The Washington Post Editorial Tuesday, April 15 1997; IT BOTHERS Americans that the Europeans, their eye on trade, seem insensitive to acts of terrorism and repression conducted by the likes of Iran and Cuba. But of course it bothers America's trading partners in Europe that the United States wields sanctions against them when they do not support American foreign policy in such places. These tensions are a well-etched feature of the post-Cold War scene. Fortunately, sometimes something positive happens to ease the strain.

In a particularly raw case, the United States had penalized the European Union, in the so-called Helms-Burton legislation, for dealing in expropriated Cuban property. The EU responded by filing a complaint against Washington, in the dispute-settling World Trade Organization, for attempting to extend American embargo law beyond American territory. No party has acted entirely from high principle in this dispute. But both finally accepted the need to head off a major collision that could have spoiled a fledgling trade institution -- the WTO -- critical to American as well as European free-trade interests. Key legislators remain skeptical, but the Clinton administration and the EU have bought time to work out joint and improved standards for the protection of property rights.

Meanwhile, American efforts to enlist the Europeans in isolating Iran have gotten a boost. A German court convicted three Iranians for the murder of three Kurdish dissidents in Berlin after finding the killings had been ordered by an Iranian body including the country's president and its paramount spiritual leader. Faced with these facts from one of their own, the Europeans had no choice but to terminate the "critical dialogue" by which they had spun the trade-protecting illusion of Iranian moderation, and to expel Iranian ambassadors. Now, if reluctantly, they are to consider targeting other items of Iranian travel and commerce.

These deliberations will go on under the shadow of a fresh report linking a senior Iranian official to the Saudi group suspected of the bombing in Saudi Arabia last June that took 19 American lives. A finding that Iran was as directly responsible for the Khobar Towers bombing as the Berlin court found it was in the Mykonos restaurant bombing would have implications extending beyond trade. These include possible American military reprisal. Europeans who shy from that possibility can best discourage it by getting tough on the economic side.