ACIS Iran Pulse no. 98 • August 5, 2019

Iranian Provocations Prompt German Policy Shift on Iran

Micha'el Tanchum*


In the strategic confrontation between the United States and Iran, the next move belongs to Europe, placing the EU's most influential member, Germany, and its evolving policy toward Iran, at a critical crossroads. Germany has played a central role in creating the INSTEX alternative payment channel for trade with Iran.  While Germany and its EU partners have made it clear to Tehran that INSTEX will not be used for U.S. sanctioned products, Tehran is seeking to pressure the Europeans to allow INSTEX's use for Iran's oil exports by escalating the crisis through a series of provocative yet calibrated actions. However, Iran's provocations seem to be backfiring.  Iran's recent attacks on oil tankers in the Persian Gulf have been roundly condemned by Germany, leading Berlin to contemplate joining an initiative to create a European naval protection force for Persian Gulf maritime commerce.  Although German participation would require a sufficiently broad international mandate, the possibility of Germany's participation already indicates that a shift has occurred in German-Iranian relations.


The U.S.-Iran confrontation entered a new phase on July 7, 2019 with Tehran's breaching the 3.67 percent enrichment cap to which it agreed in the 2015 nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA).  Hoping to increase its bargaining advantage through measured escalation, Iran's government declared its intention to continue to breach the agreement by increments every 60 days. Tehran's objective is to alarm sufficiently Germany and its partners France and the United Kingdom – the European signatories to the JCPOA – to save the accord.  Iran seeks to prompt the so-called E-3 to either convince Washington to ease its crippling sanctions on Iran in exchange for talks or to abandon their compliance with U.S. sanctions and use INSTEX to revive Iran's lucrative oil exports.


As Iran's reported oil exports plummeted by almost 90 percent in July 2019 to a mere 100,000 barrels per day and facing the costly and potentially disastrous prospect of having to shut down oil production in several of its fields, Iran decided to intensify the pressure on the U.S. and Europe by attacking commercial tanker traffic in the Gulf.  With the time clock for its economy and its oil industry running down, Tehran's dangerous gambit was prompted by its perception of the E-3 as lacking either the capability or the will to uphold the terms of the JCPOA in defiance of Washington. However, the gambit may have backfired, creating a turning point in German-Iranian relations.  Germany, who enjoys the deepest relationship with Iran among the E-3, struck a more strident tone against Tehran after the first wave of tanker attacks on July 13, 2019.  Speaking at a press conference in Berlin five days later, German Chancellor Angela Merkel declared that there is “strong evidence” that Iran was behind the tanker attacks near the Strait of Hormuz.  Although Merkel, whose center-right Christian Democratic Union (CDU) leads Germany's governing coalition, reiterated her commitment "to solve the conflict with Iran in a peaceful way," she also urged Iran to uphold the terms of the JCPOA, warning Iran that "there will naturally be consequences," if it did not (Bloomberg, June 19, 2019). 


Germany's chancellor has been one of Europe's most ardent advocates of the JCPOA and strongly opposed U.S. President Donald Trump's decision to quit the multinational nuclear accord with Iran.   At the 55th Munich Security Conference on February 16, 2019, Merkel delivered a speech in support of the JCPOA with uncharacteristic passion (The Irish Times, Feb, 17, 2019). Without mentioning the U.S. president by name, Merkel strongly rebuked the U.S. administration's policy, claiming that the JCPOA was the best way to exert a restraining influence on Iranian behavior in strategic matters not specified in the agreement.


Merkel's turnabout in July perhaps could have been influenced also by the hostile reaction in Iran to German Foreign Minister Maas's June 10, 2018 visit to Tehran, spearheading a concerted European effort to preserve the JCPOA.  In his press conference with Iranian Foreign Minister Javad Zarif, Maas, whose center-left Social Democratic Party is coalition with Merkel's CDU, reiterated Germany's long-standing and friendly relations with Iran and promised that “the EU will spare no effort”  to reduce tensions (Fars News Agency, June 11, 2019). Affirming that "Iran’s living up to its commitment under the nuclear deal," Maas declared that, with regard to INSTEX, the EU is united in " trying to keep and develop economic cooperation with Iran."


Despite his affirmative declarations, Maas’s trip drew widespread criticism in Iran, with the country’s press harshly denouncing the EU as ineffectual in delivering sanctions relief despite Iran’s compliance with the JCPOA (DW, June 12, 2019). Iran's ultraconservative newspaper Javan, closely tied to the Islamic Revolutionary Guard Corps (IRGC), published a highly-offensive cartoon that depicted Maas with a swastika armband and performing a Nazi salute while wearing glasses whose lenses were in the shape of blue Stars of David, carrying the caption, “the stinking leftovers of Nazism and fascism have manifested themselves in the spirit of the weakest Europe in history." The ultraconservative daily Kayhan, associated with Iran's Supreme Leader Ayatollah Ali Khamenei, decried the "arrogant" nature of Maas's mission.  Arman, a reformist newspaper, ran a commentary by Hamidreza Assefi, who served in a senior position in reformist President Mohammad Khatami's foreign ministry, in which Assefi complained that, “The German foreign minister’s statements showed that he came to Iran with nothing in hand. Europe is trying to manage a crisis in the region, but is unable to compensate for its shortcomings and weaknesses.”


