Economy, Domestic Economy

German Businesses at Forefront of European Rush to Iran

German Businesses at Forefront of European Rush to IranGerman Businesses at Forefront of European Rush to Iran

While only few German companies were among the institutional investors who rushed to gauge economic opportunities in Iran after it reached a preliminary nuclear deal with the P5+1 countries, the trend has been changing recently.

German Economy Minister Sigmar Gabriel recently headed an economic delegations, including 10 industrial giants to Iran, only days after Tehran and world powers—namely the US, France, Russia, China, the UK and Germany—successfully concluded their talks over Tehran’s nuclear energy program. More German business delegations are planning to visit soon.

Financial Tribune interviewed a former German diplomat and economic expert in Berlin, who wished to go unnamed, on the German companies’ approach toward investing in Iran. The expert noted that intensive dialogue is going on between German banks and the federal government as well as between the federal government and the US Treasury about the conditions of lifting financial sanctions against Iran.

“German companies, especially small- and medium-sized enterprises, are very eager to come back to Iran,” he said, adding that flights to Iran are fully booked as many German companies are traveling to Iran to contact their former partners.

“Germany had been Iran’s biggest trading partner for years, but we lost a lot of our trade with Iran to countries such as China and India after the imposition of sanctions against Iran’s nuclear program,” he added.

“For the first time after many years of restrictions, Germany will have an official stand in an October trade fair in Tehran,” he said. “State secretary at the Federal Ministry for Economic Affairs and Energy, Matthias Machnig, will travel to Tehran to inaugurate the stand and negotiate with Iranian officials.”

Over the past few years, large global banks such as Swiss banks, Deutsche Bank and Commerzbank have been forced to pay billions of dollars in fines due to violation of sanctions laws and are therefore reluctant to resume operations with Iranian banks before the sanctions are officially lifted and the US gives them the green light, he added.

However, he noted that a Hamburg-based Iranian-European bank named Europaisch-Iranische Handelsbank AG is hiring new staff to prepare for the Iran gold rush in the post-sanctions era.

“German banks are gearing up for that time, though they are averse to making that public,” he added.

The expert predicted that once the sanctions are fully lifted, foreign investments will flow into the country not only from Europe, but also from the US.

He, however, referred to rial depreciation and high inflation rate as two major impediments to foreign investment.

“German fund managers and banks are currently gauging up high potential sectors in Iran, including oil, mining and other industries to identify investment opportunities,” he said.

He said German banks are fully prepared to fund investments in Iran.  “We can cover credit lines through government guarantees—widely known as ‘Hermes Cover’ in the business world.”

He referred to machine tools as one of the most lucrative areas for German investors in Iran, pointing that Germany is among the world’s largest and most established producers of machine tools.

“Almost all industries in Iran are in need of new machinery to upgrade their production lines, which makes this market very attractive for German suppliers.”

Chemical and pharmaceutical sectors are other major German industries set to enter Iran, including Bayer and BASF, which were strongly present in the Iranian market before the sanctions. Shipping, mining, automotive and aviation were mentioned by the expert as other strong German industries.