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CONFIDENTIAL CONFIDENTIAL//NOFORN SECRET SECRET//NOFORN UNCLASSIFIED UNCLASSIFIED//FOR OFFICIAL USE ONLY

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### Viewing cable 09BERLIN1577, NOW FOR THE HARD PART: MERKEL,S TEAM EXAMINES NEXT

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Reference ID | Date | Classification | Origin
--- | --- | --- | ---
09BERLIN1577 | 2009-12-14 07:07 | CONFIDENTIAL | Embassy Berlin

`

    VZCZCXRO5162
    RR RUEHBC RUEHDBU RUEHDE RUEHDIR RUEHFL RUEHKUK RUEHKW RUEHLA RUEHNP
    RUEHROV RUEHSL RUEHSR RUEHTRO
    DE RUEHRL #1577/01 3480754
    ZNY CCCCC ZZH
    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

`