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France and UK reduce trade ties with Iran

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France and UK reduce trade ties with Iran

By Najmeh Bozorgmehr in Tehran

Published: July 18 2008 03:00 | Last updated: July 18 2008 03:00

The British and French embassies in Tehran have dramatically scaled back their trade sections amid a slowdown in business ties with Iran caused by international sanctions.

According to diplomats in the Iranian capital, the UK embassy has all but shut its trade section while the French economic section’s staff has halved over the past year as political pressure over the nuclear dispute erodes trade links.

“There have been lots of political efforts in Europe for the past year or so to decrease trade with Iran,” said a diplomat. “It is understandable that Britain, which has the closest ties with the US, has gone that far.”

Alan Attryde, the first secretary for commercial and economic affairs at the British embassy, will leave Iran this month, while his deputy left some time ago.

International sanctions, particularly the financial restrictions imposed by the US, have deterred business with Iran and forced banks in Europe to cut down dealings with Tehran. The European Union last month also tightened the screws by imposing sanctions on Bank Melli, the country’s largest.

This has led to Iranian trade moving away from Europe towards Asia. China, which has enjoyed growing trade since the early 1990s, ranked third behind the United Arab Emirates in 2006 with $4.48bn (€2.83bn, £2.24bn) of exports.

For now, diplomats say there are no signs that other European countries, notably Germany and Italy, which have the highest level of western trade with Iran, are planning similar reductions at their embassies. But the French and British moves are likely to undermine further the investment environment and affect the import of technology.

France’s Total announced its withdrawal from a multi-billion-dollar gas project last week, following a similar move by Royal/Dutch Shell two months ago.

Iran’s senior nuclear negotiator will meet representatives of world powers in Geneva tomorrow to discuss Tehran’s response to a package of economic and political incentives designed to persuade Iran to curb its nuclear programme.

Iranian officials have shrugged off the impact of international sanctions, saying they have not been damaging enough to force the regime to agree to a suspension of uranium enrichment. Although they admit doing business with Iran has become more difficult, they stress the government can afford the cost because of record oil revenues.

The British embassy refused to provide the latest trade figures but about £1bn ($2bn, €1.26bn) of goods were traded between the two countries in 2006. French exports to Iran stood at $1.5bn last year, down by 20.3 per cent compared to a year earlier, with exports of cars and equipment falling and consumer goods, including cosmetics, rising.

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