A/S SULLIVAN MEETS WITH GERMAN OFFICIALS;

C O N F I D E N T I A L BERLIN 000443 SIPDIS SIPDIS STATE FOR EUR/ERA, AGS USTR FOR DDWOSKIN, SDONNELLY, MMOWREY E.O. 12958: DECL: 03/04/2017 TAGS: EAGR ETRD PREL GM SUBJECT: A/S SULLIVAN MEETS WITH GERMAN OFFICIALS; DISCUSSES MERKEL'S TRANSATLANTIC ECONOMIC PARTERSHIP, DOHA, IRAN Classified By: EMIN Robert F. Cekuta for reasons 1.4(b) and (d) ¶1. (C) Summary: Assistant Secretary for Economic, Energy, and Business Affairs Dan Sullivan met Jens Weidmann, the Chancellery's Director General for Economic and Financial Policy, and Karl Brauner, the Economics Ministry's Director General for External Economic Policy, February 1-2 to discuss advancing the WTO Doha talks, Chancellor Merkel's transatlantic economic initiative, and export credits for to Iran. German officials expressed determination to move ahead with Merkel's transatlantic economic initiative and were encouraged by USG support. They believe a successful conclusion to Doha is achievable, but think French elections could limit the EU's ability to give more on market access. Nonetheless, German officials promised to support Mandelson's attempt to obtain approval for a better EU agriculture offer. On Iran, they noted a drop in German exports to Iran and said Germany maintains strict export controls. Exports of dual-use items, they said, are closely monitored and do not receive Hermes credit guarantees. Officials said if Germany cut off all official export credits, it would disadvantage German firms vis-a-vis those of other exporting countries, cause Iran to withhold payments on the amounts now owed Germany, and, they argued, undercut the growth the middle class they see as important Iran's movement away from its current policies. End Summary -------------- Doha Development Agenda: German Assessments -------------- ¶2. (C) The German sense is a successful conclusion to the Doha Round is possible, but they quickly point out the difficulties May elections in France present when trying to improve on the EU agricultural offer. Weidmann said Chancellor Merkel had "very tough talks" with President Chirac January 31, leaving Weidmann with the sense real progress, while possible, will require heavy lifting to Chirac to back down before the French election in May. Brauner wondered if the U.S. could move things forward by making an offer that would "embarrass" the EU, shifting public blame for the lack of progress off the U.S., and making Mandelson "sweat." Brauner thought an ambitious offer would divide the EU into two camps -- those who view agricultural liberalization as an opportunity and those who oppose it -- and would make the EU reconsider its position. He said Mandelson takes "a lot of beatings" on his negotiating mandate and cannot go much further now in terms of a new offer. That said, a new U.S. agricultural offer could be the catalyst the Doha negotiations need to address the important areas of nonagricultral market access and services. Brauner said the current high prices of commodity crops, due to biofuel demand and other factors, make it easier to accept more changes to agricultural offers. He mentioned the February 11 informal EU trade ministers meeting in Brussels, where Germany planned to voice its support for Mandelson and his negotiating mandate. ¶3. (C) Brauner noted EU business interests have finally begun pushing hard for a successful conclusion to Doha. He specifically mentioned that French industry trying to rally support for Doha by taking a more confrontational stance with its agricultural sector. German industry, on the other hand, has shied away from such a strategy, thereby drawing the public criticism of the German government. However, German has become more engaged in their efforts to secure a successful conclusion to Doha. -------------- Merkel's Transatlantic Economic Initiative -------------- ¶4. (C) The top economic figure in Merkel's Chancellery, Jens Weidmann, updated A/S Sullivan on Germany's progress in advancing the Chancellor's transatlantic economic initiative. Weidmann stressed the need for political level leadership to keep the Initiative from falling victim to "trench warfare" within the bureaucracies. The Assistant Secretary noted he had confirmed with Deputy National Security Advisor McCormick that McCormick would be Weidmann's counterpart in advancing the initiative. Weidmann said Merkel believes shared U.S. and EU "common values" in the transatlantic economic relationship reflect areas of U.S.-EU cooperation in the global economy. Building on these common values can have global benefits; while the Initiative is not designed to be a counter to China and other emerging market countries, it is a way to set out the rules of the international system in which we want China, India, and others to operate. Brauner said the Chancellor's goal is to give momentum to an initiative that goes beyond the Presidency and anchor it institutionally in the transatlantic relationship. He noted the importance of having the full support of the EU; Brauner said the support is there. ¶5. (C) Examining various options, Weidmann said one proposal calls for a sectoral approach to regulatory cooperation, targeting sectors where the benefits are the largest. He suggested experts could identify the regulatory barriers in each sector, working within existing or new frameworks to examine and comment on these barriers. After regulators have commented, a list of specific regulations in each sector would be moved, if necessary and appropriate, to the political level for a decision. He also agreed signing the Open Skies agreement would be a good deliverable, as people can "relate" to this agreement. Weidmann promised to talk with the negotiators and examine the possibilities for realizing this idea. -------------- Iran: Sanctions; Export Credits -------------- ¶6. (C) Regarding Iran, Brauner conceded the subject of sanctions and limiting export credits is difficult. Brauner said the number of applications for export credits and volume of Germany's trade with Iran has dropped considerably over the past year. He explained export credits give German companies a certainty to conduct business and are protected should the economic situation worsen. By having the German government back the risk, it acts as the insurer where no private company offers insurance. He noted the export credit system is government backed, but the premiums collected cover the cost of the claims. He argued German companies, not the Iranians, are the beneficiaries. The German government is hesitant to cap or halt export credits for fear of Iranian companies defaulting on payments owed. According to Brauner, Iran has traditionally been a reliable debtor. Responding to questions, Brauner said export credits cover projects in the petrochemical industry. He said these projects are not associated with the military. He said Germany maintains an active effort to prevent dual-use exports to Iran and that any such items would not be able to receive Hermes credit guarantees. ¶7. (C) Brauner also mentioned reports from German companies in Iran that Turkish companies have sold General Electric turbines in Iran, which were then assembled by Chinese workers. He promised to provide more information on this alleged sale, as well as ask if similar transactions have occurred. Embassy is following up with his office to obtain the promised additional information. ¶8. (U) Assistant Secretary Sullivan cleared this cable subsequent to his departure. KOENIG