Thursday, 24 August, 2017

Germany, France Eye Lucrative Deals in Iran

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Germany

Founder of a company in southern Germany that is a world leader in tunnel-boring equipment, prepares himself for the day when Iran reopens for business, Reuters reported

Martin Herrenknecht visited Tehran, meeting officials in the energy ministry and sewage department. Before Western sanctions hit, Herrenknecht, which carries its 72-year-old founder’s name, did 10 million to 15 million euros ($11 million-$17 million) of business a year in Iran.

It has maintained an office there, anticipating a day when Iran reaches a nuclear deal with major powers that will put lucrative projects like a long-delayed expansion of the Tehran metro back on track.

“I know what projects are coming and I’m ready to sign when the sanctions are lifted,” Martin Herrenknecht told Reuters.

Like a host of other German companies, many of them small-to-medium sized “Mittelstand” firms, Herrenknecht, based in Schwanau in prosperous Baden-Wuerttemberg, is gearing up for a return of the Iranian market.

As talks about a deal with Iran approach a Tuesday deadline, a senior German official said: “It’s like a regatta. Everyone is trying to put themselves in the best position to be first when the starting gun sounds.

“They are trying to assess whether the old relationships are still valid. Can they rely on the people they know or do they need to build new relationships?” he said.

Germany has commercial and cultural ties to Iran that go back to the 19th century.

Unlike Britain and Russia, Germany had no imperialist history in the region, making it an attractive partner, and by the late 1930s German firms were involved in almost every major industrial project in Iran including the Trans-Iranian Railway.

But during the years of sanctions, China, the United Arab Emirates, South Korea, Turkey and India have overtaken Germany in Iran trade. German exports to Iran fell from a high of 4.4 billion euros in 2005 to 1.8 billion in 2013.

The German official mentioned Volkswagen and Daimler as among those jostling for position.

Volkswagen said it had not restarted any business activities in Iran and Daimler said it was closely monitoring the situation although any transactions or re-entry into Iran would depend on the outcome of the nuclear talks.

But a person familiar with the situation at VW, Europe’s biggest carmaker, said: “Of course there are talks,” adding that the same applied to all potential suppliers. “It’s done rather behind the scenes to see what levers one will need to pull.”

A Siemens spokesman said this week the company was waiting for an outcome of the nuclear talks before making any decisions about how to proceed there. “If something changes, we’ll deal with it,” he said

A source close to the government recently explained the dilemma: “German industry really wants to pile into Iran. They’re worried that if they wait, the French or even Americans will get in before them.

France

Since the start of tortuous nuclear negotiations with Iran, France has been seen as taking the toughest stand. Now as a deal nears, Paris must be ready to dash in and grab a slice of the long untapped market, AFP reported.

“The first repercussions of any deal will be the opening of the Iranian market. That’s what all the Western countries are waiting for,” a top western diplomat said recently.

After years of biting sanctions, countries are on the starting blocks ready to resume business with Iran, said one French economist.

With a population of 77 million people, Iran has the world’s fourth largest oil reserves and the second largest gas reserves.

“Be careful, don’t be late. You have to prepare yourselves. The market won’t wait for you and your competitors are already there,” said the Iranian ambassador to France, Ali Ahani, in 2013.

And it’s not just the French. Russia and China are desperate to hold onto and increase their own slice of the pie. While American companies, long shut out of the Iranian market, are also keen to return.

France used to have a strong presence in Iran before the sanctions went into effect, with Peugeot and Renault being major players in the Iranian auto industry and energy giant Total heavily involved in the oil sector.

But two-way trade has fallen from four billion Euros in 2004 to just 500 million in 2013, according to French statistics.

“Unfortunately we are heavily criticized by Iranian society, which sees us as having abandoned them during a difficult time,” said Carlos Tavares, the chairman of French automotive giant PSA Peugeot Citroen, recently.

Chinese manufacturers “are already at the door, the Americans too,” he said, adding that “to rebuild trust (of the Iranians) is difficult.”

 The French employer’s federation, MEDEF, is due to visit Iran in September to try to kickstart ties.

Some 107 representatives from the body travelled to Iran early last year, triggering anger in the US which said it was still too early to do business with Tehran.

But the 2014 visit came hot on the heels of delegations from Italy, Germany, Austria, Portugal and South Korea.

Despite strong cultural and historic ties, France’s image has suffered in Iran during almost two years of nuclear negotiations during which it has adopted a tough position, observers say.

But Iranian Transport Minister Abbas Akhoundi said recently that “no doubt economic leaders will be more realistic than politicians and they will be able to ensure their logic succeeds”.

Adopting the mantle of being the guarantor of any deal, France is also eyeing large contracts with Sunni-majority nations in the Gulf, which have long been wary of Shiite Iran’s regional ambitions and its role in Middle East crises.

“We haven’t made a choice of Sunnis over Shiites,” Fabius said. “Iran is a great country, a great people and a great civilization. It’s not anti-Shiite to say we don’t want nuclear proliferation.”

Thierry Coville, expert with IRIS, the Institute for Strategic and International Relations, however questioned the French strategy.

 “We wanted to play the role of ‘bad cop’, but on the diplomatic front there has been a lot of unhappiness about that,” he told AFP.

 “We’ve been seen as the staunch ally of Israel and Saudi Arabia.”

 In a sign of the tense relations, the reformist Iranian daily Shargh last week headlined Fabius’s arrival at the Vienna talks as “The return of the French obstacle.”

 

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