A Roller Coaster Ride to Tehran

37. Jahrestags des Ersten Golfkriegs
It looked like the only way was up. Source: AP

One year ago, when a German government jet swooped into Tehran, the 30 executives aboard dreamed of a renaissance in trade with Iran. They met their Iranian counterparts and, with the landmark nuclear deal signed, the mood bordered on euphoria on both sides.

That fast turned to fear. President Donald Trump has threatened to “decertify” the agreement and German businesses now dread that sanctions could be reimposed on Iran.

German businesswoman Julia Esterer joined the Tehran trip, her hopes high she could rekindle old contracts from the time before sanctions were imposed. Her family-owned firm makes fuel trucks and had many Iranian clients up to 2009. But her optimism has ebbed during the past year as several tenders have proved unsuccessful and orders have been canceled.

She is not alone. Iran, long starved of investment and with a population of 80 million, is an attractive market for German businesses. Firms rushed in, excited at the prospect of an infrastructure boom, and they initially overlooked Iran’s human rights record and its threats to Israel. But lavish contracts proved few and far between as Iranian companies were slow to invest and European firms became cagey, fearing mercurial US policy could leave them on the wrong side of American law.

“German companies with significant US business are holding back right now.”

German businessman with significant Iranian ties

Some European companies worried about US policy even before last November’s presidential election. Their fears have grown since then: “German companies with significant US business are holding back right now,” said one businessman with close ties to Iran.

Prospects looked unpromising after Mr. Trump described the nuclear framework agreement with Iran as “the worst deal ever.” He has also called Iran “an economically-depleted rogue state whose chief exports are violence, bloodshed and chaos”. In this context, Germany’s banks remain cautious, influenced by US policy, according to Ms. Esterer. That is partly what has kept a promised twice-weekly link between Cologne and Tehran by Lufthansa subsidiary Eurowings grounded. Iranian paintings headed for Rome and Berlin likewise remain under wraps, the exhibitions postponed. Individuals, too, are uneasy – bearers of passports carrying an Iranian stamp can be refused entry to the US.

Businesses are facing a tough reality, though a few have profited. One is Voith Turbo, a specialist manufacturer of automotive drive trains and braking systems, with an annual turnover of €4.3 billion, or $5 billion. Benno Morlock, who heads its industry division, was also aboard the jet to Tehran last year. He said while Iran’s pent-up investment demand is enormous, so too are the obstacles, starting with financing. While Voith Turbo can finance export deals, Iranian firms still have problems. A further problem is that some industrial goods are classified as dual-use products, including software, so Mr. Morlock has to closely inspect any new business to be sure it is within the law.

Nonetheless, Voith Turbo has gone ahead and beefed up its Tehran team. The company currently exports transmissions used in buses and rail vehicles and sees opportunities in the paper business, electricity generation, minerals, and oil and gas prospecting. For now, though, Voith’s staff run a sales office; local production remains a distant dream.

“Iran remains an interesting market, since it contains the world’s second-largest gas reserves and fourth-largest oil reserves.”

spokesperson,, Bilfinger Group

German industrial services group Bilfinger has also done well despite the rhetoric — and it’s excited about the prospect of the world’s second-largest gas reserves and fourth-largest oil reserves. Major infrastructure investment is needed, above all in environmentally friendly technology, as anyone who knows Tehran’s smog problems will testify. The company won a contract with Esfahan Oil Refining Company (EORC) in 2016 and renewed it earlier this year.

Bilfinger’s Iranian contracts are worth tens of millions and the company conducts the business in euros without participation by American banks. The company has had a comparatively smooth financial ride, with regional banks prepared to accept money from Iranian businesses and to pay suppliers.

Finding a bank able to handle her business has also raised Ms. Esterer’s hopes. She remains eager to return to Iran though she watches the political scene closely. She fears sanctions could destroy her connections. If relations worsen, China could benefit if her loyal customers eventually decide to buy elsewhere.

Philipp Mattheis and Harald Schumacher are editors for Wirtschaftswoche, a sister publication of Handelsblatt. To contact the authors:

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!