Charles Lane argues that relations between Germany and the US are becoming strained as a result of "double standards" in trade and diplomacy with Iran
January 20, 1996

Foreign Affairs

November/December 1995

German-American friendship has been a pillar of the western alliance in the post-cold war era. Helmut Kohl and Bill Clinton enjoy a natural rapport. But when it comes to dealing with Iran, Germany and America have consistently been at odds. Although the two governments have assured each other that their objectives in the near east are the same-to keep Iran from developing nuclear weapons, supporting terrorism, and disrupting the Arab-Israeli peace process-they differ radically over means. The US has tried to isolate Iran diplomatically and strangle its economy. Germany-and Europe-favour engagement ("critical dialogue") built around a multi-billion dollar trade and investment relationship.

The arguments over how to handle Iran are a continuation of a long-standing transatlantic debate about "trading with the enemy." During the cold war, European governments, Germany's in particular, were less willing than the US to use trade embargoes against the Soviet Union. They leaned toward d?tente. This was a matter not only of commerce but of geopolitics. The Germans, who abutted the communist east for 40 years, felt and still feel that containment would not have succeeded without the contribution of Ostpolitik, their policy of engaging the east on issues of trade and diplomacy.

Since the demise of the Soviet Union, these disagreements are going to become more difficult for American policymakers to control. In the past the US and Europe could differ over trading with the Soviets, but containment was still a shared goal. Now Europe and America lack a common enemy. Potential enemies-"rogue" states such as Iran, Iraq, North Korea, and Serbia-have multiplied, and there is no agreement over how threatening they are or whom they threaten most.

The result is a climate of opportunism and, as Europe sees it, a double standard, in which the US sweeps Chinese human rights violations under the rug and asks for European help in financing the sale of nuclear reactors to North Korea, yet at thesame time calls for the dual containment of Iran and Iraq.

On the other hand, Germany's "critical dialogue" has gone beyond the realms of commerce. In October 1993 the glass doors of Helmut Kohl's office complex in Bonn opened to receive an unusual guest: Ali Fallahian, the chief of Iran's foreign intelligence service, and known architect of an international terror organisation. Germany's Federal Crime Office wanted to arrest Fallahian upon his arrival in Bonn for instigating the machine-gunning of four Kurds at a Berlin restaurant on September 17th 1992, but Kohl's office blocked it.

The Fallahian visit caused a furore in Germany and led to embarrassing revelations about the degree to which Iran had used German territory and exploited the German government's discreet toleration. When American officials learned of the Fallahian visit, they were amazed and angry. They believe that money is behind the German decision to stick to the "critical dialogue." The Islamic Republic is investing billions of dollars in modernisation, and western firms figure prominently in Tehran's plans. German industry is eager to snap up Iranian contracts and penetrate the Iranian market of 60m people.

What irks American officials most about German deals with Iran, however, is that Germany subsidises them. Bonn has underwritten roughly $10 billion in sales and investment by German companies. Germans believe their technology and finance can strengthen the hand of Iranian moderates and hence open up the society to the west.

The Europeans have a point-and the Clinton administration has little choice but to evolve a more flexible containment strategy. If the stick of American sanctions were to be wielded in clever alternation with the carrot of European trade, both instruments might be more effective in inducing changes in Iran's behaviour. But currently Iranians are the ones exploiting the rifts among western countries. A rethinking of tactics by the US could help turn the tables.