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R 140754Z DEC 09 ZDK
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC 6044
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. 
 
----------------------------------------- 
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. 
 
------------------------------------------ 
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. 
 
--------------------------------------------- ---- 
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. 
 
------------------------------------------- 
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. 
 
---------------------------- 
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