Taking care of business

Germany has come out on top of the world economic crisis – and remains a major trader with Iran.

berlin (photo credit: MarkusSchreiber / AP)
(photo credit: MarkusSchreiber / AP)
HISTORY WHISPERS – AND sometimes shouts – from every street corner in Berlin. A museum exhibition on Adolf Hitler, the first of its kind in Germany, draws crowds to the German Historical Museum. Adults and children regularly visit the Jewish Museum, which depicts over a thousand years of Jewish life, discrimination and massacres. The Holocaust Memorial, a field of gray stelae, stands mute near the Brandenburg Gate, evoking a graveyard in the heart of reunited Berlin. Nearby, a museum details the crimes of the Gestapo’s crimes, at the precise spot where Gestapo officers tortured countless victims. In Bebel Square in front of Humboldt University, where the Nazis burned books, Israeli sculptor Micha Ullman’s memorial stands near a plaque bearing the famous quote by Heinrich Heine, “Where books are burned, ultimately people will burn.”
Even without the museums, history makes itself heard. “Stumbling blocks” – pavement stones with the names and details of individuals deported to death camps – have been placed near the entrances to buildings throughout the city. Their placement is not random; each stumbling block indicates that the person it memorializes lived in an adjacent building before being taken away by the Nazis. An effort is underway to map the precise address, down to the apartment number, of every resident of Berlin who was killed in the Holocaust.
Cold War history is also evident, with memorials to the Berlin Wall and the people shot to death while trying to escape from the Iron Curtain inescapable throughout the city.
Yet Germany is not a historical relic. For Israel and Israeli businessmen, it contains perhaps the best potential in Europe. As indicated by the gleaming new shopping centers sprouting up in Potsdam Square, rebuilt after decades of wartime bombing and desolation at the epicenter of Cold War division, contemporary Germany is a thriving economic powerhouse, the engine of Euro-zone economic growth. As crises engulf Ireland and Greece, with Portugal and perhaps Spain about to come under intense market pressures, Europe increasingly looks to Germany to provide economic leadership – and to help the weaker nations pay their debts.
Greece’s economy may be rapidly contracting, Ireland has been reduced to stretching out its hand for bailout money, even France is falling short of expectations, but the German economic juggernaut plows ahead. Despite losing nearly 5 percent of GDP immediately after the world financial crisis precipitated by the Wall Street plunge of September 2008, Germany roared back, reducing unemployment and boosting consumer spending, while developing a strong export sector and an enviable trade surplus. Its GDP growth this year is well on track to exceed 3 percent.
“A few months ago, German politicians were saying they would be pleased with 2 percent,” notes Inon Elroy, director of the Israel Trade Center at the Israeli Embassy in Berlin. “Now look where they are. And many German corporations are now reporting their most profitable business quarters in their entire histories.”
ELROY TELLS THE JERUSALEM REPORT the office he directs in Berlin is the single largest foreign trade office in the world maintained by the Israel Ministry of Industry, Trade and Labor. “Germany is Israel’s third-largest trading partner, after the United States and China, and its No. 1 trading partner in Europe. Germany’s importance for Israel’s foreign trade has only grown over the past several years.”
Shmuel Hoffmann, a senior trade officer in Elroy’s office with nearly eight years of experience in the Berlin trade office, seconds Elroy’s assessment. “The German market is the largest consumer market in Germany,” says Hoffmann. “It is also a worldwide center of trade shows and business-to-business marketing. Germany is also a ‘referent’ for the rest of Europe, more than Spain or even France. If a businessman can point to success in Germany, that alone can open doors throughout the rest of Europe, but the opposite is not the case.”
Both Elroy and Hoffmann are openly impressed with how Germany skillfully navigated its way out of the financial straits of the worldwide economic downturn to emerge stronger than ever. They ascribe the country’s turnaround to a wise selection of policies, including a strong government stimulus and a “cash for clunkers” old-for-new car trade-in program that went significantly farther than a similar American effort. They also praise the social sensibility that the German government maintained throughout – and not only because it indicated concern for the welfare of individuals hurt by the downturn; the social programs also proved to be highly profitable for corporations and the economy as a whole.
“The state here gave money to companies to give their employees what were essentially temporary paid vacations, instead of firing them,” Elroy recalls. That may seem a wasteful use of public funds, but Elroy praises it as a well-thought-out plan that paid off. “If these workers had been fired, they would have been on the unemployment rolls, and then much of that money would have been paid anyway in unemployment benefits,” he points out. “When the economy picked up again, the workers were there and simply went back to their jobs, without the dislocation and pain that would have occurred if they had been laid off.”
