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The Associated Press: Alliance Split Over Iran Nuclear Defiance

February 08, 2007

What we are not going to do is mirror what the (U.S.) Federal Reserve has done Europeans are accusing Americans of strong-arming them into cracking down on Iran in the latest trans-Atlantic conflict straining efforts to maintain a joint front on Tehran and its refusal to freeze uranium enrichment.

U.S. officials, in turn, complain that Europe is not pulling its weight because individual nations are placing business interests above the common goal of keeping Iran from heading down a path that could lead to nuclear weapons.

State Department spokesman Shawn McCormack has said that Washington would ‘continue to push and prod’ the Europeans.

U.S. companies are barred from doing business with Iran, and a law Congress passed in 1996 allows Washington to penalize even foreign firms engaged in commerce with the Islamic republic.

EU foreign ministers called on all countries to enforce sanctions outlined in a U.N. resolution last month that targeted people and programs linked to Iran’s nuclear and ballistic missile programs. But there is nothing comparable to the U.S. legislation in the European Union.

European officials say nothing obliges their countries to follow U.S. footsteps and choke off trade and economic ties with Iran beyond what is stipulated in the U.N. resolution.

The American measures ‘have no effect for the European people,’ French Foreign Ministry spokesman Jean-Baptiste Mattei told reporters last week.

That does not stop the Americans from trying.

European officials and industry representatives told The Associated Press of increased calls by U.S. Treasury or embassy officials on European banks, oil companies and other sensitive industries in recent weeks to get them to cut back on dealings with Iran.

‘All the oil companies will tell you that they are having regular visits from the U.S. embassies in their countries,’ said a European oil consultant, speaking on the sidelines of last week’s Vienna meeting of the National Iranian Oil Co. with international oil firms seeking to do business with OPEC’s second-largest producer of crude.

Like others who spoke about trans-Atlantic tensions over Iran, the oil consultant spoke on condition of anonymity because of the delicate nature of the topic.

Roughly 80 percent of Iran’s revenues come from oil exports _ and Tehran’s creaky oil industry badly needs foreign investment to keep up production and export. So it makes sense for Washington to keep up the pressure on the oil front.

The U.S. Embassy in Vienna acknowledged Washington encourages ‘companies to consider whether such investments will really be stable over the long term, and whether they will be worth the risk to their investments and to their international reputations.’

With America shut out of Iran, oil companies from other countries remain eager to take up the slack, particularly because Tehran’s petroleum industry is not under U.N. sanctions. Though it has fallen since then, total European Union trade with Iran was at more than $25.85 billion in 2004, the last year complete figures were available.

Among those signed up for the Vienna meeting were executives from Russia’s Lukoil, China’s Sinopec, Austria’s OMV and Royal Dutch Shell PLC.

‘Nobody in Europe is going to give up the opportunity of doing business with Iran just for the sake of pleasing the Americans,’ the oil consultant said.

Such attitudes clearly rankle U.S. officials.

Gregory L. Schulte, the chief U.S. representative to the International Atomic Energy Agency, called on European governments Wednesday to stop granting credits ‘to subsidize exports to Iran,’ and to ‘take more measures to discourage investment and financial transactions.’

If anything, the trans-Atlantic strains could increase.

Iran says it wants to develop enrichment to generate power and has started assembling the first of what it says will ultimately be 54,000 enriching centrifuges at underground bunkers near the central city of Natanz _ just weeks away from a Feb. 21 Security Council deadline to stop the program or face sharpened sanctions.

While the Americans call for tough U.N penalties come Feb. 21, a restricted EU position paper, made available to the AP, appears to dance around the tough choices EU members will have to make. It asks: ‘Should we press for further U.N. sanctions if Iran fails to comply’ by deadline time?

Officials on both sides of the Atlantic acknowledge differences exist.

A U.S. official said that perceived European foot-dragging ‘has not resonated well’ in Washington. An EU official told The Associated Press that Europeans were not ready now to go beyond the U.N. resolution.

‘What we are not going to do is mirror what the (U.S.) Federal Reserve has done,’ the official added, alluding to U.S. moves to freeze designated Iranian assets, including some big banks.

Russia _ a veto-wielding Security Council member that backs calls for an end to Iranian enrichment but was the key opponent of a U.S. push for harsher U.N. sanctions _ complicates the mix by maintaining multibillion dollar business ties with Iran that irritate both Washington and Brussels.

It is the contractor for Iran’s nearly completed Bushehr nuclear plant, has recently sold anti-aircraft missiles to the Islamic republic and maintains cozy relations with Iran’s oil and gas sector. Just last week Ayatollah Ali Khamenei, Iran’s supreme leader, further raised the anxiety level in energy-dependent Europe when he suggested that his country and Russia _ which together own about half the world’s natural gas reserves _ move to establish their own OPEC.

There is some evidence U.S. pressure is working on the EU front.

Commerzbank last week ended dollar-demoninated transactions with Iran, after officials at the bank _ Germany’s second-largest _ spoke of ‘U.S. pressure’ on their institution. With the move, Commerzbank joined Britain’s Barclays PLC and HSBC Holdings PLC, Societe Generale SA and Credit Lyonnais of France, and Credit Suisse Group, UBS AG and ABN Amro Holding of Switzerland.

Associated Press writers Matt Moore, Alexander Higgins, Frank Jordans, Jamey Keaten and Laurence Frost contributed to this report.

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