60 German companies still in Iran despite US sanctions: German industry delegate in Iran

Iran-German trade ties have seen recent downs due to the US sanctions but those measures haven’t stopped dozens of such companies to leave Iran altogehter.

Ali Dashti

17 July 2019
ID : 22110
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Iran-German trade ties have seen recent downs due to the US sanctions but those measures haven’t stopped dozens of such companies to leave Iran altogehter.

Dagmar von Bohnstein, Managing Director Delegate of German Industry and Economy in Iran. File photo. Iran Chamber Newsroom

Dozens of German companies keep doing business in Iran, defying unilateral US sanctions, says managing director of German-Iranian Chamber of Commerce and Industry (AHK Iran), adding that German businesses know that it would be very hard for them to get back to Iran if they completely leave the country.

60 German firms are still doing business inside Iran even though they have been under immense US pressure to leave the country after President Donald Trump reimposed unilateral extraterritorial sanctions on Iran, says Dagmar von Bohnstein, Managing Director of German-Iranian Chamber of Commerce and Industry (AHK Iran) in an interview with Iran Chamber Newsroom.

Answering Iran Chamber Newsroom’s written questions, von Bohnstein said “now the number is around 60”, without giving names for the fear of US reprisals.

According to von Bohnstein, there were 120 German businesses active in the Iranian market in 2016, that is, a year after the multilateral nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), came into force as an international treaty.

That year, Iran witnessed a flurry of international, mostly European, companies that were seeking lucrative contracts in a market of more than 80 million people.

“These companies are interested in the Iranian market as an industrialized, young and valuable country. They are monitoring the market and try hard to do business without getting in conflict with US sanctions,” added von Bohnsetin, Delegate of German Industry and Economy in Iran.

Both large German companies as well as Small and Medium-Sized Enterprises (SMEs) are actively engaged in machinery, chemical industry, medical and pharmaceutical sectors as well as green energy, according to the AHK Iran managing director.

An attractive market with many eyes set on it
“The Iranian economy is attractive and valuable. Iran and Germany have traditional and strong trade relations. The potentials in Iran are really high. The country is industrialized, many factories work with German machinery. The work force is young, educated, able and very open to new technologies,” she added, stressing that “Made in Germany” is a brand in Iran. “These conditions are more than attractive,” according to von Bohnstein.

“Germans know that if they completely leave Iran, it will be difficult coming back to the market again because of the competitors,” she acknowledge.

“Even in 2018 Chinese companies exported almost €2b machinery to Iran while German machinery industry sold a little more than €1b,” explained delegate of German Industry and Economy in Iran.

However, she noted that “good history and mutual trust as well as good working relations” are what keeping the Germans inside Iran.

INSTEX: an important political message that won’t do miracles

Four months after Trump Administration withdrew the US from the JCPOA and reimposed extraterritorial economic sanctions on Iran, European Union’s High Representative for Foreign Affairs and Security Policy Federica Mogherini announced that EU would create a Special Purpose Vehicle (SPV) to maintain business ties with Iran.

That SPV morphed into INSTEX (Instrument in Support of Trade Exchanges) late January when German, France and British leaders announced its creation, meant to do humanitarian trade (agrifoods, pharmaceuticals) with Iran; items, whose trade, has been affected by bank’s fears of clearing Iranian transactions.

Nearly 6 months after the announcement, the trade mechanism hasn’t completely processed any transaction, although the Europeans and Iran say it’s become operational.

To facilitate such trade, Iran also set up a similar company, called Special Trade and Financing Instrument between Iran and Europe (STFI).

Von Bohnstein is hopeful though that the European channel will be useful in reviving Iran-Europe trade.

“INSTEX is a really important political message. It increases independency of US politics in the foreign trades,” she mentioned in the written interview.

The managing director of AHK Iran called on traders and countries to “be patient” as INSTEX is processing first transactions. “As they say, INSTEX will be in humanitarian goods in the first stages after successful experiences it will go further than that,” she reiterated.

“INSTEX will help to go on doing business with Iran. But it will do no miracles as our German foreign minister confessed when he was in Tehran in June. We should be realistic about that,” said von Bohnstein, referring to a recent visit by German Foreign Minister Heiko Maas to Tehran meant to de-escalate tensions between Iran, Europe and the US.

US ambassador to Germany squeezes German business to quit Iran
Richard Grenell, the US envoy to Germany, has been tough with German companies, that are still active in the Iranian market, urging them to change course or face sanctions.

Some German firms with big shares in the US market shied away from Iran after the reimposition of unilateral US sanctions, and Grenell has been pushing the rest to leave Iran too. 

But, managing director of German-Iranian Chamber of Commerce and Industry believes German firms are more resilient when it comes to trade. “I can assure you German companies are well experienced in trade. They are highly export-oriented and know how to deal with political attempts to influence them,” she told Iran Chamber Newsroom.

A solution for current challenges
The German businesses, that have opted for braving the US punitive measures and staying in Iran, can also overcome banking problems, says von Bohnstein, but what could make them stay in the long run is better investment climate.

“Staying or leaving Iran is a mere business decision for German companies, which has to be taken individually. In general: The more attractive a business surrounding is the easier companies stay, trade and invest,” she says.

“To attract German companies and motivate them to stay, Iranian officials could and should take more welcoming policies regarding the foreign investors,” urged the German business official, adding that “unreliable regulations, long-lasting approval processes and burdensome administration” are factors which do not attract foreign investors as well as Iranian ones.

“The private sector needs room to maneuver, innovative surroundings. In this regard Iran can improve even and especially during sanction times,” she stressed.

Von Bohnstein goes on to ask the Iranian authorities to take more measures to make the country’s banking system more transparent and compliant with international banking regulations.

“German banks cannot engage with Iranian traders easily as long as international banking standards are not achieved in Iran. Compliance and Transparency in banking systems is essential for international trade relations,” she mentioned.

What AHK Iran is and what it does
“AHK Iran is part of a worldwide net of over 130 “Außenhandelskammern” in 90 countries. The headquater is DIHK in Berlin. This big net supports bilateral trade all over the world and works in close cooperation with the German Ministry of Economics. This is the reason that AHK Iran has played a supportive role in past 44 years with all of the political and economic ups and downs in Iran. We create a secure and productive platform so firms of both side can find the best partners. We try to inform both sides about the potentials, values and situation of the other side so that they can attract to the right point. The big amount of German and Iranian business delegations organized by the AHK Iran shows the interests of both sides. AHK Iran will go on working hard to keep the business ties between our countries close and strong,” according to a von Bohnstein’s written response about AHK’s role in promoting German-Iran business relations.