http://www.thenational.ae/thenationalconversation/industry-insights/economics/despite-sanctions-ties-between-iran-and-germany-remain-strong
Despite sanctions, ties between Iran and Germany remain strong
Apr 23, 2012
Reports that Siemens, the German engineering group, is refusing to supply and maintain new turbocompressors for Iran's South Pars gas field are the latest examples of how international sanctions are hitting the country's industry - but business ties between Germany and Iran remain strong.
The news about Siemens should come as no surprise after the company said two years ago it would not enter into any new deals with Iran.
Other German firms, though, continue to engage in brisk trade with the country and are finding ways of exporting goods despite mounting restrictions.
German companies have adapted to the sanctions and even the European Union's decision in January to freeze the assets of Iran's central bank and this month's move to disconnect Iranian banks from the Swift financial transfer network won't shut down legal exports of machinery, chemical products, agricultural produce, vehicles and vehicle components to Iran.
Alternative ways are being found for settling trade debts, including suitcases filled with cash, barter deals, and especially money transfers via banks in third-party countries such as Turkey, Armenia, Belarus and Azerbaijan.
German exports to Iran fell 18 per cent last year but still amounted to a hefty €3.1 billion (Dh15.05bn). They are expected to fall at a similar rate this year, with the German engineering industry association, VDMA, complaining this month that the financial sanctions will have "massive effects" on German firms. But given the West's determination to tighten the economic stranglehold on Iran, an export drop of less than a fifth this year, seems relatively minor.
Germany is the EU's biggest exporter of goods to Iran, well ahead of Italy and France. In 2010, China was the biggest source of Iranian imports, followed by the UAE and Germany, according to the CIA's World Factbook.
It may seem strange that Germany maintains such strong business ties with a nation whose leader, president Mahmoud Ahmadinejad, denies the Holocaust and wants to wipe Israel off the map. After all, denying the Nazi genocide of six million Jews is a crime in Germany, and supporting Israel is a firm part of Germany's foreign policy doctrine.
Yet German firms have gone on supplying industrial equipment that Iran not only cherishes due to its quality, but relies on to keep its industries functioning.
Some two-thirds of Iranian industrial firms use machinery and equipment made in Germany and rely on imports of German spare parts. The main reason for this is that Germany helped Iran to industrialise in the 1920s. Sectors such as the cement, paper and textile industries were built up using machinery made in Germany.
Recent trade and business exchanges, though legal and not in breach of the various sanctions already imposed on Iran, reflects Germany's long-running ambivalence towards the West's tough stance on Iran, despite its claim to be 100 per cent behind efforts to stop the nuclear programme.
For years, Germany maintained a balance between backing sanctions vigorously enough to avoid negative international headlines, and preventing the restrictions from becoming so severe that they hurt German business.
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http://www.thenational.ae/thenationalconversation/industry-insights/economics/iran-looks-to-pakistan-for-food-deal
Iran has held talks with Pakistani officials about bartering iron ore for wheat as it looks for loopholes in global sanctions.
The news comes as Iran struggles to find ways to import food staples needed to feed its 75 million people and control rampant inflation.
"We have offered one million tonnes of wheat to Iran, and in return, Tehran will provide us fertilisers and iron ore," Shafqat Hussain Nagmi, the managing director of the Pakistan Agricultural Storage and Services Corporation, a food security firm part-funded by Pakistan's government, was quoted as saying yesterday by the International News, a news website based in Pakistan.
The two sides will discuss the pricing of the commodities, which both countries are willing to trade under barter arrangement, Mr Nagmi was quoted as saying.
One of Asia's largest wheat producers, Pakistan exported nearly 2 million of the total 25.2 million tonnes of wheat it grew last year.
Iran is increasingly offering to swap its oil, gold and other commodities in return for food to help keep the economy afloat as US and EU sanctions squeeze the country.
A sharp drop in the value of the Iranian rial is making it difficult for buyers in the country to pay for basic goods such as wheat and rice from abroad. As a result, consumers are facing rising food costs. Inflation is tipped to reach 21.8 per cent this year, forecasts the IMF.
"My friends in Iran are telling me prices of basic goods have gone up substantially," said Ali Sowdagar, an Iranian businessman in Dubai.
Iran's plight has worsened since last month after the Society for Worldwide Interbank Financial Telecommunications, based in Belgium, cut off about 30 Iranian banks including the central bank from its global interbank transfer system.
But Iran is finding ways around the situation.
Indian officials have already proposed paying for Iranian oil imports with wheat exports. Further afield, Uruguay said last month it would ask Iran if it could export rice in exchange for oil.
Iran has found other solutions, too.
"If an Iranian trader and its foreign partner hold accounts at the same bank, transfers could be carried out internally," analysts at the Economist Intelligence Unit wrote in a report last month.
"In addition, Iran could conceivably engage a Chinese bank [for example] to serve as its proxy, using payments owed for Iranian oil to purchase imports on Iran's behalf."
Iran has been selling oil in currencies such as Japanese yen, Indian rupees and South Korean won. The downside to such deals is the difficulty Iran faces in repatriating its earnings.
Iran has already been forging closer trading ties with Pakistan in recent months, despite tightening sanctions.
Pakistan signed a deal in January for the purchase of gas from a proposed pipeline that will run from Tehran to Pakistan.
Iran would start sending gas supplies to Pakistan in 2014, senior Iranian energy officials were quoted by Iran's Fars News Agency as saying on Saturday.
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