Germany, meanwhile, also positioned itself as a world leader in solar energy and cleanenergy technology, first by providing significant financial support for those industries when they were just beginning, and then weaning them off subsidies and directing them towards the export market. “This was very good for them, not so good for Israel,” Elroy tells The Report, “because now Israeli companies in the photo-voltaic and solar energy markets face stiff competition from Germany.”
THE BREAKDOWN OF ISRAELI exports to Germany is a familiar litany: 38% electronics and other advanced technology, 20% optical and medical items, 13% chemicals, 10% plastics. But a lot of hard work is behind the figures.
The Israel Trade Center in Germany, say Elroy and Hoffmann, is always ready to assist Israeli businessmen seeking entry to the large German market. It also strives to boost Israeli exports by ensuring an Israeli presence in trade conventions, hosting events bringing together Israeli and German businessmen, and promoting Israeli products in “Israel Weeks” in supermarkets and department stores. Says Hoffman, “We hope to expand that to ‘Israel Months.’”
In cooperation with the German Federal Ministry of Economics and Technology, it hosted an “Israel-Germany Innovation Day” in early December, with speeches by German Federal Minister of Economics and Technology, Rainer Brüderle, and Israel’s Minister of Industry, Trade and Labor, Binyamin Ben-Eliezer. Other speakers included René Obermann, CEO of Deutsche Telekom AG, and Saul Singer, co-author of “Start-up Nation: The Story of Israel’s Economic Miracle.” Panel discussion titles included “Innovating Sustainability: Fresh Thinking For a Greener Planet,” “Innovating New Media: Opportunities in a Converging World,” and “Innovating Healthcare: New Ideas For a Healthier World.”
With regard to the mistakes Israeli businessmen make when trying to enter the German market, Elroy and Hoffmann repeat the critiques heard throughout the world: Too many Israeli businessmen come with over-confidence and a penchant for short-term thinking, lack of preparation, and expectations that improvisation can overcome any obstacle.
“Israelis need to understand that no one is waiting for them here,” says Hoffmann. “They must impress their potential customers, and that is a high bar. Germany has the highest industrial grade in all of Europe.”
Elroy continues, “Israelis need staying power and patience, which is sometimes in short supply for them. Israelis see the shortterm, and Germans tend to take a long-term view. Germans are very deliberate decision takers, and they are process oriented. Processes here take time to develop.
“Israelis need to understand that due to the German federal system many decisions are decentralized,” he continues. “Each state can make separate decisions, requiring repeated efforts, in a geographically large country. And as always, it is important to get to know your market. We [at the Israel Trade Center] can assist businessmen before they invest too much in a mistaken manner.”
Yet there is also an affinity between the Israeli and German approaches. “Germany is a strong information technology player, but notice where they are strong,” points out Elroy. “SAP [a German software corporation] for example, is immense, but it is focused, like much of German IT, on business and industrial software. Israel can bring more nimble and innovative technology. In fact, people often do not realize how much Israeli technology there is in the electronic items they buy because it is often buried in chips or in web infrastructure.”
Israeli IT corporations with significant presence in Germany include ECI, Checkpoint and Comverse. SAP has significant investments in Israel. Last year, Siemens bought Israeli solar energy company Solel for $418 million. “And Siemens turned Solel into a world center for solar energy development,” points out Hoffmann. “They send their customers to Israel to learn about Solel’s technology. Getting people to travel to Israel to see how much technology development takes place there is a good idea in general – many Europeans do not fully appreciate it until they actually see it.”
Corporate purchases run both ways. Earlier this year, Israel’s Teva Pharmaceuticals bought Ratiopharm, Germany’s second-largest generic drugs producer and the sixth-largest generic drug company in the world, for ¤3.625 billion. The health and medications market in Germany in general is emerging as a large potential market for Israeli exports, just behind information technology, and is considered a trend that is set to expand significantly.
Elroy and Hoffmann consistently support statements by German government officials for the positive business atmosphere for Israelis in Germany and cite the “special relationship” between the two countries. “There is no serious Israeli boycott/divestment movement in Germany, in contrast to other European countries,” they say. “Israel’s presence in several EU scientific and technological bodies also helps build a positive image.”
