The controversial involvement of the Bundesbank in an oil deal between India and Iran is possibly more politically sensitive than previously thought. According to government sources in Berlin, the deal was made in connection to the release of two reporters from the weekly paper Bild am Sonntag from Iranian detention last February. The sources say the German government approved the Bundesbank's help in the Iranian-Indian transaction in exchange for the release of the two prisoners.
The government's official response to questions from SPIEGEL ONLINE has been reserved. A connection was neither confirmed nor denied. When asked what role the Indian-Iranian deal played in the release of the two prisoners, a spokesperson for the Foreign Ministry said: "The federal government became active at the very beginning of the detention of the two German journalists in October 2010, so that they could be brought back to Germany as soon as possible."
The spokesperson referred to the statements made by Foreign Minister Guido Westerwelle, of the business-friendly Free Democrats (FDP), after the return of the journalists. At that time, Westerwelle thanked "all those who worked together to find a solution for this very complicated case."
A Stress Test for Trans-Atlantic Relations
That Germany would help Iran, despite sanctions against the regime in Tehran, to make the oil deal is not universally smiled upon -- and could create trans-Atlantic problems. The US has viewed Westerwelle's diplomatic course critically, even before the government abstained from the United Nations Security Council vote on Libya in March. In particular, Berlin's stance on the debate over Iran's presumed nuclear program is seen as too soft by many. The oil deal would be considered further proof that Germany is distancing itself from its most important allies. A representative of the US Treasury Department was quoted in the New York Times on Thursday as being "concerned" about the German government's compliance with the deal.
Westerwelle personally picked up the two German journalists on Feb. 20 in Tehran with a government airplane. They had been in captivity for more than 130 days. The Iranian authorities previously downgraded their 20-month sentences to fines of about €36,500 ($51,800) each. The regime in Tehran also demanded an apology from the publishing company, Springer-Verlag.
Until now, it has been thought that the largest German concession was the personal meeting between Westerwelle and Iranian President Mahmoud Ahmadinejad, a man notorious for his repeated demands for the annihilation of Israel. "It was not a visit which included significant negotiations," Westerwelle said afterwards.
Money Flowing Through Germany
Government sources, however, say that additional background discussions took place in connection with the visit. Those talks concerned the intermediary role the Bundesbank would play in payments for Iranian oil exported to India. The money flowed from the Indian Central Bank to Frankfurt, and from there on to the controversial European-Iranian Trading Bank (EIHB) in Hamburg, which then transferred it to Tehran.
Officials say that the business deal was one of several options discussed during the tough negotiations for the release of the two journalists. In the end, the German side considered the transaction acceptable.
According to information received by SPIEGEL ONLINE, the clearance was given a few days after the release of the reporters. How much money was exactly involved is unclear. The government has declined to say when and why it gave the political green light for the deal. "The federal government cannot comment on individual transactions," a government spokesperson said. The government confirmed the existence of a transaction on Monday, following a report in the financial newspaper Handelsblatt.
The two Bild am Sonntag reporters were arrested in Iran in October 2010 because they interviewed the son of Sakineh Mohammadi Ashtiani, the Iranian woman who received international attention after being convicted for adultery and sentenced to death by stoning. The reporters had traveled to Iran on tourist visas.
Looking for a Channel
At that time, India was looking for alternative channels to finance its dealings with Iran, after it broke off direct business transactions with the country under pressure from the United States.
Their search bore fruit in Germany, with the EIHB and the Bundesbank. In January and February, media outlets in India reported on what were described as difficult negotiations. By early March, a solution was allegedly found. The deal involves significant sums of money: Every year, India imports some $12 billion worth of oil from Iran. The EIHB declined to comment on the deal. Earlier this week, the Bundesbank said it is required to carry out payments of account holders who do not run afoul of EU regulations.
Berlin has rejected criticism of the role played by the Bundesbank: the package of EU sanctions against Iran foresees the far-reaching monitoring of payments related to Iran, said a government spokesperson. Transactions greater than €40,000 ($56,800) must be authorized. Permission can be denied "should there be sufficient evidence that the transaction is connected with deals relevant to proliferation or to exports prohibited by EU law," the spokesman said. Oil deals are not part of the EU sanction package, he added.
The EIHB Under Fire
The EIHB has also so far avoided being blacklisted by the EU, a fact which is viewed with some displeasure by the US. Washington suspects that Iran uses the EIHB to circumvent international sanctions and to process billion-dollar transactions with weapons dealers and with companies suspected of financing Iran's missile development program and its presumed nuclear weapons program. Since September 2010, all US banks have been forbidden from dealing with the EIHB.
The administration of US President Barack Obama has pressured both Germany and the EU to introduce a similar ban. A representative of the US Treasury Department was quoted recently in the New York Times as saying that the US is working together with its allies to isolate the EIHB. In early February, prior to Westerwelle's visit to Iran, 11 US Senators wrote a letter to the German foreign minister, urging him to take action against the EIHB. Soon after arriving back in Germany with the two reporters in tow, Westerwelle penned an answer to the Senators. He assured them that the EIHB was "under strict controls" from the appropriate authorities. The letter is dated March 1.
On the same day, India's Minister of Petroleum and Natural Gas reported to the lower house of the Indian parliament that outstanding payments in the value of about $1.5 billion had been sent on their way to Iran.