"How did it come to pass that an opposition's measure of a president's foreign policy was all or nothing, success or "failure"? The answer is that the political absolutism now normal in Washington arrived at the moment--Nov. 7, 2000--that our politics subordinated even a war against terror to seizing the office of the presidency." - Daniel Henninger - WSJ 11/18/05
"the slovenliness of our language makes it easier for us to have foolish thoughts." - George Orwell

Tuesday, September 18, 2007

Sanctions Against Iran Limited: Germany and Iran Business as Usual

If you're interested in continued business and care very little for or even recognize the threat from the Islamic Republic of Iran, be sure to visit:

"BERLIN - A conference entitled "Iran - Business Opportunities for German Exporters" is opening tomorrow in Darmstadt, Germany, under the auspices of the Hessian state government and an initiative of the Federal Ministry of Economics and Technology, and to the chagrin of Israeli diplomats, who have accused Berlin of sending a message of "business as usual" to the regime in Tehran."
Today from Berlin chief government spokesman Ulrich Wilhelm said:
"We are adhering to efforts for a negotiated diplomatic solution, all other options are not presently at disposition."
The question will likely remain; would serious and invasive economic sanctions deter negative moves on the part of Iran with regard to its nuclear ambitions? We'll probably never know, however, were Iran's number one trading partner play along, adherence to "efforts for a negotiated diplomatic solution" might be less of a fiasco than it already is.

Fact Sheet

German Chancellor Angela Merkel said in February 2006, “We must take the Iranian president’s rhetoric seriously.” 1 Similarly, Germany’s Minister of Foreign Affairs Dr. Frank-Walter Steinmeier has more than once declared his support for diplomatic and economic sanctions against Iran. 2

Nevertheless, German companies have continued to invest billions of Euros in Iran over the past decade, and the German government supports those investments through public subsidies.

Germany’s overall investment in Iran:

  • Germany is Iran’s number one trading partner, providing vital investments for Iran’s economy.
  • “Some two thirds of Iranian industry relies on German engineering products,” said Michael Tockuss, former President of the German-Iranian Chamber of Commerce in Tehran. “The Iranians are certainly dependent on German spare parts and suppliers.” 3
  • 2005, export guarantees were reduced by more than 36.8 percent to around 1.4 billion Euro. The German government's compensation for the risk of trade with Iran was 5.8 billion Euro. 4
  • The German Engineering Federation (VDMA) stressed how its business with Iran has grown: “In the year 2005, the German machine construction made exports to Iran worth € 1.5 billion; in 2006, the business was even more lucrative.” 5
  • Five thousand German companies do business with Iran, a third of which have a representative or a mission in Iran. Of these companies 1,750 are registered as members of the German-Iranian Chamber of Commerce in Tehran.
  • Many firms want to do business in Iran, albeit increasingly in secret to avoid public awareness of their partnership with the regime. They include giants such as BASF, Henkel, Continental, Bahlsen, Krupp, Linde, Lurgi, Siemens, ZF Friedrichshafen, Mercedes, Volkswagen, MAN, Hansa, Hoechst, and smaller firms such as Stahlbau Schauenberg, Schernier, and Wolf Thermo-Module.
  • “German companies are trying now, as much as possible, not to publish their contracts with Tehran,” the German business paper Handelsblatt wrote in January 2007. “‘Everything that could affect the U.S. market is deadly. Siemens for example, did not comment officially on its locomotives deal. 6
  • July 29, 2007: Deutsche Bank announced, in the future it is not going to keep accounts in Iran. In doing so, it will be following the footsteps of Commerzbank and UBS. 7
  • August 21, 2007: Dresdner Bank has said it plans to pull the plug entirely on "its activities with Iran and in Iran," citing excessive "bureaucratic expenses." The Financial Times Deutschland said Dresdner Bank's 2006 lending in Iran amounted to the low end of the hundreds of millions of Euros, and had fallen to double digits in 2007. 8

Examples of major German corporations investing in Iran:

  • Siemens: On November 14, 2006, Iran’s Power Plant Projects Management Company (Mapna) and Germany's Siemens signed a deal worth € 450 million ($570 million U.S.) to build 150 locomotives for the Iranian railway network, the official news agency IRNA reported. The deal envisages the import of 30 fully built locomotives to Iran in the first phase and construction of 120 more inside Iran over six years. The contract also requires Siemens to transfer the technical know-how to Iran in 10 years. 9 Three years earlier, in August 2003, Siemens—a firm with expertise in nuclear power station construction—signed a contract to deliver 24 power stations. To complete the deal, Siemens had to commit itself to “technology transfer with regard to small and medium-sized power stations.” 10
  • BASF: BASF Iran has been active since 1959 and represents the entire BASF portfolio, with a special emphasis on strongly growing industries like automotive, petrochemicals (catalysts), and fiber. BASF Iran had a turnover of around € 70 million in 2005. 11

The German government provides subsidies:

