote that the HRC was biased against Israel, Peschke expressed confidence that the HRC would deal with Goldstone’s dramatic shift in a “responsible” manner.

Ahead of the arrival in Berlin late Wednesday of Netanyahu and Foreign Minister Avigdor Lieberman, competing German and Israeli narratives were playing out. In the German version, Israel had sought the visits to sort out the diplomatic mess between the two countries over how to advance Israel-Palestinian peace efforts.

A Merkel administration spokeswoman wrote The Jerusalem Post by e-mail on Wednesday that an “informal meeting” would take place between Netanyahu and Merkel. She also noted that Israel’s government had requested the parley. Merkel chastised Netanyahu in February for failing to rekindle peace talks, which ostensibly triggered efforts by Israel to mend the fissure with Berlin. Thus the German narrative.

According to sources close to the Netanyahu administration, by contrast, there is no need for fence-mending and the reports Israeli-German disputes – leaked by a German source – are inaccurate.

Any talk of blame for the deadlocked peace process has been overshadowed, however, by headlines in Germany’s leading business publication regarding Germany’s financial relations with Iran – at the reported price of destabilizing the security of Israel, the West and the Mideast.

Consequently, it might be that Germany – with its roughly 4 billion euro annual trade relationship with Iran – is on the defensive in these talks, rather than Israel.

Though the initial list of talking points for Merkel and Netanyahu did not include the Islamic Republic, the Jerusalem Post has learned that the “implementation of Iran sanctions” is now on the agenda.

Merkel’s government has been under fire from the United States for its weak adherence to – and at times nonenforcement – of Iran sanctions.

In the span of a week, a series of hard-hitting investigative reports in Germany’s main business daily Handelsblatt revealed that Foreign Minister Guido Westerwelle worked with Germany’s central bank (the Bundesbank) to pump billions of euros into Iran’s coffers.

Germany’s Foreign Ministry cooperated with the USsanctioned, Hamburg-based European-Iranian trade bank (EIH) via the Bundesbank to process Indian crude oil payments. In short, Israel’s so-called “special” partner in Europe reportedly circumvented US sanctions against Iran. Merkel is said to have intervened on Wednesday to turn the screws on future EIH-Bundesbank Iranian crude oil payments.

The oil funds have swollen the financial pockets of Iran’s regime, allowing it to advance its military and nuclear programs. And the desperately needed capital spells a new financial windfall for Iran to use to support its proxies, Hamas and Hezbollah. All of this helps explain why Yinam Cohen, Israel’s spokesman at its embassy in Berlin, was quoted on the front page of the Handelsblatt on Tuesday calling for the closure of the EIH.

Merkel has steadfastly refused to shut down EIH, which is arguably Iran’s most important financial institution on the European continent for its nuclear and missile programs. The US Treasury Department’s anti-terror unit sanctioned the EIH because of its role in Iran’s military and nuclear apparatus.

German-Israeli relations have also been strained since the Merkel administration aligned its government with a Lebanon-sponsored UN Security Council resolution in February, condemning Israel’s settlement construction. The Israel Embassy in Berlin was reportedly sent a strong assurance from the German government that it would oppose the resolution. Germany reneged, prompting Netanyahu to articulate his disappointment with the chancellor in a late-February phone call. She reportedly fired back that he was the one who had disappointed her by failing to take “a single step to advance peace.”

Reuters contributed to this report.

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