AUSTRIAN TRADE DELEGATE VIEWS ON IRANIAN POLITICAL AND

UNCLAS SECTION 01 OF 02 VIENNA 002948 SIPDIS SIPDIS, SENSITIVE BUT UNCLASSIFIED E.O. 12958: N/A TAGS: PGOV ETRD EINV PREL IR AU SUBJECT: AUSTRIAN TRADE DELEGATE VIEWS ON IRANIAN POLITICAL AND ECONOMIC SITUATION REF: VIENNA 1604 VIENNA 00002948 001.2 OF 002 Summary -------------- ¶1. (SBU) A former Austrian trade delegate to Iran recently told Emboff that financial sanctions are effective in the banking sector, but less successful in deterring Austrian companies from trading with Iranian counterparts. In the view of the trade official, U.S. sanctions were counterproductive, because they ultimately undermined the position of pro-U.S. factions in Iranian society. Austrian exports to Iran are declining, not because of sanctions, according to our interlocutor, but because of a general deterioration of Iran's economy. End summary. ¶2. (SBU) During a recent informal meeting with Emboff, a former representative of the Austrian Economic Chamber (Wirtschaftskammer Oesterreich-WKO)in Tehran discussed his impressions of the current Iranian economic and political situation. The trade rep had just returned from a three year tour in Tehran where he promoted Austrian trade and investment in Iran. Iranians Predisposed to U.S., But Not To Sanctions -------------- -------------- ¶3. (SBU) In the opinion of the trade rep, U.S. policy towards Iran was "counter-productive and wrong." Although many Iranians were positively inclined towards the U.S., USG policy had damaged the Iranian economy, making it difficult for most Iranians not to support the regime. According to our contact, many Iranians believed that increased commercial relations between Iran and the West could improve the political climate. The trade delegate's Iranian interlocutors often expressed concern that the U.S. was unfairly siding with an "inhumane" regime in Saudi Arabia against Iran. Most Iranian Shiites, according to the trade rep, considered themselves more open and democratic than their Sunni counterparts. There is a democratic movement in Iran, which hopes the 2009 elections will usher in regime change and an era of reforms. Financial Sanctions Effective -------------- ¶4. (SBU) Commenting on financial sanctions targeting Iranian banks, the trade rep maintained that almost no bank is willing to finance or guarantee investments in Iran. Also effective, to a certain extent, were U.S. warnings that it might implement the Iran Sanctions Act (ISA) against companies that invest in Iran's energy sector. However, our interlocutor criticized the ISA as "a breach of international law," allowing extra-territorial application of U.S. laws. Austrian Business Prefers "Business As Usual" -------------- ¶5. (SBU) According to our contact, the WKO and other European business lobbying groups will continue to support legitimate European trade and investments in Iran, as long as UN, European, and national laws are upheld. It was difficult to do business in the "cumbersome" government-controlled oil and gas sector. Nevertheless, our interlocutor maintained that there were attractive opportunities for investments and trade in other sectors, particularly in those that have been recently privatized. ¶6. (SBU) Austrian exports to Iran continue to decline, not so much because of international sanctions, according to the trade rep, but because of a general deterioration in Iran's economic situation. Austrian exports to Iran decreased by 15.6% to Euro 339 million in 2006, and decreased by another 9.6% in the first three quarters of ¶2007. ¶7. (SBU) Our contact expressed hope that relations between the U.S. and Iran could improve, particularly following elections in both countries. He predicted that the 2009 presidential elections in Iran could usher in more political and economic reforms. Our contact maintained that many opinion leaders in Iran are increasingly discontent with the government's economic performance, as well as Ahmadinejad's "lunacy." Comment -------------- ¶8. (SBU) Austria has historically enjoyed excellent commercial relations with Iran, even in the immediate aftermath of the 1979 revolution. While the comments are the trade rep's private views, they echo the views expressed to us from various government and VIENNA 00002948 002.2 OF 002 business leaders: economic sanctions are not the most appropriate means to effect regime change in Iran. On the contrary, many Austrian policy makers argue that intensified trade and economic cooperation would facilitate political reforms. KILNER#