  • In March 2006, the Federal German Foreign Ministry promoted Iran as a partner for German companies: “Even today Iran is one of the most important markets for German companies in the entire Near and Middle East. From January to November 2005 Germany exported goods valued at more than € 4 billion to Iran.” This, the Ministry said, was “evident proof of the agility of the German-Iranian cultural exchange,” in contrast to the fact that “Iran does not maintain diplomatic relations with either the USA or Israel.” 12
  • In its 2004 annual report on export guarantees, Berlin’s Economics Ministry noted: “Federal Government export credit guarantees played a crucial role for German exports to Iran; the volume of coverage of Iranian buyers increased by a factor of almost 3.5 to some 2.3 billion Euros compared to the previous year.” The report continued: “The Federal Government thus insured roughly 65% of total German exports to the country [Iran]. Iran lies second in the league of countries with the highest coverage in 2004, hot on the heels of China.” 13
  • In 2006, the limited coverage coupled with the tense political situation in Iran lead towards a further 40 percent decrease in the volume of coverage to about 900 million Euro (previous year: 1.4 billion Euro). In the second quarter of the year 2006, Schuler SMG GmbH & Co. KG provided Iran with a hydraulic transfer press which included band arrangement for the construction of wheels. Iran's export guarantees were reduced by over 38%. Along with the cuts of short dated commercial transactions, export guarantees were also reduced for intermediate-term and long-dated projects in the sector of petrochemistry and the manufacture of foam plastic. 14
  • The German government plans to grant further Hermes export credit guarantees for trade with Iran. In February 2007, Germany’s Minister for the Economy announced that the policy will not be changed just “because of new political obstacles…. Iran-related export credit guarantees are still available.” 15
  • European export assurers no longer cover big projects that require funding. Together they placed Iran within the most expensive category, which means an augmentation of charges at 20 percent. Bank credits are, if at all, only being approved at adverse conditions. 16
  • In September 2007, iXPOS -an initiative of Germany’s Ministry of Economics- is supporting an event by the International Chamber of Commerce in Darmstadt that promotes business ties between Iran and Germany. Many German companies have had experienced "ups and downs" doing business with Iran, the invitation says, but they still look at it from the following perspective: "Iran is used to crises – somehow it always survives". Iran's economic potential certainly justifies this positive perception, it says in the invitation. 17

Trade Volume Germany-Iran 2002-06 18:


Exports to Iran

EUR 2,234 million

Imports to Iran

EUR 320 million


Exports to Iran

EUR 2,678 million

Imports to Iran

EUR 290 million


Exports to Iran

EUR 3,574 million

Imports to Iran

EUR 391 million


Exports to Iran

EUR 4,429 million

Imports to Iran

EUR 462 million


Exports to Iran

EUR 4,110 million

Imports to Iran

EUR 410 million

Last update: September 17, 2007

1 Welt, 5.2.2006; Interview mit Angela Merkel, Der Stern, 8/2006, FAZ, 14.1.2006.

2 „Steinmeier droht mit Sanktionen, Focus-Online, 31.8.2006
„Außenminister Frank-Walter Steinmeier in einem Interview mit dem Nachrichtenmagazin Der Spiegel, 19. Juni 2006”
Auswärtiges Amt der Bundesrepublik Deutschland

„Steinmeier warnt Iran: Isolierung oder Verhandlungen“, FAZ, 30.3.2006.
„Steinmeier schließt Sanktionen gegen Iran nicht aus,“ German News, 21/2/06.

3 “Wirtschaft drohen Milliardenverluste“, Interview with Michael Tockuss, Focus 13/2/06.
Kathrin Erdmann, “Deutsche Wirtschaft im Iran verunsichert,“ DW-World.de, 6/10/05.

4 „Ausfuhrgewährleistungen der Bundesrepublik Deutschland. Das Geschäftsjahr 2005 im Überblick”, BMWi S. 61
„Exportgarantien der Bundesrepublik Deutschland. Hermesdeckungen“, Halbjahresbericht 2006,
S. 2. Auswärtiges Amt der Bundesrepublik Deutschland

5 Peter Philipp, US-Sanktionen gegen den Iran verunsichern europäische Unternehmen, DW-World.de, 10.1.2007.

6 „USA drängen deutsche Firmen aus Iran”, Handelsblatt, 11.1.2007.

7 „Contra Iran“, FAZ, 30/7/07, S. 9.

8 Dresdner Bank stellt Iran-Geschäfte ein, Financial Times Deutschland, Angela Maier (Frankfurt) and Mark Schieritz (Teheran), 21/8/07.

9 „Iran und Siemens unterzeichnen Lokomotivengeschäft im Wert von 570 Mio. US-Dollar”, AFP, 14.11.2006

10 Kathrin Erdmann, Ibid.

11 http://www.basf.co.ir/

12 Auswärtiges Amt der Bundesrepublik Deutschland, Länderinformationen

13 Jahresbericht 2004, S. 60.

14 "Ausfuhrgewährleistungen der Bundesrepublik Deutschland. Das Geschäftsjahr 2006 im Überblick," BMWi p. 61.

15 Nachrichten für Außenhandel, 22.2.2007.

16 „Sanktionen verhindern neue Großprojekte in Iran,“ FAZ, 30/7/07, S. 9. "Ausfuhrgewährleistungen der Bundesrepublik Deutschland. Das Geschäftsjahr 2006 im Überblick," BMWi S. 66.

17 „Iran – Marktchancen für deutsche Exporteure”, IHK Darmstadt Rhein Main Neckar

18 Auswärtiges Amt der Bundesrepublik Deutschland

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