Cablegate: Now for the Hard Part: Merkel,S Team Examines Next

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INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHII/VIENNA IAEA POSTS COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 03 BERLIN 001577

SIPDIS

E.O. 12958: DECL: 12/15/2019
TAGS: PGOV PREL KNNP ETTC EFIN IR GM
SUBJECT: NOW FOR THE HARD PART: MERKEL,S TEAM EXAMINES NEXT
STEPS IN IRAN

Classified By: Ambassador Philip D. Murphy for reasons 1.4 b/d.

1. (C) SUMMARY. Chancellor Merkel set the German agenda on
Iran with her early November statement before the U.S.
Congress on "zero tolerance" for a nuclear armed Iran and the
need for tougher sanctions should engagement not work.
During a private roundtable hosted by Ambassador Murphy,
however, members of Germany's Iran "brain-trust" from the
German Parliament, MFA, Ministry of Economics and top
government funded think tank welcomed the President's
engagement policy, recommended broadening the dialogue to
areas of cooperation (drugs, Afghanistan, diplomatic
relations), betrayed little beyond a superficial knowledge of
the nuclear program, argued that Germany took the largest
economic hit from recent sanctions, and expressed doubts as
to the efficacy of sanctions, giving us a window into the
difficult task Chancellor Merkel will have in keeping her
government on her page. In the end, we assess that Merkel
will have her way. END SUMMARY.

2. (C) The November 24 event at the Embassy included members
of Parliament from the four main German political parties:
FDP Elke Hoff, CDU Andreas Schockenhoff, Greens Kerstin
Mueller, and SPD Rolf Muetzenich. From the MFA, Policy
Planner Markus Ederer, DG for Economics Ruediger von Fritsch,
DG for Disarmament and Nonproliferation Amb. Peter Gottwald,
and Iran Task Force Director Andreas Krueger attended.
Ministry of Economics DG for External Economic Policy
Karl-Ernst Brauner and the Director of the German government
funded research institute Stiftung fuer Wissenschaft und
Politik (SWP, or Institute for Science and Politics) Volker
Perthes also attended.

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MFA: TRR Not Dead Yet; But Not Well Either
-----------------------------------------

3. (C) The Ambassador opened the discussion by thanking the
German government for its excellent cooperation on Iran and
asked his guests to share their thoughts on the Iranian
internal situation, especially given recent reports of the
expanded role of the IRGC in the cultural/educational spheres
of life, and how that might affect Iran's external policy.
MFA DG for Disarmament Gottwald stated that if we were
correct in assessing the Iranian regime's primary goal to be
survival, then we still had a chance with a negotiated
solution. He said that while the Tehran Research Reactor
(TRR) deal was not "well," Germany wasn't ready to pronounce
it "dead" quite yet. He concluded with a strong statement
saying that a nuclear armed Iran would be a nightmare in and
of itself and a disastrous blow to the NPT regime which was
why Germany would be a strong partner in support of further
sanctions.

4. (C) MFA Policy Planer Ederer said he thought Iran was
confused about what it wants and that the West might be even
more confused about how to get what we want. He said we want
Iranian behavior change, but we don't agree yet what will get
us there. He said UN sponsored sanctions would isolate Iran
and limit its capacity, but questioned whether they would
change Tehran's behavior. He said he realized sanctions
remained a good alternative to military action, but
questioned whether they were really capable of anything other
than just buying time.

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More Carrots before we Reach for the Sticks
------------------------------------------

5. (C) SWP's Perthes argued Iranian Supreme Leader
Khamenei's primary interest was to maintain the security of
the system and prevent regime change. Perthes said Khamenei
feared a velvet revolution over all else, though regional
instability was a close second. He noted Iran remained
besieged by problems of drug smuggling, piracy, and
instability in Pakistan. He recommended more emphasis be
placed on trying to find an incentive for the regime to
cooperate on the regional track, which had already shown some
progress. He said the April 2009, 300 million dollar Iranian
pledge at the Pakistan donor's conference was an important
symbol of the value the regime placed on regional security.
He suggested the West "broaden" relations with Iran to areas
where cooperation could be had: drugs, Afghanistan, and
diplomatic (especially Consular) ties. POL M/C noted this
was fine, but ignored the fact that time was not on our side.
Rather, Iran was installing new centrifuges each week. If
Iran wanted to build confidence or "broaden" relations, it
could modulate that pace, but time was not a luxury we had.
Gottwald agreed emphatically.

