End of sanctions against Iran
Iran: Justified optimism
The Central Association of Electrical and Electronics Industry (ZVEI) responds to the Iran subject with objective data. Chief National Economist Andreas Gontermann explains: “With approx. 80 million inhabitants, the population of Iran is approximately the same as that of Germany. The social product of the country – amounting to 314 billion Euro in 2014 – is comparable to that of Austria, the number of inhabitants of which is nearly ten times less.” The demand backlog is correspondingly high in Iran, which owns more than 10% of the global oil reserves.
The demand concerns among other things, the infrastructure of the country, industrial production facilities and production processes as well as the health care sector. Before the economic sanctions, Germany was the most crucial trade partner of Iran, though China assumed that position today.
“Total exports of the German electronics industry to Iran were 260 million Euro in 2014, which corresponded to a mere 0.2 % of the total exports in the sector”, emphasizes Gontermann in view of the fact that in 1992 German electronics exports to the country was in the range of 890 million Euro. The share in the total exports was 2% then, which gave Germany the 11th position in international buyer ranking. A return to a two percent share, according to today‘s yardsticks, would correspond to an export volume of approx. 3.5 billion Euro. That would be approximately 13 times today’s value and therefore, an enormous potential.
Considerable order pool therefore for chemical products and chemical plants
A considerable order pool also exists for chemical products and chemical plants. Even today, Germany is an important supplier of chemicals and pharmaceuticals to Iran, because the country buys approx. 10 % of its chemical imports from Germany. “The German companies are ready to further expand their good market position in the coming years”, asserts Manfred Ritz of the Association of Chemical Industry.
Earlier, Iran was a small but dynamic, growing export market from the German perspective, in which export of chemicals amounted to 450 million Euro in 2015. This was 0.3 % of the total chemicals exports, wherein the export volumes since 1999 increased by a total of about 150 %. The lifting of the sanctions and normalization of economic life in Iran could further accelerate the growth rates. In any case, the chemicals sector was impacted by the embargo only peripherally: Only chemicals of crude oil and natural gas production were on the prohibited list.
Traditionally good economic relations can get a new boost
The German machine tools industry greets the lifting of the economic sanctions against Iran with conspicuously greater expectancy. Heinz-Jürgen Prokop, Chairman of the German Machine Tool Builders’ Association (VDW) clarifies: “We are currently poised at the starting blocks of re-establishing our traditionally good relations with Iranian customers.”
The VDW is already preparing to hold a symposium, supplemented by a specialized fair jointly with Stuttgart Fair in early summer this year. On the whole, high modernization demands exist in all areas of metal processing and there are special business opportunities in this sector for equipment providers of the oil and gas industry as well as the vehicle industry.
Nevertheless, German machine tools export will not experience exponential leaps automatically, because more than anything else, the banks would have to participate actively in the payment transactions with Iran and enable the financing of potential business deals. Moreover, machine tools are also affected by export control for being dual-use goods, so that some high-value production machines could be delivered exclusively on the basis of export approvals.
That trade with Iran will not reach the old peak values again within a very short period is also conceded by Federal Economy Minister Sigmar Gabriel: “I am aware that the revival of German-Iranian economic relations and especially financial relations is a long-term process.” But this does not dilute the optimism that business associations in particular exude. The chorus is also joined by Tobias Weiler, Managing Director of Spectaris, the Industry Association for Optical, Medical and Mechatronic Technologies: “The lifting of the economic and financial sanctions offers a good opportunity to give a new boost to the traditionally good German-Iranian economic relations.”
Even at the level of the federal states, the economic associations exude confidence. Alfred Gaffal, President of the Bavarian Industry Association (VBW) has solid actions to offer: “To improve the conditions of our companies in Iran, VBW has, jointly with the Training Institute of the Bavarian Industry, already opened a representation of the VBW industry in Tehran in November 2015.”
The discussions held thus far have shown that both sides are interested in long-term cooperation. The Bavarian Industry is positioned at the starting blocks and at the invitation of BVW, a 100-member business delegation of the Teheran Chamber of Commerce will be coming to Munich in February.