After Sanctions

German Companies Hopeful in Iran

Iranians walk past a revolutionary mural in Tehran, Iran, January 17, 2016. REUTERS/Raheb Homavandi/TIMA ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. FOR EDITORIAL USE ONLY.
Iranians walk past a revolutionary mural in Tehran.
  • Why it matters

    Why it matters

    German companies are keen to take advantage of the business opportunities in Iran where infrastructure investments are needed.

  • Facts

    Facts

    • Trade sanctions have now been lifted on Iran after the United Nations confirmed it had reduced its nuclear program.
    • At the same time, twelve prisoners were exchanged between the United States and Iran.
    • Iran will hold parliamentary elections on February 26.
    •  
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    Audio

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Following the weekend announcement that sanctions on Iran would be lifted, hopes are flourishing among German companies.

Daimler Trucks on Monday was among the first to make a concrete first step, announcing it had signed letters of intent for a joint venture to produce and sell vehicles in the country.

It was the first, early sign that the developments called for by Iran’s president Hassan Rouhani may be ahead. Mr. Rouhani had called in a television announcement last week for 2016 to be “a year of economic prosperity.”

This prosperity is a distinct possibility for the first time in almost two decades, as foreign investors look to enter or return to the country.

In its announcement, Daimler said it has signed letters of intent with Iran Khodro Diesel (IKD) and Mammut Group, a Dubai-based manufacturer and distributor of truck bodies. IKD is a subsidiary of Iran Khodro Industrial Group, the largest vehicle manufacturer in the region, which has cooperated with Daimler for more than 50 years.

The companies will cooperate with a joint venture to produce Mercedes-Benz trucks and powertrain components locally, Daimler said in a statement. They will also establish a sales company for Mercedes-Benz trucks and components.

Daimler Trucks plans to open an office in Tehran during the first quarter of 2016 and there are also plans for the company to return as a shareholder in the former engine joint venture Iranian Diesel Engine Manufacturing.

Both partners also hope to set up a joint venture for local sales of Mercedes-Benz commercial vehicles.

“Daimler commercial vehicles have always had an excellent reputation in Iran. And right now, there is a huge demand for commercial vehicles, especially trucks,” said Daimler board member Wolfgang Bernhard.

Daimler and Mayan, owned by Mammut Group, also signed a distribution agreement to sell Mitsubishi FUSO trucks in Iran, Daimler said.

Beyond the automotive sector, energy, food and pharmaceutical companies are all hopeful about doing business too.

“We need practically everything. Hundreds of airplanes, new ports, and an overhaul of the whole infrastructure.”

Saeed Layla, Analyst, Tehran

Germany’s economics minister and vice chancellor, Sigmar Gabriel, said he welcomed “the chance to open a new chapter in German-Iranian economic relations.”

Mr. Gabriel is expected to co-chair an economic conference with his Iranian counterpart Ali Tayyebnia later this year.

Germany’s former chancellor, Gerhard Schröder, will also travel to Tehran. “German companies and business owners are ready to participate in all economic and industrial fields,” he said. “After the closing of the nuclear chapter, Europe and Germany hope to make utmost use of Iran’s great potential to solve regional crises.”

Germany’s foreign minister, Frank-Walter Steinmeier, also announced his intention to visit Iran’s president Hassan Rouhani in the near future.

Other business is moving forward, as well.

Germany’s Siemens corporation is working towards building a 925 kilometer-long high-speed rail line between Tehran and Mashhad, along with delivering 500 trains.

Iran’s transport minister Abbas Akhondi announced plans to order 114 passenger jets from Airbus in the near future. The government plans to buy a total of 400 planes in the coming decade.

Ulrich Grillo, the president of the Federation of Germany Industry, welcomed the end of the sanctions too, saying it would mean an enormous boost for business between his country and Iran. “We believe it’s realistic that exports could double from the current level of €2.4 billion,” he said.

 

Mr. Grillo called on the governments of Germany and those of the Gulf region to create the conditions for lasting peace. “Iran has an enormous need for lasting improvements to its infrastructure.”

Mr. Grillo said he saw opportunities in particular for Germany’s machine construction industry, as well as in chemicals, automotive, health care, in the expansion of renewable energies and construction.

“We need practically everything,” said Tehran-based analyst Saeed Laylaz. “Hundreds of airplanes, new ports, and an overhaul of the whole infrastructure.”

Beyond business, the rare success for international diplomacy in the Middle East has led some to hope other conflicts in the region may be resolved too.

Germany’s foreign minister, Frank Walter Steinmeier, said in a statement the diplomatic victory allows for the hope that “we may yet succeed in defusing other urgent crises and conflicts in the region, especially regarding the civil war in Syria.”

“It won’t happen overnight and it won’t be easy, but neither were the nuclear negotiations with Iran.”

Late Saturday, the trio of the European Union’s foreign affairs representative Federica Mogherini, Tehran’s foreign minister, Mohammad Javad Zarif, and his United States counterpart John Kerry announced that Iran had fulfilled its obligations to scale back its nuclear program, leading to the lifting of sanctions.

The three politicians said the agreement now implemented will be a key contribution to increasing peace, stability and security.

Director General Yukiyo Amano of the International Atomic Energy Agency (IAEA) said, “Relations between Iran and the IAEA are now entering a new phase.”

The move came alongside a prisoner exchange between the United States and Iran, which have not had diplomatic relations since 1980. The twelve prisoners had represented a further burden on relations and those released include the Washington Post correspondent Jason Rezaian, who had been held for one and a half years in Evin prison.

In Iran, Mr. Rouhani rejoiced. “We Iranians have reached out to the world in a sign of friendliness, and leaving behind the enmities, suspicions and plots, have opened a new chapter in the relations of Iran with the world.”

A few days earlier, Iran removed the core of its heavy-water nuclear reactor in Arak and filled it with cement, effectively making it unusable. In the weeks beforehand, almost all of the country’s supply of enriched uranium was handed over to Russia, where it is be processed into fuel rods for Iran’s Bushehr nuclear reactor.

In addition, in the highly complex and detailed set of Geneva agreements, Iran also agrees to dismantle two-thirds of its 19,000 uranium centrifuges and place them under the supervision of the IAEA.

Up until 2030, enrichment is only allowed to take place in Natanz, not in the second underground facility in Fodor, which will be converted into a research facility.

Furthermore, the IAEA will be granted extraordinary monitoring rights for the next quarter century.

 

Martin Gehlen is a Middle East correspondent. To contact the author: gehlen@handelsblatt.com

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