EU warns Iran over boycott of Danish goods
(AP)
Updated: 2006-02-08 10:13

Iran should "think twice" about imposing a boycott on Danish goods or canceling contracts with European countries, EU trade chief Peter Mandelson warned Tuesday after the EU said the move would further chill already icy relations.

Iranian officials announced a suspension of all trade and economic ties with Denmark Tuesday to protest provocative caricatures of the Prophet Muhammad that first appeared in a Danish newspaper and have been republished in other newspapers around Europe.

"I would make it clear to the government of Iran that any boycott of Danish goods is a boycott of the European Union as a whole," Mandelson told The Associated Press during a retail conference in Prague. "I hope that the government (of Iran) will think twice."

The dispute over the cartoons adds to already tense ties amid growing concerns in the EU and in the United States that Iran is aiming to develop nuclear weapons.

A European Union official, speaking on condition of anonymity due to the sensitivity of the issue, said Brussels had not been able to confirm the Iranian action and was awaiting word from Danish authorities and companies, which would be notified first of Iran's moves.

The European Union is Iran's main trade partner. The 25 EU members had combined exports to Iran worth euro11.8 billion (US$14.1 billion) in 2004, while their combined imports were valued at euro9.2 billion (US$11 billion), according to the EU statistics agency Eurostat.

Only euro171 million (US$204.8 million) of that trade was with Denmark. The bulk of Danish exports are machinery and pharmaceutical and medical products.

Saudi Arabian businesses began a boycott of Danish goods on January 26, when supermarkets put up signs urging shoppers to stop buying Danish goods or removed products from the shelves.

"There are Danish companies that are affected by the boycott but it is too early to say whether it will have consequences for (the) Danish economy, which is sound," Danish Prime Minister Anders Fogh Rasmussen said at a news conference on Tuesday.

Mandelson said a boycott would do little to solve the crisis around the cartoons, one of which depicted the prophet wearing a turban shaped as a bomb with a burning fuse.

"I don't believe that a boycott is a legitimate response to public concern," said Mandelson. "I also think that a boycott hurts both sides and damages Iran's interests as much as it would European interests."

He added that the EU was working "to resolve this issue peacefully, quickly and with the minimum disruption to trade."

EU spokesman Johannes Laitenberger warned that even though Iran is not a member of the World Trade Organization, the EU would take measures against Tehran if it sought to boycott European goods.

It was unclear what action the European Commission, which is responsible for the EU's trade policy, could take in response to a boycott since it has already suspended EU-Iran free trade negotiations in wake of concerns over Iran's nuclear program. The EU could apply its own economic sanctions, however, officials said such a move was not being considered at this time.

"We can only take action if it is state-sponsored. Chambers of commerce are not governments," said Mandelson's spokesman Peter Power.

The EU has made similar threats of trade and political action against Saudi Arabia and other Middle Eastern governments either at the WTO or elsewhere, if they are found to be behind boycotts of Danish goods over the cartoon controversy.

WTO chief Pascal Lamy said in Geneva that no member state has broken its commitments under global trade rules regarding the publishing of newspaper cartoons of the Prophet Muhammad.

Iranian Commerce Minister Masoud Mirkazemi told state-run radio that beginning Tuesday all contracts and negotiations with Danish companies would be suspended. He had said a day earlier that Iran would not allow any new permits for Danish goods, but his announcement Tuesday appeared to go a step further, suspending all existing contracts.

Iran's Health Ministry said Monday it was canceling previously approved business deals for medical equipment with Danish companies.

Mirkazemi said Iran would not be put off. "The EU can respond any way it wants," the commerce minister said.

Before the falling out over Iran's nuclear program _ which Tehran says is only for the production of energy _ the EU and Iran were negotiating a free trade pact as part of forging closer political and economic ties. Those talks were frozen last year.

The EU and Washington pushed through a resolution last weekend at the U.N.'s nuclear monitoring agency in Vienna, Austria, forwarding concerns over Iran's nuclear program to the U.N. Security Council. The council has the power to impose economic and political sanctions.