Iran: Desperation

Britain seeks to raise pressure on Iran over sailors

After a day of escalating tension between London and Tehran, which pushed oil prices up sharply, the U.N. Security Council agreed a watered down statement expressing "grave concern" at the situation and supporting calls for the crew's release.

Britain, which had sought a tougher statement, plans to urge the European Union to help isolate Iran at a two-day meeting of EU ministers starting on Friday.

Acts of Desperation: Siege Mentality

Iran is now also militarily encircled by the US forces. American troops are based in almost every country bordering Iran - Afghanistan, Iraq, Turkey, Pakistan and Azerbaijan.

The US Navy has been conducting a series of exercises in the Gulf - the biggest war games in the area since the invasion of Iraq four years ago.

The sense of being under siege is compounded by the US military's detention in January in Iraq of five Iranians. [snip]

And in December a former Iranian deputy defence minister disappeared in Turkey. Some Western media reported that he had defected to the West.

But the Iranian government and his family say he was abducted by the US or Israel.

All these events and pressures have created a siege mentality in Tehran.

More on Economic Warfare

Reflecting the confusion inside the Iranian state, the first coordinates for the allegedly transgressing British boats given to the British by the Iranian government turned out to be within Iraqi territorial waters too. Not until three days later did the Iranians come up with a second "corrected" set of coordinates which conveniently put the British forces on the wrong side of the line. Only someone whose political and moral compass is totally disorientated by hostility to American and British policy could dare to suggest that this act of shameless, lying, cross-border piracy is justified or excusable.[snip]

But there is something Europe should do: flex its economic muscles. The EU is by far Iran's biggest trading partner. More than 40% of its imports come from, and more than a quarter of its exports go to, the EU. Remarkably, this trade has grown strongly in the last years of looming crisis. Much of it is underpinned by export credit guarantees given by European governments, notably those of Germany, France and Italy. According to the most recent figures available from the German economics ministry, Iran is Germany's third-largest beneficiary of export credit guarantees, outdone only by Russia and China. Iran comes second to none in terms of the proportion of German exports - in recent years up to 65% - underwritten by the German government.

The total government underwriting commitment in 2005 was €5.8bn (£3.9bn), more than for Russia or China. As the squeeze grows on Iran from UN sanctions and their knock-on effects, and as President Mahmoud Ahmadinejad fails to deliver on his populist economic promises, this European trade becomes ever more vital for the Iranian regime - and ever more dependent on European government guarantees to counterbalance the growing political risk.

In the Commons yesterday a former foreign secretary, Malcolm Rifkind, asked if Britain's European friends - and Germany, France and Italy in particular - might be prevailed upon to convey to Iran, perhaps privately in the first instance, the possibility that such export credit guarantees would be temporarily suspended until the kidnapped Europeans are freed. I gather that if such private pressure is not forthcoming, Britain might be tempted to raise the suggestion more formally at a meeting of European foreign ministers in Bremen this weekend.

So here's a challenge for the German presidency of the European Union: will you put your money where your mouth is? Or are all your Sunday speeches about European solidarity in the cause of peace and freedom not even worth the paper they are written on?