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Germany increases pressure on Iran

On Monday, Germany revoked Mahan Air’s licence to use German airports as Iran’s largest private airliner has been accused of transporting military equipment and personnel, such as the IRGC’s Qods Force, to theatres of war in the Middle East such as Syria.

This move represents the second time a major EU country applies sanctions against an Iranian entity since the 2015 JCPOA has been signed. The first time was on the 9 January when the EU designated a unit of Iran’s Ministry of Intelligence and Security as a terrorist organisation and froze its assets as well as the assets of two men linked to the unit.

These new sanctions show a growing unease between Tehran and Brussels. The Islamic Republic has lately been accused of conducting two assassination plots last year in France and Denmark against Iranian opposition figures. The Netherlands have also recently claimed that criminals were hired by Iran in 2015 and 2017 to kill dissidents on Dutch soil.

Iran’s foreign ministry spokesman has rejected all these claims saying that those are all plots made to mar EU-Iran relations. US and Israeli officials have welcomed the recent European actions. Mahan Air has been placed under US secondary sanctions for terrorism since 2011 and the American ambassador to Berlin, Richard Grenell, has sought to weaken German trade with Iran since assuming office in 2018. The airline, known for its affiliation to former Iranian President Hashemi Rafsanjani, had until last week 4 weekly flights to Dusseldorf and 2 others to Munich. Barcelona, Paris and Milan are the three other European cities served by Mahan Air.

European officials have also voiced their anger at Tehran for its failed satellite launch on the 15 January and sending short-range ballistic missiles into Syria on the 30 September. The latter launch targeted ISIS militants as a retaliation to the 22 September Ahvaz terror attack that left more than a dozen Iranian soldiers dead. Such ballistic missile launches contradict the UN’s Security Council “calling upon” Iran to refrain from such actions.

To voice their concerns against Tehran’s belligerent actions, EU diplomats from Belgium, Britain, Denmark, France, Germany and the Netherlands asked to meet Iranian diplomats in Tehran on the 8 January. Shortly after being read a written statement by EU diplomats, Iran’s political deputy at the Foreign Ministry, Abbas Araqchi, abruptly left the meeting followed by other Iranian diplomats.

In fact, Europe is not the only party unhappy in the bilateral relations. Araqchi strongly criticised the EU’s “laxity” in maintaining the JCPOA and its failure to bring a Special Purpose Vehicle to life on-time. The SPV was supposed to be operative late last year to circumvent US sanctions and support legitimate EU-Iran trade. Moreover, the senior Iranian official has shown frustration against the fact that EU governments such as Denmark have provided political asylum to dissidents alleged of terrorism in Iran. The Islamic Republic’s secretary for the Supreme National Security Council, Ali Shamkhani said on the 9 January that Europe missed its chance to save the nuclear deal, thus showing Tehran’s growing frustration against Brussels’ inaptitude to keep the JCPOA’s benefits alive.

Whilst American officials might rejoice at those recent events showing widening fractures between Tehran and Brussels, the fact remains that both sides remain committed to the JCPOA, continuing trade and political engagement. The American Secretary of State, Mike Pompeo, expects to host allies in Poland over the 13-14 February for a conference on Iran’s influence in the Middle East. However, the EU’s High Representative and Foreign Ministers from France and Luxembourg have said they would not attend the conference. Britain and Germany are expected to follow suit.

Nonetheless, the future months are likely to turn more difficult between Iran and the EU. Recently, an Afghan-German national working for the German military has been accused of spying for the Islamic Republic and sharing data to an Iranian intelligence agency. Being one of Iran’s top-3 EU trade partners, Germany is likely to continue trade ties with the country but at an ever slower pace due to the effect of US sanctions, the overdue SPV and growing tensions over alleged IRGC-backed operations throughout Europe.

Since 2016, the German government has insured more than 58 German companies with 911 million euro worth of export credit to deal with the high risks linked to this market. With the signature of the JCPOA, Germany was set to regain its prime position as Iran’s top-5 trade partner. In 2017, bilateral trade volumes increased by 17% to reach 2.96 billion euros. Statistics for bilateral trade in 2018 are currently unavailable but such commerce has drastically dropped after the American President announced the resumption of secondary sanctions in May 2018. Facing Trump’s warning that any company dealing with Iran could not do business in the US, German companies were quick to leave the Iranian market, similar to other European firms. The luxury automaker Daimler and electronics company Siemens announced their withdrawal in August. Later, the German government prohibited the repatriation of 300 million euros placed in the German-Iranian Commerce Bank in Hamburg.

Hamburg, a city long primed by Iran’s business elite and hosting several Iranian banks such as Bank Melli and Bank Sepah, has become less attractive to Iranians as a result of US secondary sanctions. Transfers to such banks have been brought to a halt and Deutsche Telekom has terminated its telecommunications services to such financial entities. For German firms in Iran, operation risks have been the biggest impediment to business as they are unable to pay and be paid on time. This has therefore prompted many companies to step out of the Iranian market, thus leaving only a few small and medium companies waiting for the SPV to take form to continue operations.

Sources:

Al Monitor, 9 January 2019, “Iran national security adviser says Europe missed chance to save nuclear deal”

Iran Front Page, 20 January 2019, “Details of Diplomatic Meeting Between Araqchi, Europeans Released”

Handelsblatt, 9 December 2018, Moritz Koch and Matthias Bruggmann, “Europas Handel mit dem Iran steht vor dem Aus”

ISNA, 20 January 2019, “Germany sanctions Mahan Air”

Reuters, 21 January 2019, “Germany bans Iranian airline from its airspace after US pressure”

Reuters, 19 January 2019, “Iran denies ties to Afghan held in Germany for spying”

The Jerusalem Post, 6 November 2018, Benjamin Weinthal, “Despite sanctions, Germany Supports Iran Trade with Nearly 1 Billion in Credit”

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