Analysis: Why did Germany capitulate?

EU sanctions Iranian ‘nuke-bank’ EIH in Hamburg.

EIH Bank 311 (photo credit: REUTERS)
EIH Bank 311
(photo credit: REUTERS)
BERLIN – The European Union on Tuesday issued an updated list of sanctioned Iranian companies involved in Tehran’s nuclear program, including the Hamburg-based Europäisch- Iranische Handelsbank (EIH).
Since at least 2008, the Merkel administration had vehemently opposed the closure of EIH.
What prompted the German government to shutter a main financial conduit for German businesses and Iran’s economy?
According to the EU statement, “EIH has played a key role in assisting a number of Iranian banks with alternative options for completing transactions disrupted by EU sanctions targeting Iran.”
EU foreign policy chief Catherine Ashton signed the 19-page order, which was reviewed on Tuesday by The Jerusalem Post.
"In 2009, EIH was used by [the Deutsche] Postbank in a sanctions evasion scheme which involved handling transactions on behalf of UN-designated Bank Sepah. EU-designated Bank Mellat is one of EIH’s parent banks," according to the EU sanctions list. (Both Bank Sepah and Bank Mellat are based in Tehran.) The Merkel administration had consistently ignored warnings from the French, American and British governments about EIH’s nuclear and military activities. Last year, the US Treasury Department sanctioned EIH because it had served to advance Iran’s nuclear and rocket programs.
The International Herald Tribune reported last summer that Chancellor Angela Merkel snubbed President Barack Obama’s request to close EIH.
According to a WikiLeaks cable from 2008, Will Gelling, the head of the British Foreign Office’s Iran Coordination Group, said the UK “is pushing Germany on this bank with a view to an EU listing,” but “Germans are pushing back.”
A second 2008 British WikiLeaks dispatch conveys the frustration of trying to rope Berlin into a robust sanctions strategy against Iran: German agreement on anything meaningful will be “pulling teeth,” reads the cable.
The French tried to place the EIH on the sanctions list in February, but the Germans squashed the proposal.
The UK’s efforts to twist Germany’s arms to shut down the EIH’s operation have hardly been reported. The Anglo- American analysis, and the French efforts against the dangers of the so-called terror bank EIH, were well ahead of the security curve. It appears that the Merkel administration prioritized short-term profits for German firms (total trade with Iran exceeded 4 billion euros in 2010) over long-term global security.
Nonetheless, the new decision to ban EIH, largely because of its strategic importance for Iran’s drive to go nuclear, might very well be the crowning achievement of this EU sanctions round.
The converging American, French and British pressure, particularly from the US Treasury’s terror financing unit, prevailed over Berlin’s desire to protect mid-size German firms – the main EIH customers – at the expense of international security.
Stuart Levey, the US Treasury’s former assistant secretary for terrorist financing, and his successor David S.
Cohen, as well as the staff of the department working to counter terror financing, put a laser-like focus on pulling the plug on the EIH operation in Europe. All of this helps to explain why the Americans wore down Berlin, which was beginning to panic about the damage to Germany’s post- World War II reputation, as well as the possible loss of access to American markets and financial institutions.
In June, Obama will present Merkel with the Presidential Medal of Freedom, America’s highest civilian award. One wonders if the chancellor also wanted to avoid more lousy press reports about her government protecting the so-called Iran terror bank.