German exports to Iran soared in October, a month before the United States reinstated a second wave of sanctions on the Islamic Republic to choke its oil and shipping industries, data seen by Reuters showed.
The surge signals willingness among Germany’s small- and medium-sized enterprises, 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 totaled almost €400 million ($455 million) in October, a year-on-year surge of 85% and the highest monthly volume since 2009.
US President Donald Trump abandoned a 2015 nuclear deal between Tehran and world powers. The first wave of US sanctions was enforced in August and the second in November. Trump has called it “the toughest sanctions ever” aimed at crippling Iran’s economy.
Around 1,000 German Mittelstand companies have business ties with Iran and 130 have set up branches in the country. This is while multinational companies, including German engineering giant Siemens, pulled out of Iran, fearing US sanctions.
“Mittelstand companies provided most of the exports to Iran,” Michael Tockuss of the German-Iranian Chamber 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.”
Expectation for Sustained Trade, Further Growth in Exports
That is why the chambers of commerce expects exports to Iran to continue growing. They grew by 4% to €2.4 billion in the first 10 months of this year, and Tockuss said he expects monthly export volumes to average €200-250 million a month next year.
The European Union intends to establish a system to facilitate non-dollar trade with Iran and circumvent US sanctions. It wants a 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.
“The situation is quite clear for us because the sanctions which are now put in practice are well known for us since months. The situation is divided; the big companies, especially the stock exchange companies, here in Germany, they stopped their trade and investment relations with Iran. The backbone of our economy, small- and medium-sized companies, they will continue to do trade with Iran,” Michael Tockuss told DW in an arlier interview.
EU Hesitation Slammed, as Mogherini Promises SPV by Yearend
During his interview with DW, Tockuss, who is also the head of Hamburg Chamber of Commerce, slammed EU’s inaction in the face of US sanctions, saying it has been all talks on the part of the European Union so far and no practical actions.
“The EU gave a lot of strong political statements. They were talking about blocking sanctions; they were talking about special vehicle for financial transactions with Iran but nothing came, at least up to today. I can tell you none of our member has one practical step forward, one practical support from the EU or from our ministries in Berlin. The EU shows practically nothing to support the Iran deal,” he said.
The European Union’s foreign policy chief said on Monday a system to facilitate non-dollar trade with Iran and circumvent US sanctions could be in place by the yearend.
Asked about progress on the SPV, Federica Mogherini told reporters: “I would expect this instrument to be established in the coming weeks so before the end of the year as a way to protect and promote legitimate business with Iran.”
She did not offer any other details following a meeting of the bloc’s foreign ministers in Brussels but said work on creating the mechanism was “advancing well”.
Germany’s Ambassador in Tehran Michael Klor-Berchtold reaffirmed his country’s commitment to Iran’s nuclear deal (formally known as the Joint Comprehensive Plan of Action) last month in spite of the US reimposition of unilateral sanctions.
“The German government is fully aware of the problems created by the US government for Iran and remains committed to its agreements as part of the JCPOA,” he said during a meeting with Iran Small Industries and Industrial Parks Organization’s representatives.
In comments similar to Tockuss, the envoy referred to small- and medium-sized enterprises with short-term yields as major placeholders for expanding Iran-Europe ties under the current circumstances, saying SMEs are the true backbone of the German economy.
“We wholeheartedly support and welcome the cooperation of SMEs of the two countries,” the ambassador said, adding that such firms realize creativity and innovation as they understand the markets well.
Klor-Berchtold further said the embassy is following up measures to ease visa issuance for Iranian business representatives.
“The embassy is striving to reduce the time and ease the process based on which visas are issued for Iranian business representatives for them to be able to participate in exhibitions or educational courses held in Germany,” he said.
Sadeq Najafi, deputy minister of industries, mining and trade, said 90% of Iranian SMEs represent short-term profit businesses that can be supported by Germany in expanding trade in the face of US sanctions.
“The realities of Iran in the area of SMEs must be communicated to European companies,” he said, noting that the US may continue to exert pressure on Iran.
“But we are used to operating under harsh conditions and expect the German government to stand beside Iran.”
The Islamic Republic of Iran Customs Administration’s latest report shows Germany was the fifth biggest exporter to Iran during the first eight months of the current Iranian year (March 21-Nov. 21) with $1.6 billion worth of shipments to the Islamic Republic, accounting for more than 5.43% of the value of Iran’s total imports. The export figure, however, showed a 14% decrease compared with last year’s corresponding period.