Iran, Germany Sign 10 Business Deals

German firms have signed 10 business agreements with Iranian partners during the fifth session of Iran-Germany Economic Commission in Tehran on Monday.

The European country’s Vice Chancellor and Economy Minister Sigmar Gabriel and his Iranian counterpart Ali Tayyebnia attended the session.

Several German Mittelstand firms, the small- to medium-sized companies that form the backbone of the economy, had signed deals with Iranian partners, including SMS group, a builder of steelmaking plants and INTRA industrial solutions, Reuters cited German Economy Ministry as saying.

Mitsubishi Germany signed a contract to modernize a gas-fired plant, while plant constructor Keller HCW wants to build a brickyard in Iran.

Both countries’ central banks have also agreed to a technical cooperation deal. There was no detail on the size of the agreed deals.

Industrial giant Siemens AG and automaker Daimler will be among the first German firms to benefit from opportunities in Iran, but they are proceeding carefully and only after legal reviews.

The German banking sector has been reluctant to underwrite business deals for fear of falling foul of remaining US sanctions imposed on Iran over non-nuclear issues.

 Reminder to the US

Speaking at the opening of an economic forum at Iran Chamber of Commerce, Industries, Mines and Agriculture headquarters in Tehran on Monday, Gabriel said Germany wanted to “remind the United States of the commitment to get to an effective dismantling of sanctions”.  

“Germany wants to help Iran push ahead with reforms,” he said, adding that he believed the Islamic Republic was a reliable credit partner.

“Our aim is to support the current government with its path to opening up to the world.”

The visiting German minister stressed, “Iran was a reliable credit partner that kept agreements as a rule.”

“Iranians have always thought highly of German people,” said the head of ICCIMA, Gholamhossein Shafei, adding that his country is after improved economic, cultural and technologic relations with the European country.

 The Balancing Act

As many as 37 business representatives from prominent German companies, including Siemens AG and Volkswagen, accompanied the minister on the flight to Iran and more joined him once the plane landed in Tehran, Deutsche Welle reported.  

Another 37 journalists will be on hand to record how the minister, who is also the head of Social Democrats, manages a 48-hour balancing act.

The purpose of the trip is to “position the German economy one year on from the nuclear agreement”, said Rudolf Gridl, who specializes in the Middle East and North Africa at the Economy Ministry. “We are very confident that contracts or letters of intent will be signed.”

Germany’s relations with Iran have changed dramatically in the past year. After years of Iran’s economic sanctions, negotiations between Iran and the five permanent members of the UN Security Council (Russia, China, the United States, France and Britain) plus Germany succeeded in a wide-reaching easing of sanctions in return for the country’s pledge to scale back its nuclear program and submit to international inspections.

Once the agreement was reached, Gabriel became the first EU minister to visit Iran and other German politicians have been quick to revive the previously good relations between the two countries.

“There’s a very large interest from the German side,” Gridl said. “All the German federal states have already sent delegations separate from this trip happening now.”

The main lingering problem is that the United States has only partly relaxed its sanctions. Iran can export oil and gas again, as well as access long-frozen assets, but a US embargo remains in place. That makes international banks and business, including some in Germany and France, hesitant to invest in Iran.

A dozen years of sanctions have resulted in Iran’s banks lagging behind international standards.

“The federal government tries to provide Iran technical help with regard to bringing its banking sector up to speed,” Gridl said.

There are high expectations, especially in the power, transport and health care industries. Many of Iran’s hospitals are dilapidated and require international knowhow.

 Bilateral Trade

Managing Director of Iran-Germany Chamber of Industry and Commerce Rene Harum said 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 in Tehran last week, Harum said bilateral trade stood at €2.5 billion in 2015, IRNA reported.  

He said 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.

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 (started March 20), 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 four-month period, indicating an 18% rise year-on-year. Imports mainly included industrial machinery, grain, pharmaceuticals and steel products.