February 09, 2010

Significant Reduction of Trade Between Iran and Germany

Persia House

Reformist Think Tank Highlights the Cost of Iran’s Increased Isolation

Iranian Diplomacy - Summary translation by Persia House
January 31, 2010

The level of trade between Iran and Europe has been declining [in recent months]. The German company Siemens plans to end its cooperation with Iran during the upcoming summer. Additionally, a Hamburg-based company specializing in pier construction has also expressed its reluctance to renovate the Bandar-e Abbas facilities [in southern Iran], despite denials by its Iranian counterpart, Tidewater Company.

German news media attribute the reduction of [direct] trade between Iran and Germany to [political] pressure by the U.S. and Israel, but they also remind everyone that large Iranian-German commercial deals continue to take place in Dubai. The electronic Iranian news outlet, Asr-e Iran, reports that in the first six months of 2009, the volume of trade between Iran and the 27 members of the European Union (EU) was $6 billion less than what it was during the same period in 2008.

Meanwhile, one of the hot topics covered by the German news media is the effort of German Chancellor Angela Merkel to impose additional sanctions on Iran. They have in particular pointed out that, on the one hand, she is being pressured by the U.S. and, on the other, she is doing so in order to prove her country’s friendship with Israel.

More than anything else, Western energy companies are interested in Iran for its [oil and] natural gas resources. The end, however, of cooperation by major banks, coupled with Iran’s current political climate, has adversely affected contacts in this field. In 2004, the German government provided 2.3 billion Euros in guaranteed credit to German companies for commodities exported to Iran. This amount was reduced to 68 million Euros in 2009—3 percent the amount that was provided during the Khatami administration. This move has led German companies to be less interested in direct dealings with Iran because, if Iran were to fail in paying its bills, their investments would not be guaranteed by the German government. For the original article in Persian, click here.

Persia House Analysis:

The reduction in trade between Iran and Germany—the Islamic Republic’s second-largest trading partner in 2008—illustrates the worsening relations between the two governments, mainly due to growing concerns over Iran’s nuclear program. This article by a Reformist think tank contrasts with reports in the state affiliated media that gloss over the isolating effects of Iran’s foreign policies and highlight preliminary deals with foreign companies even when the finalized contracts are not concluded.

Due in part to Germany’s pressure on its companies doing business with Iran, German exports to Iran declined by 22 percent in the first three months of 2009 when compared to the same period in 2008. In response to Germany’s hardening stance on the Islamic Republic over the nuclear issue and the crackdown on domestic dissent following the June 2009 presidential election, the regime has taken a harsh tone towards Germany, accusing the Germans of running a spy network to foment the post-election unrest.

The possibility of further sanctions has also caused other European countries to rethink their commercial ties with Iran. Italy, which had been pulling ahead of Germany as Iran's major European trading partner, recently announced that it will not be making any new investments in Iran. The Italian energy firm ENI recently decided to end its development of Iran’s Darkhovin oil field.

Source Information:

Iranian Diplomacy is an independent think tank established in 2007 by Seyyed Mohammad Sadegh Kharrazi. Kharrazi served as Iran's Ambassador to the United Nations and France, and also as an advisor to former President Khatami. He is considered to be a moderate diplomat who has taken a leave of absence from government service following disagreements with the Ahmadinejad administration.

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