Iran General NewsGermany’s commercial ties with Iran prove hard to cut

Germany’s commercial ties with Iran prove hard to cut


New York Times: As European leaders argue about whether to tighten sanctions against Iran, the debate is not just diplomatic. Here in this industrial city, German exporters gathered Tuesday to learn about “market opportunities” in Iran that they complain are drying up. The New York Times

Published: September 21, 2007

DARMSTADT, Germany, Sept. 18 — As European leaders argue about whether to tighten sanctions against Iran, the debate is not just diplomatic. Here in this industrial city, German exporters gathered Tuesday to learn about “market opportunities” in Iran that they complain are drying up.

Germany has long been one of Tehran’s largest trading partners, but its exports to Iran plunged nearly 18 percent in the first half of this year. Business people at the chamber of commerce here blamed the legal uncertainties of doing business in Iran for the trend.

Still, Rolf Weitowitz, a representative of the German Office for Foreign Trade, told the group that Iran was eager to buy all sorts of capital goods that German companies specialize in making: turbines for power plants, water-treatment systems, monorails, even windmill farms.

Iran, he said, would offer “promising potential for German suppliers and partners,” if only the political atmosphere had not been soured by the dispute over Iran’s nuclear ambitions, the United Nations sanctions over the same issue, and the anti-Israel comments of Iran’s president, Mahmoud Ahmadinejad.

To some critics, the fact that this meeting was held illustrates why Germany is not taking as hard a line as the United States or France toward Iran. German companies, they say, are determined to preserve their ties to a country that has been one of their most durable trading partners.

“Germans either can’t, or won’t, see the kinds of people with whom they are doing business,” said Nasrin Amirsedghi, an Iranian writer and critic of the Tehran government, who distributed leaflets outside the meeting. “How can this country, with its history, ignore such things?”

Chancellor Angela Merkel has condemned Mr. Ahmadinejad, saying in a speech in February 2006, “A president who questions Israel’s right to exist, a president who denies the Holocaust, cannot expect to receive any tolerance from Germany. We have learned our history.”

Largely under pressure from the Bush administration, Germany’s three major commercial banks agreed over the summer to wind down their business in Iran, an important step in isolating the country, experts say, by making it harder for its government to obtain financing.

Germany’s Economics Ministry has also scaled back the export credit guarantees it issues for trade with Iran, to $1.2 billion last year from $3.3 billion in 2004. But German companies still exported $5.7 billion worth of goods to Iran in 2006, up from $5 billion in 2004.

Privately, American and Israeli officials express frustration that Germany has been more resistant than Britain or France to reducing commercial ties with Iran. With Germany’s hold on the Iranian market so unsettled, experts say China has overtaken it as the largest trade partner.

At least 1,700 German companies are active in Iran, including household names like Siemens and BASF. Many of these connections go back decades, though few companies like to advertise that nowadays. Siemens, for example, supplies locomotives and gas turbines to Iran.

“We’re not giving out much information, primarily because of security issues,” said a spokesman for Siemens, Wolfram Trost.

France also has deep commercial ties with Iran through companies that include Renault and Total, and the sharper tone of President Nicolas Sarkozy toward Tehran has put them in an awkward position.

For the German machinery makers and other exporters at the meeting here, most of them family-owned businesses, the deteriorating atmosphere is a source of deep frustration. Those already in Iran worry that Chinese exporters are waiting in the wings to pluck their customers.

“If the Germans stop exporting, if the French stop exporting, the Chinese will do it. Period,” said Albert Sax, the managing director of Labcon, a small company that supplies laboratory equipment to Iran. “This entire system of embargoes and sanctions will be meaningless.”

His colleagues nodded glumly, their mood having already darkened upon hearing a lecture on the legal risks they face dealing with the country. For companies with ties to the United States, those risks are particularly acute because of its strict embargo, said Harald Hohmann, a lawyer who specializes in trade.

Asked what a German exporter to Iran should do if it has American employees, Mr. Hohmann replied, “Remove all the Americans from the company.” Later, he clarified, “I’m not against America; I just want companies to understand the risks of doing business in Iran.”

Deutsche Bank cited the red tape and administrative costs of being in Iran as the main reason it is closing its business. But Deutsche Bank, as well as Dresdner Bank and Commerzbank, were prodded by the Treasury Department in Washington, which sent the under secretary for terrorism and financial intelligence, Stuart Levey, to Germany in July to lobby the banks.

A spokeswoman for the Treasury Department declined to comment on Germany’s commercial ties with Iran.

With tensions rising, Germany seems sensitive to accusations that it is fostering a business-as-usual atmosphere. Chancellor Merkel spoke out against bidding by German companies for a contract to build a magnetic elevated rail system in Iran. The Economics Ministry asked the chamber of commerce in Darmstadt to remove the ministry’s name from a brochure and Web site advertising the meeting about marketing to Iran.

The chamber’s deputy director, Axel Scheer, said the federal and state authorities would have preferred that he had canceled the meeting. Rubbing his eyes in frustration, he said he did not intend for the meeting, scheduled a year ago, to be viewed as promoting Iran.

“It’s our obligation to explain to German companies the risks of doing business there,” he said. “We’re not trying to support weapons sales to Iran. This is not a political organization.”

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