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German Companies Pull Out of Iran, Slowly

Posted by Zand-Bon on Feb 2nd, 2010 and filed under INTERNATIONAL NEWS FOCUS, International Companies in Business with Iran, News, Photos, Sections. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry


February 2, 2010


BERLIN — German companies, long Iran’s biggest trading partners in Europe, are finding it increasingly difficult to do business there as the United States, Israel and others campaign for tougher U.N. sanctions in response to the country’s nuclear program.

At the company's annual meeting last week, a protester's sign said, "Siemens: No aid for the torturing regime Iran." Miguel Villagran/Getty Image

Yet even those companies that say they are pulling out — most notably Siemens last week — are likely to 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 influential German Engineering Federation, a lobby 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 past 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, or $186 million, compared with €503 million in 2007. In 2005, they were €1.4 billion.

Germany remains Iran’s biggest trading partner in Europe, although the market is small. Dozens of German companies have offices in Iran; Herrenknecht, a German company considered the market leader in tunnel-boring machines, lists three.

German exports to Iran in 2008 amounted to nearly €4 billion, or less than 1 percent of total German exports. That was down slightly from €4.4 billion in 2005.

As a bloc, the 27-country European Union exported €14.1 billion to Iran in 2008 — machinery, transport equipment, manufactured goods and chemicals. Imports totaled €11.3 billion in 2008, mostly energy and energy-related products.

China is Iran’s largest trading partner, responsible for about 14 percent of its imports and exports in 2008.

Beijing has been resisting renewed calls for expanded sanctions on Iran, but pressure on German companies has become much stronger in recent months.

Chancellor Angela Merkel has repeatedly called for more sanctions, saying last week that “time was running out.” She even suggested that if the U.N Security Council failed to endorse a new package of sanctions, then European countries and other like-minded governments should take action.

Vocal pro-Israeli and Iranian exile lobbies are active, too, asking questions at the annual general meetings of those German companies doing business with Iran.

Peter Löscher, the chief executive of Siemens, the largest European engineering company, announced last week that the company would pull out of Iran once it had cleared its order sheet and fulfilled its contracts over the next couple years, mostly infrastructure projects. The announcement coincided with the state visit to Berlin of the Israeli president, Shimon Peres, who warned that Israel would be targeted if Iran obtained nuclear weapons.

Siemens played down its involvement in Iran. “Our turnover there was insignificant,” said Wolfram Trost, a spokesman for Siemens. “It was only 0.7 percent, or about €500 million, of our total sales.”

Still, Siemens had been under investigation by German customs officers. Last year, they found turbo compressors destined for Iran via a Siemens branch in Sweden. The investigators said the compressors could have had a dual-use role, including for example in Iran’s missile program. Siemens said all its exports to Iran were “for civilian purposes” and declined to elaborate on any specifics.

Ferrostaal, a company that makes petrochemicals and oil-, natural gas-, and solar-fueled power plants, said in a statement that it received no new orders from Iran in 2009, and that all its past engineering and construction contracts “are finished already.”

The company had sales to Iran of €1.6 billion in 2008 and expects the same for 2009. The International Petroleum Investment Co. of Abu Dhabi owns 70 percent of Ferrostaal and MAN of Germany the rest.

BASF, the giant German chemicals company, which has operations in Iran, refused to comment.

ThyssenKrupp, a German steel company that has had decades of experience in Iran, said it abided by all export and sanctions regulations. Alexander Wilke, its spokesman, said the company’s business in Iran was less than 0.5 percent of global sales, which last year totaled €40.5 billion.

Because of the sanctions regime, the Federal Office of Economics and Export Control, or BAFA, is scrutinizing more closely every request by a German company to export to Iran. Holger Beutel, a BAFA spokesman, said that the agency was particularly on the lookout for “dual-use” exports, which can be used both for civilian and military purposes. Under existing U.N. sanctions, no dual-use equipment for nuclear or related technology is allowed.

In 2009, BAFA granted 7,210 permits for dual-use purposes, of which 48 were for Iran. It refused nine dual-use export licenses for Iran. In 2008, BAFA granted 7,845 permissions for dual-use purposes, of which 39 were for exports to Iran. Fourteen export licenses for Iran were refused.

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

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

Peter Löscher of Siemens said the company would gradually pull out of Iran over the next couple years. Gurinder Osan/Associated Press

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.”

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