Iran and the European Union’s 27 member states traded €401.17 million worth of goods in January 2023, registering a 5.31% rise compared with the same month of the year before.
New data released by Eurostat show Germany was the top trading partner of Iran in the EU region during the period, as the two countries exchanged €126.07 million worth of goods, 4.37% less compared with the same month of 2022.
Italy came next with €50.91 million worth of trade with Iran to register a 30.4% rise. The Netherlands with €54.56 million (down 7.61%) and Belgium with €34.11 million (up 47.73%) were Iran's other major European trade partners.
Romania registered the highest growth of 425.55% in trade with Iran during the month under review and was followed by Belgium with 47.73%.
A directorate of the European Commission located in Luxembourg, Eurostat’s main responsibilities are to provide statistical information to EU institutions and promote the harmonization of statistical methods across its member states and candidates for accession.
Organizations in different countries that cooperate with Eurostat are summarized under the concept of European Statistical System.
Iran exported €77.94 million worth of goods to the EU in January, indicating a 2.08% decline.
Germany with €26.93 million, Italy with €12.03 million, Belgium with €11.36 million, Spain with €7.79 million and Bulgaria with €4.43 million were Iran’s main export destinations.
Iran’s imports from the EU member states in January grew by 7.27% to €323.23 million. Germany accounted for the largest share of exports with €99.13 million, down 8.56% YOY, followed by the Netherlands (€51.14 million), Italy (€38.88 million) and Romania (€29.82 million).
Bilateral Trade in Review
Iran and the EU traded €5.23 billion worth of goods in 2022, registering a 7.95% rise compared with the year before.
Germany was the top trading partner of Iran in the EU region during the period, as the two countries exchanged over €1.86 billion worth of goods, 8.56% more than in 2021.
Italy came next with €713.17 million worth of trade with Iran to register a 13.32% rise.
The Netherlands with €445.57 million (down 7.61%) and Spain with €378.46 million (up 12.67%) were Iran's other major European trade partners.
Croatia registered the highest growth of 48.84% in trade with Iran during the period under review and was followed by Bulgaria with 44.13%.
Iran exported €1.05 billion worth of goods to the EU in 2022, indicating a 14.55% rise.
Germany with €278.91 million, Italy with €161.37 million, Spain with €148.23 million, Romania with €86.84 million and Bulgaria with €85.38 million were Iran’s main export destinations.
Iran’s imports from the EU member states in 2022 grew by 6.4% to €4.18 billion. Germany accounted for the largest share of exports with €1.58 billion, up 9.88% YOY, followed by Italy (€551.79 million), the Netherlands (€389.53 million) and France (€330.3 million).
Bilateral trade stood at €4.86 billion in 2021, registering a 9.09% rise compared with the year before. Iran exported €922.04 million worth of commodities to EU last year, indicating a 29.32% rise. Its imports from the EU member states grew by 5.24% YOY to €3.94 billion.
The figure stood at €4.24 billion in 2020 to register a 13.35% decline compared with €4.89 billion in 2019. Iran exported €618.03 million worth of commodities to EU, indicating a 7.18% fall compared with €665.8 million in 2019. Its imports from EU dropped by 14.32% to reach €3.62 billion.
Two-way trade gained momentum after Tehran signed the nuclear deal with six world powers in 2015. The deal, formally known as the Joint Comprehensive Plan of Action, saw years of international sanctions against the Islamic Republic lifted. In exchange, the country agreed to limit the scope of its nuclear program. JCPOA was implemented in 2016.
However, in 2018, Washington unilaterally quit JCPOA that it had signed with five other countries and Iran. The US then reimposed sanctions against Tehran, leading to a decline in Iran’s foreign trade, including with the EU.
As the government of US President Joe Biden worked to revive JCPOA, the deal appeared near revival in March. But indirect talks between Tehran and Washington have broken down over several non-nuclear issues.
INSTEX Dissolved
European countries said last month they have decided to dissolve a system that was conceived in 2019 to enable trade with Iran and protect companies doing business with it from US sanctions, but only ever processed one transaction.
