Ahead of U.S. sanctions, German exports to Iran soar

December 11, 2018 17:19
2 minute read.
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German exports to Iran soared in October, a month before the United States re-instated sanctions on the Islamic Republic to choke its oil and shipping industries, data seen by Reuters showed on Tuesday.

The surge signals willingness among Germany's small to medium-sized firms, or Mittelstand, to continue doing business with Iran despite the risk of being blacklisted by the United States for defying its sanctions.Official figures by the Federal Statistics Office reveal that German goods exported to Iran totalled almost 400 million euros in October, a year-on-year surge of 85 percent and the highest monthly volume since 2009.

US President Donald Trump re-imposed sanctions on Iran on Nov. 5 after he abandoned a 2015 nuclear deal between Tehran and world powers. He said the sanctions seek to cripple Iran's oil-dependent economy and force it to abandon its nuclear ambitions and ballistic missile program and halt support for militant proxies in Syria, Yemen, and Lebanon.

Around 1,000 German Mittelstand companies have business ties to Iran and 130 have set up branches in the country. Multi-national companies, including German engineering giant Siemens, have pulled out of Iran, fearing US sanctions.

Mittelstand companies provided most of the exports to Iran, Michael Tockuss of the German-Iranian Chambers of Commerce and Industry said. Chemicals made up about half the German goods; machines and plant equipment accounted for a third.

Tockuss said Mittelstand companies exporting to Iran were taking a calculated risk, believing US sanctions are aimed at hindering big projects in key sectors like banking and shipping.

"Our American friends are keeping an eye on vital sectors like banking, insurance, shipping and telecommunications," Tockuss said. "They are taking a tough approach toward big companies and key sectors."

That is why the Chambers of Commerce expects exports to Iran to continue growing. They grew by 4 percent to 2.4 billion euros in the first 10 months of this year, and Tockuss said he expects monthly export volumes to average 200 million to 250 million euros a month next year.

The European Union intends to establish a system to facilitate non-dollar trade with Iran and circumvent U.S. sanctions. It wants the so-called special-purpose vehicle (SPV) to help preserve the economic benefits for Iran deriving from the curbs it put on its nuclear program under the 2015 deal.

France and Germany are now due to take responsibility for the SPV. But EU diplomats have said its ambitions could be scaled back to encompass only less-sensitive items, such as humanitarian and food products, rather than oil.

Israel and the United States are opposed to continued trade with Iran. They say Iran's Islamic Revolutionary Guard Corps (IRGC), which has a vast stake in the local economy, would use the windfall from trade to finance hostile military activities in the Middle East.

"We hope that all companies are aware that there is a risk that profit from this trade in goods could be misused," said an Israeli embassy spokeswoman.

The US embassy in Berlin had no immediate comment.

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