Germany's thriving business with Iran

Chancellor Merkel is not getting much response to her appeals for voluntary self-restraints

Translated from German. Please find the German original here.

German Chancellor Angela Merkel and some people in the government are visibly uneasy about the thriving business with Iran. However, despite President Ahmadinejad's threats to destroy Israel, the government has not yet implemented bans on exports or limited export credit guarantees (Hermes covers).

By Germany correspondent Ulrich Schmid

Berlin, February 2009

The West is having a hard time with Iranian President Ahmadinejad's Holocaust denials and threats to destroy Israel. Political leaders have announced their shock and disgust, but are unable to implement concrete measures to combat it. U.N. and E.U. sanctions require that member states refrain from delivering goods that could help the country's nuclear weapons and missile program, but allow all other commercial trade. The government has been discussing the benefits of sanctions for a while now, but it should be noted that it is rarely the self-declared friends of Israel who claim that sanctions are counterproductive and would drive the Iranian people even further into the arms of the mullahs and increase the risk of war.

Vague threats of stricter sanctions

Chancellor Merkel is certainly not one of Teheran's apologists in this discussion. Merkel has displayed noticeable interest in human rights, religious freedom and the conditions in authoritarian countries for many years. She meets with outsiders, dissidents and the Dalai Lama, and unlike her predecessor, Gerhard Schroeder, she is also not afraid of openly criticizing prominent politicians. Especially if it is about the Holocaust or the devastating effects of Communist rule, the East German politician feels that moral appeal is more important than diplomatic bowing, which can then lead to considerable irritation in Moscow, Beijing or the Vatican. This is also true in the case of Iran. Merkel believes that a president who disputes Israel's right to exist and denies the Holocaust should not expect any tolerance form Germany, and the Chancellor underlined at the last Munich Security Conference the fact that her government is prepared to consider imposing stricter sanctions if Iran continues to refuse to abandon the enrichment of uranium and allow inspections of its nuclear facilities.

That is one side of the story. The other side is one of economic reality, and it puts a lot of the nice words into perspective because Germany is doing business with Iran. No other country currently exports more goods to Iran. Exports from Germany increased by 10.5 percent between January and October 2008 compared to the same period in the previous year. This is a substantial increase; in 2007 Germany exported approximately 3.6 billion euros worth of goods. Thousands of German companies sell goods to Iran. One of the biggest exporters is Siemens, which, according to its spokesman Wolfram Trost, sold 438 billion euros of products to Iran last year. According to Trost, Siemens does not have any factories in Iran.

Interrupted Shareholders' Meeting

Siemens has been severely criticized by the organization Stop the Bomb in the past few weeks. Some of the initial signatories of a Stop the Bomb petition include Nobel Prize-winning author Elfriede Jelinek, Left Party Bundestag member Petra Pau, former General Secretary of the CDU Heiner Geissler (who is also active in the anti-globalization organization Attac) and Stephan Kramer of the Central Council of Jews in Germany. The group, which is constantly accused of warmongering by its opponents in Internet forums that spew anti-Semitic views, owns shares in Siemens and asked Chairman of the Board Peter Loescher at the Shareholders' Meeting in late January why a company that worked closely with the Nazis feels it is now okay to support a country that is anti-Semitic and supports terrorists, suppresses women, religious and ethnic minorities, allows homosexuals to be killed, and works openly with terrorist organizations such as Hamas and Hezbollah. "Stop the Bomb" believes that many of the Siemens products, particularly those in the area of communication, can very likely be used for monitoring and persecuting those who oppose the regime.

Siemens, which has been shaken by numerous corruption scandals, cannot afford to offer arrogant replies to questions such as these right now. Loescher stated at the Shareholders' Meeting that ethics is the company's top priority, even when it is about human rights. Company spokesman Trost explained to NZZ that they were adhering meticulously to the legal regulations for trade with Iran and if those regulations were tightened up the company would immediately adapt to them. The law alone determines how Siemens acts. Siemens is currently double checking and strictly reviewing all of its business with Teheran. According to Loescher, Siemens is involved in the construction of gas power stations, but not nuclear power plants. Whether other companies are acting as scrupulously as Siemens claims to be remains to be seen. According to the newspaper Hannoversche Allgemeine, Aerzener Maschinenfabrik GmbH (a German mining equipment company) just secured its largest single order in its history in January. In exchange for 21 million euros, it will be delivering bellows and screw compressors for a steel factory in Isfahan.

Appeal for self-restraint

All of this is legal, because the Grand Coalition has not implemented any additional export restrictions despite considerable pressure from the Bush Administration. The launch of Iran's Safir II booster rocket on February 2, which made Iran one of eight countries in space, has not changed anything either. The Chancellor's unease is quite noticeable, but her actions amount to just applying moral pressure for the time being. She has warned German companies to practice voluntary self-restraint. If such a thing has ever existed, it has not accomplished much. In the past year, the Federal Office of Economics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle), which is in charge of monitoring Germany's foreign trade with prohibited goods, has approved over 2,800 transactions with Iran.

Nevertheless, there appears to be some dissension in the government. At the end of January the newspaper Handelsblatt reported, while citing sources from the industry and the government, that the country's assumption of risk for exports with Iran has practically ground to a halt. Apart from a few limited exceptions there will no longer be any export credit guarantees (Hermes covers) for Iran projects, and Chancellor Merkel has instructed Minister of Commerce and Industry Glos (who recently resigned) to stop granting Hermes covers for business with Iran. In doing so, Berlin is responding to the growing criticism from countries such as Israel and the United States.

But something appears to have gone wrong with this project. A government spokesperson has confirmed that Hermes covers are still being granted as long as they meet the criteria of a case-by-case review. One can only guess what exactly is going on, because the government is staying silent. But the assumption that there was resistance from those in the Coalition who are friendly with business and from trade and industry itself is obvious. One could even speculate that it was Glos, who is known to be uncivilized, who was the one to block. Did Merkel suffer a loss that has gone widely unnoticed by the public?

Duplication

One thing that is for sure is that there is a chasm between what is claimed to be and what is reality in Germany's Iran policy. On the one hand there is Chancellor Merkel and Foreign Minister Steinmeier, who last July argued in favor of bringing the nuclear power struggle with Iran before the U.N. Security Council again, while explicitly taking the Russian and Chinese reservations into account, in case there was no progress or helpful answers from Teheran. On the other hand, according to a report in the New York Times, just a few days later it was Germany that pushed the five veto-wielding members of the U.N. Security Council (the U.S., China, Russia, France and the United Kingdom), plus Germany, to extend the deadline for foregoing the implementation of additional restrictions on Teheran. This kind of inconsistency is regrettable, particularly for groups like Stop the Bomb that are convinced that Germany has the power to deal a decisive blow to or even stop Iran's nuclear program with a far-reaching trade boycott.