Hold Fire

Germany Rethinks Arms Trade with Saudi Arabia

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Clash over the Leopard.
  • Why it matters

    Why it matters

    The conflict between Saudi Arabia and Iran puts Germany, a key weapons exporter to the region, in an awkward position.

  • Facts

    Facts

    • Saudi Arabia is the third biggest importer of German weapons, after Britain and Israel.
    • Germany sold €178 million worth of weapons to Saudi Arabia in the first half of 2015.
    • Germany refuses to sell the Gulf nation Leopard 2 tanks and G36 assault rifles.
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  • Audio

    Audio

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Escalating diplomatic tensions between Saudi Arabia and Iran will have implications for Germany’s arms exports, German Vice Chancellor Sigmar Gabriel has announced.

Germany is to monitor arms exports to Saudi Arabia more closely in light of the country’s decision to carry out a mass execution of prisoners at the start of the new year, said Mr. Gabriel, who is also head of the center-left Social Democratic Party (SDP), a partner in Germany’s left-right coalition government.

Saudi Arabia sparked outrage across the Middle East and rest of the world on Friday when it executed 47 prisoners, including a respected Shiite cleric, for terrorism-related offences.

Protesters in Shiite-dominated Iran attacked the Saudi embassy in the capital Tehran, leading to a severing of diplomatic ties between the two major regional powers.

Germany has already stopped selling tanks and G36 Heckler and Koch assault rifles to Saudi Arabia, but it continues to provide other defensive weapons.

“We must now review whether in future we should take a more critical stance on defensive armaments which we have so far sold to Saudi Arabia for its national defense,” said Mr. Gabriel, who is also the economics minister.

A spokesman in his ministry added that recent events would be considered when deciding whether to continue with arms deals already in the pipeline.

The recent government report on arms exports shows that Saudi Arabia is still the third biggest importer of German weapons, after Britain and Israel.

In the first half of 2015, Germany sold Saudi Arabia SUVs, parts for armored vehicles, aerial refueling equipment and parts for combat aircraft at a cost of €178 million ($192 million).

But there are some weapons Germany has refused to send in the wake of the Arab Spring uprisings in the Middle East.

Saudi Arabia has repeatedly expressed an interest in German Leopard 2 tanks, a request that has so far been refused.

In April, it emerged that the German government had stopped Spain exporting more than 200 Leopard 2 tanks to Saudi Arabia. The Spanish company Santa Barbara Sistemas builds the tanks under license from German manufacturer Krauss-Maffei Wegmann (KMW) and had agreed to send a fleet to Saudi Arabia.

Diplomatic sources said the deal was stopped after Mr. Gabriel protested that it did not tally with German arms export policies. Spain would have to acquire license rights and tank components in Germany to close the deal; something Mr. Gabriel made clear would not be forthcoming.

German-Iranian trade is currently worth around €2.4 Billion but that could quadruple once sanctions are lifted.

Mr. Gabriel’s arms policy boils down to discouraging sales to non-NATO countries, which are only approved in exceptional circumstances. It’s a policy that attempts to restrict German arms exports as much as possible: something agreed back in 2000, when the SPD was in coalition with the Green party.

When the SPD entered the current ruling coalition with the center-right Christian Democratic Union, headed by Chancellor Angela Merkel, it made sure that 2000 agreement would be honored.

But in the 2009-2013 period, when Ms. Merkel’s CDU was in coalition with the more economically libertarian Free Democratic Party (FDP), the German government issued far more export permits, often to controversial countries.

Relations between the Sunni-ruled Saudi Arabia and Iran have been strained for decades. The two countries play a crucial role in the conflict between Shiite and Sunni Muslims that dominates politics in the Middle East.

Around 85 percent of the world’s Muslims are Sunnis, and make up the majority of the population in Egypt, Jordan and Saudi Arabia. Shiites meanwhile dominate Iran, Iraq and Bahrain, but are also found in substantial numbers in other countries.

The original difference between the two groups is based on a point of theology: Sunnis believe that the heirs of four caliphs, or leaders, who took over from the founder of Islam, the prophet Mohammed, are all legitimate leaders.

Shiites believe that only heirs of one of those caliphs, Ali, who was Mohammed’s son in law, are legitimate leaders.

But today, the conflict has turned political.

Relations between Saudi Arabia and Iran have worsened in recent years over the conflict in Syria, where Iran is backing President Bashir Al-Assad’s regime. The two sides have also clashed in Yemen, where Saudi Arabia is supporting the government in its fight against Shiite Houthi rebels.

The conflict puts Western powers, including the United States and Europe, in an awkward position.

Oil-rich Saudi Arabia is a key ally in the region, but both America and the European Union agreed last year to ease off on economic sanctions against Iran, which would in turn scale back its nuclear program.

The easing of sanctions has not yet begun, but many companies are already gearing up to enter the lucrative Iranian market once it opens. Mr. Gabriel was one of the first European ministers to visit Iran in July 2015, just after the deal was announced.

On Monday, the U.S. government asked both sides to show restraint and deescalate tensions. The United Kingdom, which sees Saudi Arabia as a useful trade partner and ally in fighting terrorism, severed diplomatic ties with Iran after the embassy attacks.

Other European countries have been more circumspect. German foreign ministry spokesman Martin Schaefer told a news conference on Monday that he did not believe that Iran had any intention of reneging on the deal to cut back its nuclear program.

“I very much expect that there is no interest among the decisive actors in Iran – the Iranian government, the Iranian president, and elsewhere – in diverging from the agreements made in Vienna last summer,” he said.

German-Iranian trade is currently worth around €2.4 billion, but Volker Treier of Germany’s DIHK Chambers of Commerce said he believed that could quadruple in around five to seven years to €10 billion once sanctions are lifted.

 

German-Saudi-Arabian Trade-01

 

Klaus Stratmann is the deputy bureau chief of Handelsblatt in Berlin. To contact the author: stratmann@handelsblatt.com

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