As the world's most powerful countries loosen the sanctions regime on Iran, European companies are looking to turn a profit from the international détente. Information uncovered by Foreign Policy shows that over 100 German companies are currently doing business in Iran -- and their European rivals are scrambling to catch up. As these corporations flood into Iran, their new investments could inject as much as $20 billion into the Iranian economy.
This has been one of the effects of the interim deal between Iran and the P5+1 countries (the U.N. Security Council's five permanent members plus Germany), which was signed in Geneva in November. In return for a freeze of some aspects of the Islamic Republic's nuclear program, the world powers suspended sanctions related to Iran's petrochemical exports, imports for its automotive sector, and its trade in precious metals. Core E.U. sanctions blocking imports of Iranian gas and oil remain in place, and restrictions on Iranian banks have not been completely suspended. But even though these restrictions are still in place -- and are nearly as stringent as U.S. sanctions -- the deal has nevertheless raised the possibility of a conflict-ending agreement that would remove all restrictions on doing business in Iran. As a result, many European companies are rushing to get in on the ground floor.
The White House has claimed that sanctions relief is only worth $7 billion, and U.S. officials have attempted to dissuade companies from beating a path to Iran's door. "Our message to all of these companies is the same: Iran is not open for business," Treasury Undersecretary David Cohen said recently. "Now is not the time to re-engage with Iran. That day may come, but it's not today."
European businesses, however, aren't listening -- and Germany, Iran's most important trade partner within the European Union, is taking the lead. German businesses never really left Iran: Even after the E.U. imposed sweeping oil and gas sanctions on Iran, Germany exported goods valued at $3.4 billion there in 2012, and exports totaled $1.8 billion in between January and September 2013.
These "made in Germany" goods are not Birkenstock sandals and gummy bears, but engineering equipment critical to Iran's infrastructure. A confidential booklet published by the Tehran-based German-Iranian Chamber of Industry and Commerce in late 2012, and obtained by Foreign Policy, lists 136 German companies active in the Islamic Republic. The chamber's work is designed to assist companies' entry into the Iranian market "with advice and practical support," according to the booklet. The large number of businesses it lists highlights the vital role German enterprise continues to play in Iran, even after the imposition of sweeping sanctions in 2010.
Daniel Bernbeck, director of the German-Iranian Chamber of Industry and Commerce, has long been an energetic cheerleader of boosting business with the Islamic Republic. He sparked controversy in the wake of the allegedly doctored 2009 Iranian presidential election, saying that he saw "no moral question here at all" in conducting business during the period of authoritarian repression.
German businesses have supplied the Islamic Republic with the sort of specialized equipment needed for large industrial projects. For example, BOMAFA, a company headquartered in the gritty industrial city of Bochum, delivers high-tech valves to conventional areas of the Iranian economy, according to a spokesman. GEMÜ, an engineering company specializing in valves and measurement systems, was also cited on the German-Iranian Chamber of Industry and Commerce's trade list. A spokeswoman, Eva Zink, told me that the company refuses to provide any information about its work in Iran.
Other German businesses have helped Iran with massive urban infrastructure projects that the Islamic Republic may have lacked the capacity to handle on its own. Herrenknecht, a tunnel-boring machine supplier, has worked in Iran on the construction of metro lines, as well as on sewage and water projects. According to a company spokeswoman, Herrenknecht's sales in Iran totaled roughly $680,000 in 2013.
German officials have tried to cool some of the corporate enthusiasm about doing business in Iran, but have had no more success than their colleagues in Washington. Chancellor Angela Merkel implemented a nonbinding "discouragement" policy meant to curtail high-visibility German-Iranian trade events and commercial deals with Iran. However, it has had little effect: Promoting business with Iran is now respectable in the Federal Republic.
Some politicians have even attempted to play matchmaker between German businesses and Tehran -- and in the process, have gotten themselves entangled with some unsavory characters. In late January, Berlin's former mayor, Walter Momper, moderated an event at the Iranian Embassy under the sponsorship of "Berlin Business Talks," which focused on developing business contacts on an informal level. Iranian state media later reported that Momper called for the complete lifting of sanctions on Iran.
In holding the event at the Iranian Embassy, however, Momper and German businessmen were rubbing elbows with an Iranian diplomat with a checkered past. Iran's ambassador to Germany, Ali Reza Sheikh Attar, was appointed by former President Mahmoud Ahmadinejad and has been sharply criticized by Iranian dissidents for his unconditional loyalty to the hard-line politician. Iranian Kurdish groups have also accused him of responsibility for the massacre of Kurds during his tenure as governor of Kurdistan and West Azerbaijan provinces.
German companies aren't alone within the E.U. in rushing to do business with Iran. Even the Netherlands, a rare European country that has spoken out vocally against Tehran's human rights abuses, is getting in on the game. In 2011, the Netherlands withdrew its ambassador after Iran hanged Zahra Bahrami, an Iranian-Dutch woman involved in the Green Movement protests. The Dutch foreign minister, meanwhile, denounced the execution as a "shocking act by a barbaric regime."
By 2014, however, all that seemed to have been forgotten. The Dutch ambassador to Iran, Jos Douma, tweeted in mid-January that he participated in "speeddate sessions to meet business[es] interested in Iran." One topic of discussion was the export of spare parts to Iran's aviation and agriculture industries. While Douma explained that sanctions were still in place, he wrote that old business hands were "cautiously optimistic" about opportunities there.
Iran's energy industry, while still under tight sanctions, represents a potential gold mine for European countries. And companies are already exploring how they might enter this sector: Royal Dutch Shell, Italy's Eni oil and gas company, and the giant Austrian oil and gas company OMV met with Iran's oil minister in Vienna in December to discuss potential future investments in developing Iran's oil fields.
That same month, Vienna sent a delegation from the Austrian Federal Economic Chamber (WKÖ), which represents the interests of Austrian businesses, to Iran. The WKÖ meeting appears to be Austria's first large-scale contact with the Islamic Republic in a number of years. And Vienna seems determined to get its share of Iranian business: According to the Austrian daily Kurier, Richard Schenz, a vice president of WKÖ, announced in January, "There is no reason to adhere to U.S. laws" regarding trade with Iran.
France is also strengthening its economic relationship with Iran. The Wall Street Journal confirmed that representatives of some of the largest companies in Paris will travel to Iran in early February to discuss possible new business ties. The companies that are sending representatives include GDF Suez, an electric utility company; Alstom, a power generation and transport company; Safran, an aerospace and defense firm; French automakers PSA Peugeot Citroën and Renault; and BNP Paribas, a financial services company.
Considerable obstacles still remain for European businesses hoping to make a buck in Iran. In addition to the sanctions still in place on Iran, the current window of opportunity could slam shut in six short months -- when the interim agreement signed in Geneva expires -- if there is no comprehensive deal over Iran's nuclear program. But European companies' willingness to invest considerable time and resources in Iran, despite the risk, is a sign of their intense interest in turning the current rapprochement into a permanent reality.
Iranian officials, meanwhile, are crowing about finding a partner that provides them with a path to overcome their economic underdevelopment, and political isolation.
"Right now many European companies have contacted Iranian firms and expressed their willingness for the expansion of mutual cooperation," Iranian First Vice President Eshaq Jahangiri said recently. "Iran is in a situation in the region and on the international arena that obstacles to its development should be removed."
Photo: Miguel Villagran/Getty Images
http://www.foreignpolicy.com/articles/2014/01/31/german_corporations_do_business_with_iran
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