ISRAEL IS NOT, OF COURSE, Germany’s only trading partner in the Middle East. Iran has long been a major market for German products – Germany is Iran’s second-largest trading partner – a fact that has apparently played a role in Germany’s relative reluctance to promote serious sanctions against a nuclear Iran.
“Every third advanced machine in Iran is of German origin,” says Michael Spaney, a founder of the Mideast Freedom Forum Berlin (MFFB). “That can give us strong leverage [over Iran] with regard to spare parts availability. But Germany needs to want to use that leverage, and show that it is willing to do so.”
MFFB is a non-profit organization that advocates for a secure Israel, often focusing on the Iranian nuclear threat and the German companies that trade with Iran. “We organize demonstrations and rallies, conduct lectures and conferences, publish and apply ‘naming and shaming’ activities to get German companies to stop trading with a threatening Iran,” says Spaney. It has also launched a Stop the Bomb movement, devoted to preventing the development of a nuclear Iran.
MFFB also purchases shares in German companies with strong Iranian business ties. Spaney explains that by becoming part owners, the organization gains leverage. “As shareholders, we gain access to corporate information that might otherwise not be available and we attend shareholders’ meetings and explain our positions.”
MFFB lobbies politicians and decisionmakers, including members of parliament in Germany. A recent petition called for the Iranian Revolutionary Guard Corps to be added to the European Union terror list and an end to economic activity with entities associated with the Revolutionary Guards; it garnered signatures of several German parliamentarians, but Spaney says that the Green Party recently asked to have the names of its members removed because it was concerned Stop The Bomb may support military action against Iran.
“From the Second World War,” says Spaney with a sigh, “the German people learned ‘No to Fascism, No to War.’ Unfortunately, this turned into ‘No to War Against Fascism.’”
Engineering giant Siemens is the most high-profile German company that Spaney’s Stop The Bomb campaign is trying to pressure. Siemens has long been the target of criticism for its Iran trade, given its Nazi-era history of benefiting from forced laborers at Auschwitz, and the fact that the nuclear power plant in Bushehr, Iran, was constructed by Siemens in the 1970s as a civilian nuclear plant during the reign of the Shah. Earlier this year, Siemens announced it would refuse all future trade ties with Iran, while maintaining existing contracts.
That is not good enough for Spaney. “In 2009, Siemens business in Iran totaled ¤438 million, and it is expected to be over ¤500 million in 2010,” says Spaney. “Siemens will be going forward with a billion-euro deal it concluded some years ago with Iran for 100 gas turbines. There are 280 employees of Siemens working in Iran. There is Siemens technology in Iran that is designated for civilian use but can easily be used for the nuclear program.”
But Siemens’ trade ties are only a small part of total German exports to Iran. “The total figure is ¤4 billion in exports per year,” says Spaney. “This includes surveillance technology, telephone tracing equipment, and other tools for spying. There are also financial institutions in Germany serving as money conduits for Iran, such as the EIH bank in Hamburg.”
EIH (Europaeisch-Iranische Handelsbank) was placed on a sanctions list by the US Treasury Department earlier this year due to concerns that the bank was transferring billions of dollars for Iran, trying to get past international sanctions. German government authorities, however, have refused to shut down the bank because official EU sanctions against the bank have not, to date, been declared.
“EIH is owned by Iran and is serving the Iranian regime. As a result, the EIH bank has been denied access to the US market. Why is it still operating openly in Germany?” asks Spaney. “The sanctions are working, and even the IAEA (International Atomic Energy Agency) reports that fewer centrifuges are working in Iran than before. But they forbid flight cargo, not shipping cargo. They [sanctions] do not include equipment that can be used for light-water nuclear development. And there is no central supervision to enforce the sanctions. Those who oppose a military strike against Iran should support serious sanctions, but even that is not happening.”
Spaney has no doubts that German trade ties with Iran have affected Germany’s position with regard to sanctions. Recently leaked United States diplomatic documents seem to bear out this suspicion. In leaked cables sent to the US State Department, American ambassadors in European capitals are quoted as being told by German officials that Germany was concerned that sanctions blocking German companies from Iran would only cause others to grab its market share.
The leaked documents, however, also show that Germany has been increasingly supportive of stronger sanctions against Iran. “There is increasing understanding regarding the need for sanctions in recent months,” Elroy says. “Competitors will take the place of German companies, but Iran is not a very large market on the world scale. With Daimler and Siemens cutting ties to Iran, things are changing.”