Export Restrictions Gulf Rivals Woo German Business

German companies are angling for business in Iran and Saudi Arabia, but hitting it big in the Gulf isn't that simple because the two countries are bitter enemies, and each demands exclusivity from business partners.
Iran offers many opportunities for German businesses.

 

German investors were wooed this week by opposing Middle East interests in meetings some 4,000 kilometers apart.

In Berlin, Iranian companies presented opportunities to possible German partners. And in the Red Sea metropolis of Jeddah, Saudi Arabia’s leadership unveiled plans for opening up the kingdom to investors.

Not only are the two countries regional archenemies, but these days they are also increasingly business focused - and often demand exclusivity. Business sources said the Gulf rivals often demand that countries deal with one and not with the other.

The “considerable animosity... increasingly affects German investors,” reported one German business representative.

Iran is one of the most opportunity-rich markets of our time. Stephan Steinlein, German deputy foreign minister

German businesses see the Gulf states as real alternatives to collapsing markets in Russia and Brazil, and an opportunity to offset weaker sales in the slowing Chinese economy.

One of the most promising areas is Iran, after crippling trade sanctions were lifted when it agreed to roll back some of its nuclear program.

Germany was the country’s biggest trading partner for decades before sanctions were imposed and now, after a decade cut off from Western markets, Iran needs trucks, cars, machines, power stations, medical technology and consumer goods.

By supplying the population of 80 million, half of whom are under 30, German exports to Iran could soon reach €10 billion, or about $11 billion, according to the German Chambers of Commerce and Industry.

“Iran is one of the most opportunity-rich markets of our time,” said deputy foreign minister, Stephan Steinlein, at the first German-Iranian economic conference in Berlin organized by the North African and Middle East Initiative of German Business.

Likewise, the current opening up of the strongly state-controlled economy in Saudi Arabia is also fueling hope among foreign investors.

“In Saudi Arabia, the opportunity lies in a complete restructuring of the economy,” explained Fahd Al-Rasheed, managing director of King Abdullah Economic City near Jeddah.

A wave of privatization and drastic phasing out of state subsidies — in addition to diversifying from an economy dependent on oil — will lead “to clearly-increased global interest in Saudi Arabia,” he said.

Recently the German engineering giant Siemens attracted attention with large contracts in the Gulf region. The Munich-based engineering giant signed an agreement with the Iranian Power Projects Management Company, also known as MAPNA, to supply and produce gas turbines.

The deal is considered an ice-breaker for new trade agreements between Germany and Iran.

“If we can now just succeed in getting the financial sector running again, then nothing will stand in the way of restoring of our traditionally excellent trade relations,” said Siegfried Russwurm, a member of Siemens’ managing board and chairman of the North African and Middle East Initiative.

The Siemens executive added that “we are being very intensively supported by the German government.”

For the first time in 15 years, Economics Minister Sigmar Gabriel will again head the German-Iranian economic commission in Tehran, Mr. Russwurm said.

Mr. Gabriel, who is also vice chancellor and head of the center-left Social Democrats, was the first high-ranking Western politician to travel to Iran after trade sanctions were lifted.

In addition, the vice chancellor received Iran’s energy minister at short notice this week in Berlin. The Siemens-MAPNA deal was signedon the fringes of that meeting, Mr. Russwurm said.

Mr. Gabriel also wants to invite Iran’s president Hassan Rouhani for a state visit to Germany. But Chancellor Angela Merkel, who heads the conservative Christian Democrats, the majority coalition partner, is opposed. Because of Israeli sensitivities she is reluctant to become too close to Tehran – even though the governments in Italy and France are less sensitive on that issue.

Reinhold Festge, president of the German Engineering Federation, is demanding even more commitment from the German government.

“The German government must be clear on its position on the banking issue,” he said.

The problem of a lack of financing for German exports and investments in Iran was “clearly a political problem,” he said. Mr. Festge blamed U.S. banking sanctions, which prevent German banks from financing business with Iran.

Mathias Brüggmann has worked as a foreign correspondent in Moscow, Brussels and Warsaw and is now head of the foreign desk. To contact the author: [email protected]