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strengthening moderate political forces in Iran; the promotion of human rights under the newly established CFSP; and the use of the means of communication (dialogue). Chapter 5 poses the question: ‘What are the achievements of the Critical Dialogue framework?’, in terms of its impact on Iran’s domestic human rights and the Euro-Iranian trade relations. The final chapter identifies causes for transatlantic divergence of stances towards Iran.

2. Developments of the Political and Economic Relations between EU-3 and Iran after the 1979 Iranian Revolution

After the overthrow of the Shah, Iran and Western Europe have experienced not only economically beneficial, but also turbulent and intermittent political relations. Following the Islamic Revolution, Iran emerged on the international scene as an independent, proactively religious, and nonaligned power. ³ A theocratic Islamist government was seen as a precedent and a political phenomenon. Tarock argues that the ideological foundation of Iran’s foreign policy was at that time unknown to Western Europe and European states could not differentiate the depth of transformation of the new system: ‘French intellectuals, journalists, and socialists initially welcomed the developments in Iran and interpreted them as encouraging signs towards Western style liberal democracy, more religiously oriented but otherwise similar to the nationalist, liberal government of Mohammad Mossadeq.’ ⁴ At the time of the 1979 Revolution several circumstances led to the expectation that political relations between Iran and Western Europe would be enhanced in comparison to those of the ‘twin Satans’ the United States and the Soviet Union. Primarily, three factors facilitated the expectation of warming relations with Western Europe.

³ Ehteshami (2001), p.283

⁴ Tarock (1999), p.46

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Iran’s perception of Europe can be determined as one factor. Western European states were not deeply involved in Iranian internal affairs and had historically positive relationship with Iran, especially in the economic sphere. ⁵ Furthermore, the anti-Western wave and rhetoric, following the overthrow of the Prime Minister Mossadeq and the Shah’s White Revolution, was directed at the US and not Europe.

The second reason for the expectation of improving relations between Western Europe and Iran was a mutual economic interest. From the European perspective, Iran was seen as an attractive export market and a source of financial investment. ⁶ After the Second World War, Germany and Iran signed various bilateral economic and trade agreements, such as the Accord on Economic and Technical Collaboration signed on 4 November 1954. ⁷ Following the rise in oil prices in 1973, Iran concluded a number of loan and trade deals with European countries. A German-Iranian Chamber of Industry and Commerce was established in Tehran in 1975 accommodating the interests of about 100 German companies. ⁸ From Iranian viewpoint, after pursuing the policy “Neither East, nor West”, Europe represented ‘a shield to its sovereignty and national interests from foreign adversaries’ ⁹ . Especially after commercial relations with US were deteriorating, it was expected that the Islamic Republic would seek to expand trade relations with Europe and Japan. Third, the developments of the bilateral ties between EU-3 and Iran led to the prospect of improving relations with the newly established Islamic Republic after relations with US were aggravating. With the exception of Britain, called in a Khomeini’s speech ‘the aged wolf of capitalism’ ¹⁰ , which was associated alongside with Tsarist Russia with the external domination in Iran in the nineteenth century, Germany and France expected positive

⁵ Tarock (1999), p.44

⁶ Parsons (1989), p.219

⁷ Mousavian (2008), p.15

⁸ German-Iranian Chamber of Industry and Commerce

Available at: http://ahk-training.de/partners/ahk-tehran.htm

⁹ Tarock (1999), p.41

¹⁰ Hooglund (2002), p.151

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connections with Iran due to some particular developments. While France relations with the Middle East have been mostly with the Arab states, Germany had enjoyed privileged place in Iranian relations, particularly in the economic domain, being by the time of the revolution the largest European exporter of goods and services to Iran. ¹¹ However, France was the European country with the biggest prospect of warming relations with the Islamic Republic since it had given refuge to the Ayatollah Khomeini from October 1978 to February 1989 ¹² prior to his triumphant return to Iran and even in his honour named the street, on which Khomeini was residing, Tehran street. 13

However, these expectations of positive development of European- Iranian relations were short-lived. The gradual revealing of the manifold aspects of Iran’s foreign policy under the theocratic regime antagonized not only the United States, but also its Western European allies. Even before the Iran-Iraq war, ties between Britain and Iran ceased when British missionaries were killed and as a result the British embassy was closed down in August 1980. The United Kingdom was represented at ambassadorial level under the Swedish flag for eight consecutive years. ¹⁴ In particular, relations between Iran and France severed, after the French favouring secular Baath socialists over clerical Islamists, supported Iraq with supply of armaments. Tension further intensified when France granted political asylum to the first elected and impeached Iranian president Bani-Sadr and Mojahedin e-Khalq’s leader Rajavi in July 1981. ¹⁵ Among other various reasons for the contention were $ 14 billion that the Shah had loaned to France for the construction of Eurodif nuclear power programme ¹⁶ and a series of bomb attacks occurred in Paris in September 1986 associated with the Iranian diplomat Vahid Gorji.

