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German Trade With Iran Down Nearly 50 Percent Since U.S. Sanctions

A visitor walks past a likeness of antique Persian statues at the Iran stand of the International Tourism Trade Fair (ITB, Internationale Tourismusboerse) in Berlin during the fair's opening day on March 7, 2018. - The business platform for global tourist

Germany’s trade with Iran has suffered a sharp fall in the year since the Trump administration pulled out of the Joint Comprehensive Plan of Action – the 2015 nuclear deal – with Iran.

Out of the 120 German companies that were operating in Iran this time last year, only 60 remain active in the country, according to the Association of German Chambers of Commerce and Industry, on Sunday May 26.

Volk Treier, the organisation’s head of foreign trade, said trade was down 50 per cent, at nearly €340m ($380), for the first quarter compared to the same period in 2018.

Treier added that Iranian exports to Germany had dropped 42 per cent. He told German news agency DPA: “U.S. sanctions affect economic relations like a full embargo because the financial sector is affected.”

The Islamic Republic is reeling from sanctions that accompanied the U.S.’s withdrawal from the JCPOA last year.

Marking its anniversary on May 8, Washington warned European banks, investors and businesses against engaging with Instex – the Instrument for Supporting Trade Exchanges.

The European Union-backed system, also known as the special-purpose vehicle (SVP), facilitates non-dollar trade with Iran that circumvents US sanctions.

Graph:Iran's Trade With European Countries
Graph:Iran's Trade With European Countries

Foreign ministers of France, Germany, and the UK adopted Instex at the EU summit in Bucharest on January 1.

The EU trio registered Instex at the address of France’s economy and finance ministry in Paris.

German banker Per Fischer was appointed to run it for six months and a senior UK diplomat is expected to head its supervisory board.

Last year, Germany exported machinery, mechanical tools, vehicles, pharmaceutical, electronic and optical products to Iran, according to the country’s Chambers of Commerce.

The organisation added that in the 1970s, Iran was the most important non-European market for exporting German goods, immediately after the U.S.

By last year, however, Iran ranked 62 among Germany’s trading partners – by the first quarter this year its significance had dropped to that of countries such as Kazakhstan and Belarus.

According to the German Chambers of Commerce, Iranian exports amount to only €60m ($67m) – accounting mainly for pistachios and dried fruits.

Other Iranian products exported to Germany were fossil fuels, rugs, iron, steel, sheepskin, and offal, the report stated.

Iran’s trade with France and Italy has suffered a similar drop.

Major European companies working with Iran left the Islamic Republic last summer before the United States reimposed its sanctions against Tehran.

Their unilateral decision to leave was based on their greater dependence on trade with the U.S.

For its part, America believes Instex to be a non-starter.

Speaking to RFE/RL earlier this month, U.S. special representative for Iran, Brian Hook, described Instex as a two-part mechanism comprising “the European side, which is the UK, France and Germany, and then the Iranian side.”

But “the Iranians have not put in place the transparent financial system that allows this to be operational”, he said. “So, I am not sure it will ever get off the ground.”

He then added that there was no corporate demand for such a vehicle.

“If you are the CEO of BMW, and you are given a choice between selling BMWs in the United States or selling BMWs in Iran”, said Hook, “you are going to choose the United States market. That is the case for every significant European company that does sort of global financial work.”