The Guardian: Washington tells EU firms: quit Iran now

UK, French and German companies begin pullout under US pressure

David Gow in Munich and Ewen MacAskill in Washington
Friday November 9, 2007

Multinational companies are coming under increasing pressure from the US to stop doing business with Iran because of its nuclear programme. European operators are facing threats from Washington that they could jeopardise their US interests by continuing to deal with Tehran, with increasing evidence that European governments, mainly France, Germany and Britain, are supporting the US campaign.

It emerged last night that Siemens, one of the world’s largest engineering groups and based in Germany, has pulled out of all new business dealings with Iran after pressure from the US and German governments. This follows the decision by Germany’s three biggest banks, Deutsche, Commerzbank, and Dresdner, to quit Iran after a warning from US vice-president Dick Cheney that if firms remain in Tehran, they are going to have problems doing business in the US.

The Foreign Office, while sympathising with City firms, has privately backed the US warnings in recent weeks, telling companies such as Shell and BP of the risks of continuing business with Iran. The French president, Nicolas Sarkozy, has urged French energy firms Total and GDF not to pursue new business in Iran. Angela Merkel, Germany’s chancellor, is joining him in pressing for new sanctions, probably at EU level.

The US is tightening its economic squeeze on Iran and last month unilaterally imposed a new round of sanctions. It regularly complains in private to the British and other European governments that American efforts are being undermined by European companies continuing to do business with Tehran. If economic sanctions fail to have an impact by next year, pressure will mount from Mr Cheney to launch air strikes against Iran.

The under-secretary for political affairs at the US state department, Nicholas Burns, and the under-secretary at the Treasury, Stuart Levey, have made frequent trips to Europe to warn companies they face the loss of American business if they continue to deal with Iran.

BP said back in 2005 that “politically Iran is not a flyer” because of the company’s huge presence in the US. Rival Shell has been tentatively moving forward with engineering studies on a large gas project in Iran but has insisted in the past that it would only take a final decision once it knew it was commercially viable. A spokesman for the company would not comment last night but industry sources said it was a “very sensitive issue”, given the scale of Shell’s oil business in the US.

The two British banks most frequently mentioned in Washington in relation to Iran are HSBC and Standard Chartered. Both banks have scaled down their operations in Iran but maintain a modest presence in Tehran.

Siemens insiders said the group, which is in the throes of clearing up a series of bribery and corruption cases involving payments of some €1.3bn (£900,000), would carry out existing contracts in Iran which have attracted government export credit guarantees, but would seek no new contracts. The engineering group won a contract four years ago to supply 24 power stations to the Iranians and last year secured a provisional €450m deal to supply 150 locomotives for Iran’s railways.

Officials said Siemens’ Iranian business amounted to less than 1% of annual group turnover of €84bn last year. This compares with sales of $21.4bn (€14.4bn or £10.1bn) in the US where the group employs 70,000. It is understood that 80% of the company’s trade is in power generation but sources insisted that Siemens had no involvement in Iran’s nuclear power programme. Germany is Iran’s biggest trading partner, with a 2006 surplus of €4bn, but trade was down 18% in the first half of this year. UK exports to Iran fell 7% last year to £431.4m, according to the British-Iran chamber of commerce.

http://www.guardian.co.uk/iran/story/0,,2208219,00.html

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