VZCZCXYZ0032
PP RUEHWEB

DE RUEHRL #1518/01 3111430
ZNY CCCCC ZZH
P 061430Z NOV 08
FM AMEMBASSY BERLIN
TO SECSTATE WASHDC PRIORITY 2588

C O N F I D E N T I A L BERLIN 001518 
 
SIPDIS 
 
E.O. 12958: DECL: 11/06/2018 
TAGS: IR AZ PREL ECON EAID IZ AF GM
SUBJECT: DAS GARBER'S DISCUSSION WITH GERMAN ECONOMIC 
OFFICIALS ON IRAN, IRAQ, AND AFGHANISTAN 
 
REF: STATE 115523 
 
Classified By: Political Minister Counselor Jeffrey Rathke for reasons: 
 1.4 (B) AND (D). 
 
¶1.  (C) SUMMARY: EUR Deputy Assistant Secretary Judith Garber 
on October 22 met with Ministry of Economics officials to 
discuss Iran, Iraq, and Afghanistan.  Deputy Director General 
of Foreign Trade Law and Export Control Karl Wendling and 
Head of North Africa and Near and Middle East Division Juegen 
Friedrich stated that sanctions against Iran were working, 
and that Germany may be open to less-targeted sanctions, 
which could have an effect on the broader Iranian economy. 
Wendling and Friedrich had just returned from a trade 
delegation to Iraq, which they described as "successful" 
given that German businesses signed several agreements during 
the trip.  Friedrich lamented the lack of an economic 
strategy for Afghanistan and provided the German assessment 
that economic reconstruction in Afghanistan faces more 
difficulty than in Iraq.  END SUMMARY 
 
IRAN 
 
 
¶2. (C) Although cast as an orientation visit for DAS Garber, 
Wendling challenged DAS Garber for an explanation of why U.S. 
exports to Iran have risen so much in the last 10 years.  DAS 
Garber explained that the percentage increase is deceptive, 
as it is an increase from a very small base.  Econoff added 
that the exports were of humanitarian items, including 
agricultural products and medical products and devices. 
 
¶3. (C) Appearing satisfied with DAS Garber's answer, Wendling 
then added that any increase in Germany's exports to Iran can 
also be explained.  First, he asserted, Iran is importing 
more raw materials and as commodity prices have increased, 
the quantity of German exports has not increased, only their 
value.  Second, he attributes the increase in value of German 
exports to Iran to "currency fluctuations."  He said that he 
expects Germany's trade with Iran to decrease following the 
introduction of the new Financial Action Task Force (FATF) 
statement on Iran, linking it to UNSCR 1803's call for 
vigilance over banks with ties to Iran's missile programs 
(see reftel). 
 
¶4. (C) When DAS Garber asked for Germany's assessment of the 
impact of Iran sanctions, Friedrich opined that they were 
working, but noted the recent announcement of cooperation 
between Iran, Russia and Qatar on natural gas reflects "the 
reality" that sanctions can only go so far.  Friedrich stated 
that the sanctions are hurting both Iranian traders and 
industry.  He also noted that the sanctions were a factor in 
the increased value of German exports to Iran, as the 
Iranians have to pay more.  (Comment:  How sanctions affect 
the relative scarcity - and the price - of goods being 
exported from Germany to Iran is not clear.)  He stated that 
the sanctions' effect on the Iranian economy made the Iranian 
government's plan to implement a 3% Value Added Tax 
politically impossible at the moment. 
 
¶5. (C) Wendling then asserted that this might not be the best 
time to move against the Iranian oil sector, as it will cause 
oil prices to rise, possibly exacerbating the current 
financial crisis.  DAS Garber disagreed on the basis that 
overall world oil demand was down. 
 
¶6. (C) In response to DAS Garber's question, Wendling gave 
his readout of the most recent P5 1 discussion on Iran.   He 
expressed surprise at China's negativity, but none at 
Russia's position.  Friedrich stated that Germany could 
accept some new sanctions against Iran that are less targeted 
and might have an effect on the broader Iranian economy. 
Friedrich stated that Iran was asking for bids on a liquefied 
natural gas plant with an estimated value of $1.4 billion. 
He asserted there was "indirect bidding" by (unnamed) U.S. 
companies on the project.  Friedrich also explained that, 
with respect to "civil goods" (non defense items), sanctions 
law must legally originate at the EU, making formal German 
unilateral action impossible. 
 
IRAQ 
 
¶7. (C) Friedrich shared that Germany had identified a roadmap 
for German investment into Iraq, and that German businesses 
remain highly interested in Iraq.  Friedrich identified the 
improved security situation as a reason for businesses to 
revitalize their relationship with Iraq.  Fifty companies 
took part in a recent trade delegation to Kurdistan, and some 
signed agreements during the trip according to Friedrich. 
Friedrich agreed that Germany should take a more active role 
in reconstruction and the development of civil society. 
Currently, Germany has identified agriculture as the most 
significant sector for investment in Iraq, in part because of 
 
its influence on the social fabric and the development of 
civil society. 
 
AFGHANISTAN 
 
¶8.  (C) Officials were more pessimistic on Afghanistan. 
Friedrich said that Allies have no economic vision for the 
country and face a more difficult situation given the 
"booming" drug industry and the lack of a natural resource 
such as oil.  The lack of alternative crops that could 
generate as much income for farmers as opium poppy poses a 
challenge to economic development plans.  Executive Officer 
of the Division for North Africa and Near and Middle East 
Bernhard Schroeder said Germany is interested in engaging on 
Afghanistan economic development but lacks a strategy. 
Friedrich confirmed that Germany was preparing a trade 
delegation to Afghanistan when two German soldiers were 
killed in an October 20 suicide attack in northern 
Afghanistan; due to the deaths, which reflect a deteriorating 
security situation, the delegation's visit is postponed until 
spring. 
 
¶9.  (U) This cable has been reviewed and approved by DAS 
Garber. 
TIMKEN JR