Berlin announced it is cutting federal export guarantees for domestic companies doing business with Iranian companies. The decision comes amid criticism from Washington and Jerusalem that, despite sanctions imposed by the United Nations, Germany’s level of trade activity with Iran increased in 2008.

Germany is Iran’s largest trading partner in the European Union. An estimated 1,700 German businesses operate within the aspiring nuclear nation, exporting nearly 3.6 billion euros worth of goods to Iran in the first 11 months of 2008.

Berlin is among six governments “leading diplomatic efforts to encourage Iran to abandon its nuclear program” (Financial Times).

On the same day of the Berlin decision, the EU also announced its decision to remove the Iranian resistance group, the Mojahedin Khalq Organization (MKO), from its list of terrorist organizations—further threatening to damage already strained relations between Western nations and Tehran.

Critics fear the move will, in effect, expand MKO activities in Europe.

“The former U.S. administration reaffirmed its designation of the MKO as a foreign terrorist organization…But Iran, which has said that nothing has changed ‘in the terrorist nature’ of the group, can be expected to take some sort of action against the EU ruling” (RFE/RL).

The MKO originated in the 1960s to fight against the U.S.-backed Shah of Iran. It “joined the 1979 Islamic revolution that overthrew him, but later fell out with the new clerical regime and fought with Saddam Hussein during Iraq’s 1980-88 war with Iran” (ibid.).