To stop Iran, twist European arms

BY ALEX ALEXIEV
New York Daily News

President Mahmoud Ahmadinejad's UN rant against the Great Satan got banner headlines around the world last week. But two smaller news items out of Iran, largely unnoticed, tell us far more about where Iran is heading and how U.S. policies can nudge the belligerent regime in the right direction.

The first report: The Iranian public did not buy a single government bond in the five months prior. The second: The French banking group Societe Generale invested $2.7 billion in Iranian oil and gas development. Taken together, they reveal an Iran that is ripe for positive change - should the Bush administration meet the moment and change its hypocritical policies now.

You see, despite huge windfall oil profits, the Iranian economy is headed for the rocks. Take the oil (90% of exports) away, and Iran is a failed state. Even with it, 40% of the population lives in poverty - and unemployment among the young is 35%. Iran's own ministry reports indicate galloping inflation and severe financial problems that threaten to shut down scores of hospitals and bankrupt critical companies.

No wonder the Iranian people have no more confidence in regime bonds.

That brings us to the French investment. The one bright picture for the regime right now is European financial assistance. Billions upon billions of foreign capital is just one side of it. The other and more important part is large-scale strategic trade that provides technology essential for keeping the regime afloat.

Last year, EU countries exported $15billion in goods to Iran, a 30% increase from 2004. Virtually all of it was in the strategic oil and gas, petrochemicals and telecommunications sectors. Seventy-five percent of the sophisticated machinery that keeps Iran's economy going comes from Europe. Wittingly or not, our European allies such as Germany, France, Italy and others are keeping the Tehran warmongers in power.

If you think that the Bush administration would be outraged by such behavior and take strong steps to stop it, you're in for a surprise. Despite having a perfect instrument to do just that - in the form of a U.S. law called the Iran-Libya Sanctions Act - the administration is sitting on its hands. Worse, after 22 consecutive vetoes, Washington last year dropped its objections to Iran's application to the World Trade Organization.

It is difficult to escape the impression that Washington's actual behavior, as opposed to its rhetoric, is a tacit endorsement of European duplicity. In fact, it's more than likely that we don't even have to apply sanctions for them to be effective. A realistic threat made to the likes of Siemens, Alcatel, Societe Generale and other companies that prop up the mullahs would make them run from Tehran like from the plague. That's to say nothing of what the American people could do if they were to insist that their pension funds divest the $188 billion they have invested in such companies.

"Europeans are like yapping dogs, kick them once and they run away," Ahmadinejad opined while also dismissing America as a "superpower made of straw." Discomforting as it is to admit, given the record of European and American policies in the intervening year, his tirades are not completely devoid of sense.

Alex Alexiev is vice president for research at the Center for Security Policy in Washington.