¹¹ Tarock (1999), p.54

¹² Halliday (1994), p.313

¹³ Hooglund (2002), p.154

¹⁴ Hooglund (2002), p.151

¹⁵ Tarock (1999), p.46

¹⁶ Halliday (1994), p.313

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3. Factors Leading to the Critical Dialogue

Two antagonistic trends led to the endorsement of the Critical Dialogue framework by the European Council in Edinburgh on December 1992, namely promising trade relations with Iran as well as a set of internal dynamics of the revolutionary regime, which represented an obstacle to accept Iran as a fully legitimate political and economic partner. In particular, several developments at international, European, bilateral and domestic level led to the establishment of the Critical Dialogue: domestic human rights abuses continued as Rafsanjani was unable to impose control on the radicals; the fatwa against Salman Rushdie; assassination of Iranian dissidents in Europe; Iranian opposition to the Arab-Israeli peace process and the support for Hamas; and allegations emerged that Iran was attempting to construct nuclear weapons.

By the time the Critical Dialogue was initiated, Iran had established significant trade relations with Europe, which also indicated potential for further economic development. Bilateral economic transactions between Iran and Europe in 1991 had reached a high point, essentially in terms of Iranian oil exports to Europe and European non-oil exports to Iran. Germany was the primary domain for Iranian non-oil exports - 34.4 percent and in 1992 bilateral volume of German-Iranian trade amounted to $6.8 billion. ¹⁷ Furthermore, with the launching of the first five-year economic development plan, Iran indicated its intentions to reconstruct its economy after the Iran-Iraq war by using foreign borrowing. ’The five-year plan (1989/90-1993/94) authorized up to $27 billion in foreign borrowing. It aimed to increase productivity in key industrial and economic sectors and to promote the non-oil export sector.’ 18

Conversely, despite the image of positive windfall of Iranian domestic politics,

¹⁷ Reissner (200), p. 36

¹⁸ Iran - Economic development, Encyclopaedia of the Nations, Available at:

http://www.nationsencyclopedia.com/Asia-and-Oceania/Iran-ECONOMIC-DEVELOPMENT.html

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following the Rafsanjani’s election and growing trade with Western Europe, some particular developments hindered political normalization with European states. First, with internal fragmentation of power in the Majlis (Iranian parliament) and the bureaucracy, Iranian government emerged not as pragmatic as perceived. While radicals dominated the Majlis in the 1980s, after 1989 Rafsanjani tried to curb political activity in a centrist direction by engineering measures that led to the exclusion of the radical wing from 1992 Majlis. The new parliament majority was moqallid (supporters of the revolution, but not radicals). The ruling clerics were organized in two factions - the Combat clerics of Tehran, which were social conservatives and Society of militant clerics, which were more liberal on social issues, but left leaning. ¹⁹ In 1990 Rafsanjani made a coalition with the Combat Clerics in order to marginalize the radical factions. Despite the image of stability, which stemmed from a more centrist government, Rafsanjani was unable to undertake significant policy initiatives due to the struggle to secure political stability through compromises between the different ruling factions. As a result, domestic human rights abuses continued as a means to suppress the liberal movement, such as the murders of intellectuals ²⁰ , the persecution of Baha’i minority21, and harassment of women and students. Second, in February 1989 Ayatollah Khomeini issued a fatwa against the British novelist Salman Rushdie for his novel ‘The Satanic Verses’, who was accused of blasphemy. A reward of $1 million for Rushdie’s murder was promised by the private organization Bonyad-e Panzdeh Khordad, which was reconfirmed by Ayatollah Khamenei in February 1992. ²² The novelist internationalized the affair by contacting Western countries and institutions, such as a meeting with German foreign minister Klaus Kinkel in October 1992

¹⁹ Bakhash (2002), p.39

²⁰ Bakhash (2002), p.42

²¹ Struwe (1998), p.17

²² Struwe (1998), p.17

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