Although the E-3 announced the establishment of a special purpose vehicle called INSTEX (Instrument in Support of Trade Exchanges) on January 31, 2019 as an alternative payment channel that would enable European companies to conduct business with Iran free of the scrutiny of U.S (IRNA, Feb 2, 2019). sanctions monitors, the mechanism did not become operational until six months later on June 29, 2019.  While headquartered in Paris, INSTEX is closely associated with Germany as the trade mechanism was created and made operational under the direction of its first president, the former manager of Germany's Commerzbank, Per Fischer (DW, January 31, 2019). The German banking executive was then  succeeded as INTEX president on August 1, 2019 by senior German diplomat Bernd Erbel (Financial Tribune, July 30, 2019).  


Despite the operationalization of INSTEX, Tehran looks askance on the value of the mechanism.  As Mohammad Reza Pour-Ebrahimi of the Iranian Parliament's economic committee told the Iranian press, “INSTEX is a useless mechanism which cannot solve economic problems created by [US] sanctions” (Mehr News Agency, June 30, 2019)  Describing INSTEX's activation for transactions only involving food, medicine, and medical equipment as "not acceptable" and "an insult to the Iranian nation," Pour-Ebrahimi declared that "Europe should honor its JPCOA commitments in trading and banking sectors with Iran. The export of Iranian oil and products are an important part of the JCPOA.”


  Iran's disappointment in Germany has been augmented by the sharp short-fall in German-Iranian bilateral trade as German companies have chosen to comply with renewed U.S. sanctions.  Upon adoption of the JCPOA in 2015 that ended the previous sanctions regime, the once vibrant German-Iranian trade relationship began to spring back to life with Germany-Iran trade expanding by 42% prior to the November 2018 re-imposition of U.S. sanctions.  Under the renewed sanctions regime, Germany's major firms such as Siemens, BASF, and Volkswagen along with German banks Commerzbank and Deutsche Bank, either pulled out of Iran or cancelled their plans to enter the Iranian market due to the fear of violating U.S. sanctions (FAZ, May 9, 2018; DW, September 21, 2018).  According to the Association of German Chambers of Commerce and Industry, German-Iranian bilateral trade declined by 50% in the first quarter of 2019 compared to the first quarter of 2019 (Radio Farda, May 27, 2019). 


This drop in bilateral trade was mirrored by a concurrent downturn in the diplomatic relations between the two countries.  Germany banned Iran’s second largest aircraft carrier, Mahan Air, from flying to and from Germany because of Mahan Air’s role in actively transporting Iranian military equipment and personnel to its proxy forces in the Middle East (Financial Times).  Calling the rescinding of Mahan's air flight permits to Germany "a hasty, unjustifiable act," Iran's foreign ministry characterized the ban to be "in conflict with the spirit governing the long-standing relations between the Iranian and German nations" (the Japan Times, Jan 23, 2019)Relations were further soured in mid-February 2019 when a German court detained an Afghan national working for the German Army and charged him with spying for Iran. Germany’s responses to these alleged Iranian actions signaled the beginning of a shift in Germany's attitude toward Iran, similar to how France's posture toward Iran was moderated by the discovery of covert Iranian operations on French soil in late 2018 (handelsblatt, January 18, 2019).


Although Germany opposes the U.S. 'Maximum Pressure' policy and would like to return to the framework of the JCPOA, Berlin has not broken ranks with Washington. Indeed, Germany shares similar concerns about Iran's proxy paramilitary forces in other countries in the region and especially its continued development of a nuclear-capable ballistic missiles. Tehran's provocations throughout July have not only failed to drive a wedge between Berlin and Washington, it has pushed Berlin to consider joining collective action in the Persian Gulf. 


While German Foreign Minister Maas informed the press on July 31, 2019 that Germany would not join a U.S.-led mission to protect international shipping in the Strait of Hormuz, Berlin has not ruled out contributing to a European-led force (DW, July 31, 2019; July 28, 2019). With Germany being one of the world's leading exporters to global markets, Berlin would be hard-pressed to remain on the sidelines of a European-led maritime commerce protection mission, particularly after Iran's July 19 seizure of a tanker belonging to Germany's European ally, the United Kingdom (BBC, July 20, 2019). Germany's naval assets available for contributing to such a mission are relatively limited. Nonetheless Berlin could provide still muster a meaningful contribution through providing important functions such as reconnaissance. 


Germany already provides naval support to the United Nations Interim Force in Lebanon (UNIFIL) and almost certainly would join a maritime protection mission with a United Nations mandate.  Germany would prefer the widest international umbrella possible, particularly for reasons of its own internal domestic politics. With Merkel's 'grand coalition' of the center-right and center-light threatened by electoral challenges from both the right and left, Germany may not join any force without a UN mandate. It does however, remain within the realm of possibility that a sufficiently broad, European-led initiative could include some form of German participation, should such an initiative materialize.


If Germany does join a maritime protection mission facing off against the IRGC Navy in the Persian Gulf, it would certainly mark a new phase in Germany's policy toward Iran. That Tehran has pushed Berlin consider this possibility already demonstrates that the dynamics in Iran-Germany relationship have shifted, widening the gap between Iran and the European Union.

Dr. Micha’el Tanchum is a senior associate fellow at the Austrian Institute for European and Security Studies (AIES), a fellow at the Truman Research Institute for the Advancement of Peace, the Hebrew University, Israel, and non-resident fellow at the Centre for Strategic Studies at Başkent University in Ankara, Turkey (Başkent-SAM).  @michaeltanchum

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ACIS Iran Pulse No. 100 ● October 31,  2019 

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