The German and French foreign ministries said the 10 shareholders of INSTEX - Belgium, Germany, Finland, Denmark, France, the Netherlands, Norway, Spain, Sweden and the UK - concluded that there was no basis to keep it going after Iran persistently refused to work with the institution, AP reported.
The statement said the decision to wind up INSTEX was taken for purely business reasons and independently of other factors.
The complex barter-type system was conceived by Germany, France and the UK in January 2019 after then-president, Donald Trump, unilaterally withdrew the United States from the nuclear deal and reimposed sanctions. The other parties to the deal were keen to keep it alive.
In March 2020, the German government said INSTEX had finally concluded a first transaction, facilitating the export of medical goods from Europe to Iran.
The statement said Iran had systematically prevented INSTEX from fulfilling its mandate for political reasons. Tehran only approved that one deal and subsequently blocked further proposed transactions, it added.
Iran-Germany Trade Prospects
Germany’s recent announcement that it would suspend trade-promotion programs for Iran does not mean severance of commercial ties between Tehran and its longstanding trade partner in the European Union, says Hamid Hosseini, an economic expert.
“European countries have gone through special economic conditions in the past months. I hardly remember a double-digit inflation rate and months-long rises in expenses in many European countries, but the economic shocks that appeared following the war between Russia and Ukraine have affected Europe’s economy negatively. In the meantime, Germany, the largest economy in the European Union, has experienced a significant pressure, struggling with serious challenges, especially in energy. The rise in government spending to support people and keep energy prices low is one of the policies that can protract the difficult situation in this country for a long time, thus it is unlikely to completely sever its ties with Iran,” he wrote for Persian daily Ta’adol.
Germany said recently it was suspending trade-promotion programs for Iran, citing the “very serious situation” in the country, referring to recent protests in the Islamic Republic.
As Bloomberg reported, the suspension — days after the EU’s top diplomatic representative said relations with Iran were deteriorating — affects loan and investment guarantees that opened up in 2016 after Iran’s nuclear agreement (known as the Joint Comprehensive Plan of Action), but have been dormant since at least 2019, the Economy Ministry in Berlin said in a statement on Friday.
“After Angela Merkel, former chancellor, left office, the rightwing parties gained more power in Germany. Under the influence of media, the European country tried to show support for the protests in Iran and announced it would cut off ties with Iran. The move does not include the severance of commercial ties though; it is about economic guarantees,” Hosseini said.
Investment guarantees have been suspended and loan guarantees will halt in January, with humanitarian exemptions. Germany’s trade promotion agency, known as Germany Trade and Invest, and Germany’s business promotion office in Iran have “reduced their activities to a minimum,” according to the statement.
According to an AP report, export credit guarantees protect German companies from losses when exports aren’t paid for. Investment guarantees are granted to protect direct investments by German companies from political risk in the countries where they are made.
An article in Forbes also suggested the impact on trade flows between the countries may not be too great, given no new guarantees have been granted since 2019.
Ever since JCPOA came into effect in 2016, German investment guarantees were given or extended for a small number of projects, with a total value of around €123 million.
It has been a similar situation for export credit guarantees. There were €176 million in 2017 and €37 million the following year, but none since then.
"Given that Iran cannot use LC under sanctions, a significant part of its imports from Germany are carried out through prepayment; this is in itself the main guarantee for German exporters. Therefore, in practice, we might not notice a significant change, but the German government usually considers credit lines centered on commercial insurance so that companies can do business with Iran; if the companies face a problem in financial settlements, they have the chance to use this credit line. As such, even if we don’t see this decision by the German government as a political issue but rather an economically influential one, the impact on German companies will be greater,” Hosseini went on to say.
Noting that Germany has been one of Iran’s main trading partners in Europe, he said Iran won’t be able to find a replacement for the country in the short run.
“Therefore, while the economic pressures on the German government in the past months and the risk of another wave of Covid-19 in the world should be taken into account, Iran needs to try to avail itself of all the opportunities, such as the Joint Comprehensive Plan of Action and the improvement of cooperation and avert a complete end of relations with Germany,” Hosseini said.
