Much of Europe Remains Key Trading Partner for Iran

FRANKFURT (AP) _ Iran is big business for Europe, whose companies sell it everything from rail equipment to turbines and even cell phone technology that has been used to block communications between protesters seeking to overturn disputed election results.
But while European governments have expressed outrage over Tehran's bloody crackdown on the demonstrations, lucrative business interests will make them think twice about taking tough action like imposing sanctions.
Europe's biggest exports to Iran include machinery and transport goods, including trains and automobiles, with some euro14.1 billion worth of goods sent to the country in 2008, up nearly 1.5 percent from the year before.
For Europe, Iran is a crucial partner for energy, which accounted for 90 percent of the euro11.3 billion in EU imports from Iran.
Daniel Bernbeck, head of the German-Iranian Industry Group said that doing business in Iran is a far cry from doing business with the government itself.
"German companies have long-term business relationships, and that is good,'' he told The Associated Press from Tehran, but added that the unrest has made it harder.
He noted that the business is not politics.
"I see no moral question here at all. We are not doing business with Iran, but with Iranian companies,'' he said. "We are not supporting the government. We are not responsible (for) what the president (Mahmoud Ahmadinejad) or (German Chancellor Angela) Merkel say.''
Critics argue, however, that trade and politics are inseparable -- with the flow of goods boosting economic growth that helps keep politicians in power. With Europe facing its worst recession in six decades, it would be even harder for leaders to turn off the tap to Iranian cash and energy resources.
France's Foreign Ministry steered clear of the issue of business ties with Iran.
Asked whether France supports broader or stronger sanctions against Iran or would recommend that French businesses scale back trade with Iran, ministry spokesman Frederic Desagneaux wouldn't say yes or no.
He said the current election crisis shouldn't be lumped in with the standoff over Iran's nuclear program, which the West believes is being used to build a bomb.
"There are two distinct aspects in our relations with Iran,'' he said. "There is the Iranian nuclear issue, the deep concern that it elicits in the international community. Concerning the current situation in Iran, we have expressed our condemnation and our demand that the election results are released in a transparent and credible way.''
He said both would be discussed at the EU foreign ministers' meeting in Trieste, Italy, later this week.
In Brussels, Iranian Nobel Peace laureate Shirin Ebadi said economic sanctions would hurt Iran's people more than the regime.
"I don't support economic sanctions because I think it's the people who always suffer from economic sanctions, what I want is political sanctions against Iran,'' she told reporters after talks with human rights activists in Brussels.
The relative quiet regarding economic sanctions is not surprising, said Wahied Wahdat-Hagh, a senior fellow at the Brussels, Belgium-based European Foundation for Democracy.
"Sanctions have to be harmonized on the European level or on the UN level. If Germany alone says we need sanctions, they know that it doesn't work,'' he said from Berlin.
Wahdat-Hagh said that countries have been doing business in Iran before the 1979 revolution and afterward -- and in the face of the U.N. sanctions leveled over its pursuit of nuclear weapons.
One reason: Iran can always look eastward to Russia and China for goods, stoking fears of competition and lost profit. China is already Iran's largest single trading partner, responsible for 14.3 percent of exports to Iran and 14.5 percent of imports from the country in 2008.
Russia is Iran's seventh-largest trade partner, and Russian-Iranian trade turnover was $3.2 billion in 2008. Russia buys about 5 percent of Iran's exports, mainly foodstuffs, and supplies steel and nonferrous metals, wood and machinery to Iran, according to Russian officials.
"They have said it many times that there are opportunities and situations for economic ties with China and Russia,'' Wahdat-Hagh said, adding that no matter how harsh the rhetoric from European leaders, those ties are likely to remain unaffected.
"Of course Europe could make pressure and use economic ties as pressure and see what happens,'' he said.
But most European companies are not eager to back moves that would hurt their profit and revenue.
In France, 55 percent of its exports to Iran are in the automotive sector. Automakers like Renault SA and Peugeot SA are being hit by declining sales and there's no desire to curb what sales it already has to Iran, considered a solid market.
According to an Associated Press analysis of U.S. government trade data compiled by the World Institute for Strategic Economic Research in Holyoke, Massachusetts, U.S. exports to Iran totaled $96 million from January to April, up from $51 million in the same period in 2008.
The biggest players in the Iranian market are in Asia and Europe. Last year, China shipped $8 billion worth of goods to Iran; Germany, $5.7 billion; Italy, $3.2 billion; France, $2.6 billion; and Japan, $1.9 billion.
Europe also sees Iran as a possible supply of more energy and another source to keep it warm in the winter if Russia curbs the flow of natural gas to the continent.
Samuel Ciszuk, a Middle East energy analyst at IHS Global Insight, said European leaders may well be reluctant to call for economic sanctions given their need for more oil and gas.
"Iran is after all the second largest producer in OPEC, so the withdrawal or shutting of its production capacity, if that would happen in some kind of conflict situation, would be problematic,'' he said.
Ciszuk said Europe could offer Iran more direct investment in exchange for a more democratic stance, but added that may not hold weight with the current regime.
"In the short term framework when the regime is making sure that it can survive it's probably a secondary concern.''