German Group Discusses Hurdles to Iran Trade

As Tehran is hosting the second edition of Germany’s specialized exhibition for machine tools and metalworking sector known as “AMB Iran 2017”, Germany’s public international broadcaster Deutsche Welle has interviewed Klaus Friedrich, an expert in Iranian affairs at the German Mechanical Engineering Industry Association (VDMA).

The industry group represents the interests of German machine and plant builders.

Friedrich discussed current problems in Germany’s business dealings with Iran. Excerpts follow:

DEUTSCHE WELLE:  What are the current impediments to bilateral trade?

KLAUS FRIEDRICH: The main problem is that there are too few bank connections between Iran and Germany. Very few financial institutions are currently prepared and ready to support business in Iran.

For business policy reasons, and with regards to US interests, they keep their hands off it. So it comes to the fact that a couple of German companies, which would like to do business in Iran—legal business allowed under the sanctions regime—cannot find a bank that handles payment transactions.

The same applies for credit financing and other financial services related to export transactions.

Are there any other problems?

The second problem is that we can’t exactly estimate how much money Iran has. The government’s financial situation remains unclear. But that might change or improve after the [presidential] elections.

Otherwise, the general compliance control around Iranian transactions is high by comparison. This was also the case before the sanctions.

Can you briefly explain the term “compliance” in this context, given that it may not be familiar to everyone?

With any transaction worldwide, but particularly in business with Iran, you have to check whether or not there is an export restriction. This means that you need an authorization from the German Federal Export Office to be sure that your export is not subject to a ban.

The sanctions against Iran have only recently been relaxed; they are not completely gone. There are still sanctions in place and companies doing business in Iran are not spared the review. We understand this primarily as a matter of compliance.

The second part of the compliance controls are declarations. Most companies, such as forwarding agencies, shipping companies, suppliers, and also banks, require confirmation that export regulations are respected.

Basically, every party needs to confirm this to everyone involved in the business deal. This bureaucratic effort is becoming more and more exhausting. But it’s caused by the businesses themselves because many of these declarations are superfluous and serve only as safeguards against personal liability.

What support are you expecting from politics? Could something change in this relationship?

This is difficult. Politics can’t force the banks to go back into Iran. But you have to actually ask the question: If the private banking sector is no longer in a position to support legal and correct foreign business, can we continue to rely on bank financing for exports in the long run? Or do we, perhaps, need to look for alternatives that are more independent of United States interference in their company policy.