German Spy Scandal Tests Merkel’s Partnership With U.S.

Photographer: T.J. Kirkpatrick/Bloomberg

When Chancellor Angela Merkel visited the White House in May, President Barack Obama called her “one of my closest partners” and “extraordinarily helpful” in uniting the EU on sanctions on Russia. Close

When Chancellor Angela Merkel visited the White House in May, President Barack Obama... Read More

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Photographer: T.J. Kirkpatrick/Bloomberg

When Chancellor Angela Merkel visited the White House in May, President Barack Obama called her “one of my closest partners” and “extraordinarily helpful” in uniting the EU on sanctions on Russia.

Working with the U.S. on Ukraine and trade just got harder for German Chancellor Angela Merkel.

With a rift over American spying reopened, Merkel’s attempts to persuade a skeptical public will be more difficult as the U.S. seeks her backing for a trade accord with the European Union and further sanctions on Russia for its involvement in Ukraine.

Nine months after reports that U.S. intelligence tapped Merkel’s mobile phone, an alleged American double agent in German intelligence is stoking more mistrust as the EU and U.S. seek to create the world’s biggest free-trade area.

“It makes the conversation a little more difficult,” Mujtaba Rahman, a political analyst at Eurasia Group in London, said in an interview. “Certainly between Merkel and Obama, certainly at a time when the U.S. is looking for German support for a number of high-level political issues.”

On a trip to China, Merkel said yesterday that last week’s arrest of the 31-year-old German for espionage is a “serious case” that violates “trusting cooperation” between allies, if newspaper reports that he sold secrets to the U.S. are true.

Merkel’s words are “pretty dramatic” by her standards, said Jan Techau, a German affairs analyst who heads the Brussels office of the Carnegie Endowment. “This is about as outspoken as she probably gets. This is one or two notches up in her rhetoric.”

German Target

The U.S. Central Intelligence Agency was involved in recruiting a German officer, CBS Evening News reported, citing an unnamed U.S. official. The operation was authorized to collect intelligence on the German government, CBS said.

Merkel’s irritation reflects Germany’s shift from U.S. tutelage during the Cold War to an increasingly independent power that’s clashed with the U.S. on everything from the war in Iraq to data privacy.

Forty percent of Germans viewed ties with the U.S. as bad, according to an FG Wahlen poll in January, compared with 5 percent in October 2012 after President Barack Obama’s re-election.

Obama has sought Merkel’s backing for expanded sanctions against Russia, trying to gain leverage with the chancellor over companies reluctant to crimp German-Russian trade valued at 76 billion euros ($104 billion) by the German government.

When Merkel visited the White House in May, Obama called her “one of my closest partners” and “extraordinarily helpful” in uniting the EU on sanctions on Russia.

Stumbling Block

Obama and Merkel are also promoting the EU-U.S. trade talks, known as the Trans-Atlantic Trade and Investment Partnership, as a way to boost growth and create jobs on both sides. “We need big projects that unite us,” Merkel said in an interview with Bloomberg News in June 2013.

EU officials have raised concern that the agreement will have to respect European privacy and data laws. Opponents campaigned against TTIP in European elections in May, focusing on U.S. food standards they say are lower than in Europe.

Though the German spy case probably won’t derail TTIP, it “is a stumbling block,” Shada Islam, director of policy at the Friends of Europe advisory group in Brussels, said by phone.

Germans identified France as their most-trusted ally, followed by the U.K. with the U.S. third, according to an Infratest poll conducted June 2-3. While 74 percent said France is trustworthy, 38 percent said the same of the U.S. in the poll of 1,004 people. The margin of error was as many as 3.1 percentage points.

Balancing Act

Merkel “needs to square the circle now,” Techau said in an interview. “She has to show resolve and outrage, while at the same time not alienating her trans-Atlantic and other partners.”

Members of Merkel’s Christian Democratic Union are demanding the U.S. behave as an ally toward Germany’s foreign intelligence agency, known as BND, where the suspected spy worked.

“The Americans have to decide whether they view the BND as a partner or as an espionage target,” Wolfgang Bosbach, a CDU lawmaker who chairs the lower house’s internal-affairs committee, said by phone. “You can’t have it both ways.”

Merkel, 59, faces her own conflict between policy making and personal affection for U.S. ideals, which has sharpened after leaks on U.S. surveillance by former NSA contractor Edward Snowden.

In a speech to Congress in 2009, Merkel said she was “passionate about the vast American landscape” and the American “spirit of freedom and independence” while growing up behind the Iron Curtain in East Germany, where the Stasi secret police spied on citizens to enforce communist control.

German Probes

Now, two German investigations into possible phone-tapping and mass surveillance by the NSA are under way as a result of Snowden’s leaks. Hours after newspapers reported a U.S. link in the latest spy case, the Foreign Ministry in Berlin called in U.S. Ambassador John Emerson on July 4 seeking an explanation.

White House press secretary Josh Earnest declined to comment on the spy case yesterday, citing the pending German law-enforcement investigation.

“The relationship that the U.S. has with Germany is incredibly important,” Earnest told reporters in Washington. “We are going to work with the Germans to resolve this situation appropriately.”

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Tony Czuczka, Leon Mangasarian

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