FRANKFURT—German companies hoped the opening of Iran's economy
following the lifting of international sanctions in January would
let them rekindle longstanding commercial ties and quickly strike
gold.
Despite a jump in exports, the results have left Germans
disappointed.
Soon after world powers last summer signed a deal to lift
economic sanctions on the Islamic Republic in exchange for curbs on
its nuclear program, German business delegations started visiting
Iran. Even before sanctions were officially lifted in January,
Germans sought local distributors and prepared to resume trade.
Other European delegations followed but expectations were
particularly high that German-Iranian business ties would flourish.
Some German firms never fully retreated from Iran, even when
sanctions were toughest.
German multinationals including engineering conglomerate Siemens
AG have announced plans for large industrial projects in Iran.
In the first six months of this year, German exports to Iran
climbed 15%, to €1.13 billion ($1.26 billion), according to the
German Federal Statistical Office. Germany's worldwide exports
during the period totaled €603.2 billion.
But many German business and government leaders had predicted
the lifting of sanctions on Iran would trigger a bonanza for their
industrial firms, which want to sell Iran equipment to help rebuild
its aging infrastructure.
Disappointed Germans are now blaming the shortfall primarily on
remaining U.S. prohibitions on some transactions with Iran.
"The development lags behind our expectations by far, because of
the [U.S.] sanctions still in place," said Gregor Wolf, director of
European and international affairs at the Federation of German
Wholesale Foreign Trade and Services. "Companies are afraid of U.S.
retaliation," he added.
Many Western financial institutions are hesitant about engaging
with the Iranian market for fear of facing U.S. fines, Mr. Wolf
said. That reticence complicates payments.
"Even though there is a positive influence from all the events
since last year, the international money transfer [system] is not
officially open yet," said Ashkan Pirayesh, an Iranian-German with
German firm Richter Lighting Technologies GmbH, who participated in
a German business delegation to Iran last September. Mr. Pirayesh
said Richter is in the process of building a local office in Tehran
but was not yet exporting to Iran.
Despite the removal of many nuclear-related sanctions imposed by
U.S., the European Union and United Nations, other U.S. sanctions
on Iran persist. The U.S. still designates Iran a State Sponsor of
Terrorism, which blocks loans to the country by international banks
with ties to the U.S., and consequently Iran's access to global
markets.
"Monetary transactions with Iran have been severely penalized by
the U.S.," said Ludovic Subran, chief economist at Euler Hermes
Group, a German trade-insurance provider backed by Allianz SE.
"Everyone is waiting for the Americans to take the first step."
Nevertheless, the payment situation has eased since last year,
experts say. At that time, German firms active in Iran had to route
payments through indirect channels such as the United Arab Emirates
or Turkey.
Now German companies have a few more options, said Amir
Alizadeh, deputy managing director at the Tehran-based
German-Iranian Chamber of Commerce.
Hamburg-based European-Iranian Trade Bank AG, which until
January had been blocked by sanctions, is back in business and a
conduit for German firms to receive payments, Mr. Alizadeh said.
Some smaller banks with limited ties to the U.S. have also begun
working with Iran, he said. The trade bank could not be reached for
comment.
The German government in June settled a longstanding debt
dispute with the Iranian government, handled through Euler Hermes,
which reopened export-credit guarantees for companies that want to
trade with Iran. This could pave the way for more German firms to
establish business ties in coming months, Mr. Alizadeh said.
Some deals have taken time to conclude. Siemens in May signed
agreements with Iran to modernize its energy infrastructure,
including providing Iran with the technological know-how to build
some gas turbines. Siemens also aims to develop Iran's wind-power
capabilities and its railway sector.
A spokesperson for Siemens said the company's portfolio in Iran
was "precisely aligned" to help the country achieve plans to
increase steel and cement production, export cars and become a
gas-and-electricity hub.
Siemens declined to elaborate on how it would obtain payments
from Iran.
Beyond the challenges of payment, obstacles remain for German
and other western firms pursuing opportunities in Iran, according
to experts. These include currency instability, a complicated
bureaucracy, a shaky legal system and ongoing political risk in the
country and throughout the wider Middle East.
"Nevertheless, Iran is going to be an interesting market in the
long term, especially for German exporters," Euler Hermes's Mr.
Subran said. "In the best case, German exporters could double their
exports in the coming years."
Write to Christopher Alessi at christopher.alessi@wsj.com
(END) Dow Jones Newswires
August 31, 2016 09:05 ET (13:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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