BERLIN 00001577 002 OF 003

6. (C) Changing course, Perthes said that if "sticks" had to
be used, he suggested more focus on "export-control" and less
on sanctions. He noted evidence suggested export control
regimes had already worked in slowing down centrifuge
progress. He concluded by saying that if sanctions must be
used, we should avoid all use of the word "crippling" and
instead focus on "targeted" sanctions in order not to turn
the Iranian masses against us and right back into
Ahmadinejad's hands. He also suggested that "unofficial"
sanctions such as Russia's decision not to sell the S300s
were more effective than most formal sanctions. If formal
sanctions had to be pursued he said only global sanctions
would be effective, and therefore advocated UNSC action.
Perthes said he saw readiness in the German business
community to accept financial loss if sanctions were truly
global, but they don't want to see business opportunities
being lost to China or India.

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Green Party : Too Late to Prevent, Need To Contain
--------------------------------------------- ----

7. (C) From the opposition, Green Party Foreign Policy
Spokesperson Kerstin Mueller said she was glad that the new
U.S. administration no longer talked about a threat of a
military option. But she also said she was skeptical that
Iran can be prevented from obtaining a nuclear capability
without a military option, and that it might even be too late
for a military option to be effective. She said she didn't
see compromise within the interests of the regime and thought
the West should focus more attention on how to "control" a
nuclear-armed Iran.

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FDP: Rank and File Grudging Partner on Iran?
--------------------------------------------

8. (C) FDP Spokeswoman on Defense Policy, Elke Hoff opened
her remarks with a grudging acknowledgment of the coalition
agreement in which her party agreed that if engagement with
Iran on the nuclear dossier failed, sanctions would be
implemented. She added that she remained personally
skeptical as to their efficacy. She said additional
sanctions would serve the unintended consequence of rallying
the masses around Ahmadinejad.

9. (C) Hoff said she often hears from constituents in the
business community that German companies are getting
pressured from their American counterparts not to do business
in Iran, and yet they see plenty of U.S. products for sale in
Iran. Econ M/C intervened and stressed that the U.S. was
ready to prosecute any U.S. businesses in violation of U.S.
sanctions and had already done so. Hoff also suggested
offering German businesses financial compensation should new
sanctions come into play. In response to a criticism from
Hoff on whether the U.S. deadline created for engagement on
Iran reflected Obama's domestic political agenda, the
Ambassador emphasized the deep commitment of the
administration to engagement.

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Germany is the Largest Loser
----------------------------

10. (C) MFA DG for Economics Von Fritsch agreed with
Perthes' suggestion to focus more on the carrots and not the
sticks. He noted that no single country has (recently)
sacrificed as much financially as Germany has, not just in
existing trade, but also in long term future contracts. Econ
M/C noted that U.S. business had also suffered enormous trade
and investment losses after 1979. Von Fritsch said if
sanctions were inevitable, German business preferred global
and clear sanctions as opposed to vague wording that can be
left open to differing interpretations. On correspondent
banking relations, Von Fritsch said the German government was
still examining the issue but that a complete severance of
correspondent banking relations including with Iran's central
bank would not be possible since it would amount to a total
trade embargo.

11. (C) Ministry of Economics DG for External Policy Brauner
referenced the inclusion in German law of the presumptive
right to trade, and said that he was concerned that what the
German Customs and BAFA (export control agency under the
Ministry of Economics) were doing to encourage "Nullbescheid"
(pre-certification that specific trade with Iran is not
illicit) might actually be illegal, as German business had
complained. He said one important consideration for Germany

BERLIN 00001577 003 OF 003

was that a further crackdown on trade with Iran could
endanger repayment of the 4.5 billion Euros in outstanding
credits that Iran owed Germany. Germany had agreed not to
issue any new credit under its Hermes (OPIC-like) program,
but expected to be able to collect on outstanding credits.
Nonetheless, both Brauner and Von Fritsch emphasized that in
the event of no progress in negotiations with Iran, Germany
was ready to enter a new round of stronger sanctions, and
that we should look to Chancellor Merkel's statements in the
U.S. Congress and FM Westerwelle's reiterations of her strong
policy as the final say on which direction Germany would go
on Iran.

12. (C) CONCLUSION. The majority of the guests at the table
distinctly deferred to Perthes for guidance on where the Iran
issue might be headed or should be headed. This was striking
amongst such a high ranking group of people operationally
involved with the Iran issue. Also illuminating was the
variety of talking points employed by the participants to
define hurdles for sanction until debunked one at a time by
Embassy officers. The candor with which even some MFA and
Ministry of Economics officials expressed their skepticism on
the efficacy of pursuing tougher sanctions on Iran may mean
that Merkel will have to press hard within her own government
to deliver on her promise of implementing tougher sanctions
should engagement with Iran fail. None of our interlocutors,
however, questioned whether Merkel would, at the end of the
day, be able to "deliver" on her promises. If and when we
decide to go forward on the pressure track on Iran, the USG
may wish to reinforce Merkel's position by showing
appreciation for Germany's strong continuing support. END
CONCLUSION.
MURPHY

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