2007-10-27

The Associated Press

PARIS: On Iran, this could be Europe's moment of truth.

France, long viewed as too busy making money in Iran to punish it over its nuclear program, is leading a push under U.S.-friendly President Nicolas Sarkozy and his activist foreign minister to hurt Tehran through its pockets. Britain is another European power that sees tougher sanctions as essential.

Yet while Europeans' fears of another U.S.-led war in their backyard are mounting, few other nations are clamoring to support stepped-up EU sanctions that backers say are needed to persuade Iran to heed international demands.

The divisions mirror those that split the continent over Iraq, though the fault lines have shifted.

"It's not unthinkable that (Europe) could reach symbolic sanctions, but it will be complicated to get much further. There's just too much division," said Philippe Moreau-Defarges of the French Institute for International Relations. "France is pretty isolated, aside from Britain."

The United States upped the ante Thursday with new sanctions targeting the Iranian Revolutionary Guards, which Washington accuses of supporting terrorism by backing Shiite militants in Iraq.

The move bars U.S. dealings with businesses with links to the Guards, increases pressure on international banks to cut any ties with those firms — and raises the intriguing question of whether the EU will follow suit.

European companies have continued raking in profits from business in Iran, from the oil sector to banking deals, since the United States first slapped sanctions on Tehran in 1979.

While corporate rivals in Asia or elsewhere could fill a void left by the possible loss of European companies in Iran, EU expertise in the financial or industrial sectors would be missed, analysts said. Iran already faces limited EU sanctions and visa bans.

Concerns have been rising in some European corners that the United States or Israel might launch armed intervention to prevent Tehran from developing atomic bombs. Iran insists its nuclear program is designed strictly to produce electricity, but has repeatedly defied U.N. demands that it suspend nuclear activity.

There is little appetite in Europe for the standoff to lead to war. But few EU members agree on what measures to take to make sure one doesn't break out.

EU foreign ministers in mid-October failed to agree on new sanctions sought by Sarkozy's foreign minister, Bernard Kouchner. He sent a letter to European counterparts Oct. 2 urging them to examine new EU sanctions mainly on Iran's financial sector, to complement efforts toward a third set of U.N. Security Council sanctions being considered but widely seen as stalled amid hesitations from Russia and China.

"The clock is ticking," Kouchner wrote.

Rome and Berlin want to give diplomacy and current sanctions more time, looking for unity through the United Nations first.

Unlike during the Iraq war, this time France and Britain are in favor of a tougher stance on Iran while Germany and Italy — Iran's biggest EU trading partner — are more reticent.

Analysts say at least two variables could alter the mix: Iran's new nuclear negotiator Saeed Jalili could toe such a hard-line that Germany and Italy might lean more toward sanctions, or the tough stance of France and Britain could overcome the hesitancy of Rome and Berlin and any other holdouts.

After meeting Wednesday in Rome with Iran's nuclear negotiating team, Premier Romano Prodi praised efforts from EU and Iranian negotiators and said Italy believes dialogue is "the only instrument" to reach a solution.

The new dynamic of European ties with the United States is central to the equation. Sarkozy has sought to rekindle French-American ties that soured during the Iraq war. Britain has been a stalwart U.S. friend. Several EU newcomers from eastern Europe tend to favor tougher sanctions, mostly because of their pro-U.S. affinities, analysts said.

Spanish Prime Minister Jose Luis Rodriguez Zapatero, who campaigned on a promise to bring Spanish troops home from Iraq, has generally shied away from the limelight in the Iran debate. Ireland appears to want any action to go through the Security Council.

Germany and Italy do not want to jeopardize economic ties, analysts said.

"These are countries that are discreet in their international relations and have economic ties to Iran," in industries such as metals, chemicals and oil, said Francois Gere, an Iran specialist and head of the French Institute of Strategic Analysis.

British Prime Minister Gordon Brown has sounded the call for sanctions loudest of late — including Thursday before the announcement of new U.S. sanctions.

"We are absolutely clear that we are ready, and will push for, further sanctions against Iran," he said. "We will work through the United Nations to achieve this. We are prepared also to have tougher European sanctions."

Sarkozy said in August he wanted to avoid "a catastrophic alternative: an Iranian bomb, or the bombing of Iran" if diplomacy failed. The mere French suggestion of military action against Iran sent shockwaves through diplomatic circles — but the comments appeared designed to allow Sarkozy to talk tough while rallying the international community around the idea of a forceful strategy on Iran that stops short of war.

Sarkozy also apparently wanted to set the example that France was willing to take a hard line against Iran, despite economic interests there. French lenders hold more outstanding Iranian debt of any in Europe — some US$5.9 billion (€4.1 billion) — or more than a quarter of all foreign claims there, according to Bank for International Settlements figures provided in September.

French automaker Renault has invested millions in a partnership to develop a local equivalent of its Logan sedan in what is seen to be a hot car market — eventually. A Renault spokeswoman said that existing sanctions on Iran have stalled the rollout of the production line that could make up to 300,000 cars per year for the Iranian market.

Some analysts say France's hard line is just for show.

"Though their rhetoric has been very staunch, in practice what they're going to do is a totally different thing," said Roger Howard, author of "Iran Oil," a book on the Mideast oil and the United States.

French oil company Total SA is close to finalizing a deal to develop the latest phase of Iran's South Pars natural gas field, Howard said. Total has declined to comment about possible sanctions.

"If Sarkozy and Kouchner are that hawkish they can put pressure on them to pull the deal or distance themselves from it," he said, noting close ties between Total, France's most-valued company, and the French government.

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