Time to Expand German-Iran Transactions

Heading a large trade delegation, Germany’s Vice Chancellor and Minister for Economic Affairs and Energy Sigmar Gabriel recently paid a two-day visit to Tehran, hoping to give a timely boost to the post-sanctions German-Iran relations.

But, a German newspaper, Die Welt, has called it a “mission impossible” in light of the existing US sanctions that deter the German banks and other corporations from engaging with Iran, reads an Op-Ed recently published by US-based think tank Eurasia Review.

“The German banks are still restrained and the issue of funding is, therefore, unfortunately still unresolved. This is a lengthy process and that this leads to disillusionment,” Rene Harum, the head of Iran-Germany Chamber of Industry and Commerce, told the press.

This does not mean, however, that the situation is completely hopeless. Last month, Ilse Agner, the minister for the economic affairs of Bavaria, was in Tehran and signed an agreement for three Iranian banks to open branches in Munich.

While Germany’s two biggest banks, Commerzbank AG and Deutsche Bank AG, continue to avoid doing business with Iran, smaller banks such as the Europaeische-Iranische Handelsbank AG in Hamburg offer letters of credit, thus expediting business transactions between Iranian and German firms.

Harum says trade between the two countries is expected to reach €5 billion in 2017 and €10 billion in the coming years.

Speaking at the first meeting of the joint chamber held late-September in Tehran, he said bilateral trade stood at €2.5 billion in 2015.  

Harum added that Germany is willing to become Iran’s top trading partner, replacing China whose trade with Iran topped $22 billion in the last Iranian year (March 2015-16).

According to the Islamic Republic of Iran Customs Administration, trade between Iran and Germany stood at $2.13 billion in the last Iranian year, down 25% over the previous year.

The German trade delegation included both large, medium and small companies, seeking a share of the Iranian market opened up by the nuclear agreement, which went into effect nearly nine months ago.

So far, Germany has lagged behind France, Italy, China and South Korea, in terms of taking advantage of the new Iran business environment and, indeed, it may be impossible for Germany at this point to regain its privileged past status as Iran’s number one trade partner.

Since 2012, Germany’s trade with Iran has suffered due to the nuclear-related sanctions and it would take a rather herculean effort by the German government to normalize trade and non-trade relations with Iran, in light of the acidic combination of both US sanctions-related inhibitions and a host of political obstacles.

Nevertheless, the prospects of easing restrictions on German-Iranian trade appear to be bright and German giants such as Siemens, Daimler, Volkswagen and a number of energy, environmental and petrochemical companies have seemingly set aside their hesitations in favor of new investments in Iran.

Accordingly, IRICA’s latest stats show bilateral trade is already witnessing a rebound.

Iran exported 10,400 tons of non-oil goods worth $87 million to Germany in the first four months of the current Iranian year, registering a 1.4% increase compared with last year’s corresponding period. Pistachios, carpet, caviar, saffron and dates were among the main exports.

More than 419,000 tons of goods valued at $671.3 million were imported from the European country during the same period, indicating an 18% rise year-on-year. Imports mainly included industrial machinery, grain, pharmaceuticals and steel products.

Gabriel’s trip, even if mildly successful, may even pave the way for an official German visit by Iran’s President Hassan Rouhani, assuming that Tehran and Berlin can make some headway in smoothing their differences on human rights and the conflict in Syria.

This is first and foremost an economy-oriented visit and Germany and Iran can well expand their trade relations despite lingering geopolitical differences.

On the whole, the cynicism of the German newspaper cited above may be exaggerated and the logic of German capitalism will likely dictate a timely breakthrough in Iran-German ties that is entirely in the realm of realistic possibilities.