German-Iranian business ties have been growing, and that’s likely to continue. The two countries, nearly the same size in population, have more in common than you might think — including a shared love of engineering.
One might imagine that trade between Iran and Germany is about sending oil in one direction, and automobiles in the other. But that’s incorrect, according to Michael Tockuss, head of DIHK e.V., the German-Iranian Chamber of Commerce, based in the northern German port city of Hamburg, which is home to a population of more than 30,000 expatriate Iranian-Germans.
“We [Germany] don’t buy crude oil from Iran,” he said. “Our refineries aren’t designed to deal with the high-sulfur crude Iran produces. Only Italy and Greece have refineries that can process it, so they’re the main European importers of Iranian oil.”
Most Iranian crude is sold to China, India, and other Asian countries, Tockus said: “Around 60 percent of Iran’s total trade revenues come from oil and gas sales. That’s a lot — but the other 40 percent are important too. Iran’s economy is the most industrially diversified in the region.”
What Iran sells to Germany includes traditional products like Persian rugs and dried fruits. In the past, before stiff anti-Iranian economic sanctions were put in place in 1995, Iran had exported some industrial products to Europe, such as truck engines. Today, it continues to sell products such as chemicals, tools and pharmaceuticals, but only to its regional neighbors, not to Europe.
Re-engaging Iran’s manufacturing capacity
Although Iran’s economy has a substantial industrial base, “the quality of its industrial products is often not quite up to the standard demanded by European markets, so they tend to sell into regional markets instead,” Tockus said.
However, he thought this would change over time, as Iranians work with European partners to improve quality, adding: “After years of sanctions, Iran needs large investment in all economic sectors.”
For its part, Germany sells industrial machines, chemical and electrical goods, construction machines and other high-end products to Iran. For the most recent period for which trade data are available, the nine months from January through October 2017, Germany sold 2.358 billion euros worth of goods ($2.846 billion) to Iran, and imported just $328 million worth of goods from Iran. German exports to Iran grew by more than 27 percent year-on-year from 2015 to 2016, and remain on a steep upward curve.
“Germany’s trade surplus with Iran is massive,” Tockus said. “But that’s nothing new. The Iranians complain about it from time to time, and we try to find ways to encourage more Iranian exports into Europe and Germany, but we’ve been running big trade surpluses with Iran for forty years.”
Normalization — a gradual process
Relations between Iran and Europe have begun to normalize to some degree in the wake of JCPOA (Joint Comprehensive Plan of Action), the July 2015 deal to cap Iran’s nuclear program so as to ensure it cannot develop nuclear weapons. As a result, efforts to further develop trade and investment between Iran and Germany are being stepped up.
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