Israel Matzav

Germans being dragged out of Iran trade kicking and screaming

At the beginning of last week, I reported that Germany's Siemens Corporation would stop taking new orders from Iran and gradually wind down its business there.

Of course, it should have been clear from the outset that would take years. But the New York Times reports that despite the relatively small share their Iran business is to German companies' total sales, many of them are reluctant to give the business up and fearful which competitors might get it. Some are even using Dubai to get around the sanctions regime.

Yet even those companies that said they were pulling out — most notably Siemens last week — will probably take years to wind down operations and wrap up outstanding contracts. Others are simply lowering their profile or finding third countries to do business through, fearing they will lose a lucrative market forever if they abandon it now.

“What our members want is a level playing field,” said Ulrich Ackermann, who is responsible for Iran and other countries in the region at the German Engineering Federation, a lobbying group for the sector. “If our German companies pull out, will other, non-German companies replace us?”

Although no precise numbers are available — several big German companies declined to discuss their business activities in Iran — interviews with other companies, trade associations and export guarantee agencies suggest a significant reduction of direct trade between Germany and Iran.

One of the biggest changes is that Iranian companies seeking to import from German companies can no longer receive credit guarantees for seven to 10 years, which used to be normal for big infrastructure projects.

Now, “they have to pay within 360 days,” said Ruth Bartonek, a spokeswoman for Euler Hermes, the agency that manages the German government’s export credit guarantees.

The change was made over the last two years as a result of political pressure from the United States.

As a result, credit guarantees for Iran in 2008 — the latest figure available — amounted to 133 million euros ($186 million), compared with 503 million euros in 2007. In 2005, they were 1.4 billion euros.

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Despite such scrutiny, the office acknowledged that German companies could circumvent these restrictions by using third countries.

The office “is conscious of the fact that business activities can be done through third countries,” Mr. Beutel said.

A German business executive in Iran who represents several German companies confirmed this. “Dubai is Iran’s biggest trading partner, yet Dubai produces nothing,” he said, requesting anonymity because, he said, he would be fired if he gave his name. “The pressure from Berlin is increasing. German companies are becoming nervous. So they go to Dubai. And the Americans do business with Iran via Dubai. As for the Israelis, they can buy perfectly good Iranian washing machines via Romania.”

Mr. Ackermann, from the German Engineering Federation, would not comment on the use of third countries. But he said that even if some German companies found ways to get around the sanctions, it cost them time, money and personnel.

“I don’t want to discuss politics,” he said. “But one thing is sure: Once you lose your market niche, it is very difficult to regain it.”

I have NEVER seen an Iranian washing machine in this country. Pistachio nuts are a different issue.

In any event, it seems that the German government is ready to cooperate on sanctions, but the German business community is a different story. That does not bode well for the prospect of imposing sanctions on Iran even if they get through the UN Security Council.

posted by Carl in Jerusalem @ 11:23 PM