German Exports to Iran Growing

Business ties between Germany and Iran have been growing, and that’s likely to continue.

Germany’s exports to Iran rose to €3.5 billion in 2017 from 2.6 billion in 2016, according to the Federation of German Industries (BDI), Reuters reported.

According to Germany’s public international broadcaster Deutsche Welle, Germany sells industrial machines, chemical and electrical goods, construction machines and other high-end products to Iran.

As DW reported, demand for machinery and equipment, vehicles and chemicals, as well as pharmaceutical and medical products, is particularly high in Iran.

Imports from Iran even increased by almost a quarter to almost €330 million. Germany not only buys dried fruits, pistachios and Persian rugs from Iran, but also industrial raw materials, for example, for the auto industry.

German exports to Iran grew by more than 27% year-on-year from 2015 to 2016, and remain on a steep upward curve.

“Germany’s trade surplus with Iran is massive,” said Michael Tockuss, the head of German-Iranian Chamber of Commerce, based in the northern German port city of Hamburg, which is home to a population of more than 30,000 expatriate Iranian-Germans.

“But that’s nothing new. The Iranians complain about it from time to time and we try to find ways to encourage more Iranian exports into Europe and Germany, but we’ve been running big trade surpluses with Iran for 40 years.”

Tockuss noted that a key demand Iranians often make is that German firms shouldn’t just export goods to Iran and should set up production facilities.

“For example, the Bavarian drywall producer Knauf has a big factory in the country,” he said.

Dispelling the idea that trade between Iran and Germany is about sending oil in one direction, and automobiles in the other, he said, “We [Germany] don’t buy crude oil from Iran … Our refineries aren’t designed to deal with the high-sulfur crude Iran produces. Only Italy and Greece have refineries that can process it, so they’re the main European importers of Iranian oil.”

  Headwinds in Doing Business

Referring to risks of doing business in Iran as a result of the United States’ anti-Iran policies, Tockuss said, “The big banks are still not ready to touch the Iran business.”

As there are still sanctions outside the nuclear agreement and US punitive measures are in place, German and European big banks, especially those with US operations, refuse to cooperate with Iran. It was not until 2015 that Commerzbank also had to pay $1.45 billion to US authorities for violations of US sanctions in dealings with Iran.

According to the Chamber of Commerce, there are many project inquiries, such as in the field of renewable energy, which are currently heavily promoted in Iran.

“Getting bank financing for such medium-term investments is almost impossible,” says Tockuss.

“In addition, it is still very difficult to settle payments with Iran. Although there are individual banks that are now making transactions, mostly do that only for their existing customers.

“The new US sanctions have meant that European companies have to be careful to avoid including US components or US bank transactions when they’re doing business with Iran … It’s still difficult for international banks and big companies to estimate their Iran country risk. But [since European sanctions were lifted] none of this has been a barrier to medium-sized German firms exporting machine tools or other products to Iran.”

   Long History of Relations

Germany and Iran have a long history of friendly relations.

“German companies have a long history in Iran. Siemens has been in Iran for nearly 150 years,” Tockuss said.

“Iranians have a long cultural memory. They know that Germany has been a good business partner for a long time and they also know that Germany hasn’t interfered in Iran’s domestic politics, unlike, for example, Britain or the US.”

Germany was able to benefit from better-performing deals with Iran, albeit not to the extent expected.

“In the 1970s, Iran was the second largest partner of our country outside Europe,” said Eric Schweitzer, president of the DIHK.

Before the sanctions in 2005, bilateral trade amounted to almost €5 billion, while in 2015, only half was left. It did not come to a standstill, even in periods of sanction, because not all goods were subject to sanctions.

After 2016, numerous German companies have reopened their representative offices in Iran, sell their products on the Iranian market and plan investments with Iranian joint venture partners, according to DIHK.

Tockuss, however, said one thing Germany could do to help develop trade with Iran is to improve business visa procedures.

“Right now, if a businessperson from Iran wants to come to Germany to explore cooperation, it often takes four months or more just to get a visa. That’s really dysfunctional,” he said.