The European Dream

As a result of decline in trade transactions between Iran and European nations in the past two years, Europeans have conceded a fair share of their market in Iran to Eastern companies, leading with China as well as South Korea, India and even some third-world countries. Following the Geneva agreement and the six-month interim deal to observe Iran's commitment, the number of industrial meetings and exchanges has increased over the past few months, as a result of which Iran has been the host to numerous foreign investment delegations, while Iranians also traveled to visit their foreign counterparts. An Iranian delegation made a trip to Germany about two weeks ago to discuss the potential areas of cooperation with German firms and manufacturers. The Minister of Industry, Mine and Trade's short visit to Berlin alongside a number of deputies and private-sector industrialists provided an excellent opportunity to sit down with Ebrahim Bahadorani, the secretary-general of Tehran Chamber of Commerce, Industries, Mines and Agriculture and examine the trade transactions of Iran with European sides, and especially, Germans.



The Minister of Industry traveled to Germany along with some of his deputies and delegates from the private-sector. What are the highlights of the trip in your opinion, as the delegate of Iran's private-sector? What will be the effect of commercial relations with members of European Union and specifically Germany -as one of the leading industrial countries in the world- on industrial and technological developments in Iran?
As far as I know, a forum was held last Monday by collaboration between Bank of Industry and Mine and one of the long-established industrial associations in Germany. A high-ranking Iranian delegation comprising the Minister of Industry participated in the event to explore the possible fields of commercial and industrial cooperation between the two nations after the sanctions. Officials were mainly concerned with reaching solutions for reestablishing ties as those of prior to imposing the sanctions. We had close and friendly relations with European countries in the past few years, but the sanctions aggravated our relations. The recent visit of the Iranian delegation to Berlin in the wake of reconstructing global relations was a smart move that put Iran under the spotlight and enabled Iranian and German traders and industrialists to extend ties. Regarding the sanctions, America's strategy was to force European governments to take sides between Iran and the US. Sanctions are twofold; those enforced by the United Nations Security Council and those imposed by the United States Congress and the President himself. Members of the European Union expectedly submitted to the sanctions due to economic dependency on the US. Many European firms could have held on to their business with Iran, but decidedly chose to slash ties as they were afraid of the imposed sanctions by the US.
For example, SWIFT - a company that facilitates international bank transfers and the procedure of opening letters of credit- was excluded from the list of the US sanction targets, but unilaterally discontinued services to Iranian banks. The Belgium-based company could at least open letters of credit for food and medicine imports, but refused to do so and thus we were made to pay for our critical imports through exchanges.
With the 11th Iranian administration in power and early agreements in nuclear talks having been reached, various European countries have expressed readiness for cooperation with Iran, among which, a number of German companies are present. When it comes to industrial relations with European nations and specifically Germany, how far do you think we can go?
Our relations with Germany and other members of the European Union had reached its nadir, thus restoring relations will be a long-term objective.
After reaching early agreements in Geneva, key economic players of European nations were confident that the gateway to Iranian markets will open and if they don't act quickly to reestablish ties with Iran, they may fall behind South Eastern and third-world countries in competition. In the past few months, a number of delegations traveled to Iran from around the world and held forums and seminars to show their determination for developing commercial relations with Iran. If you may recall, a French delegation traveled to Iran a few months ago and held a forum to examine possible areas of cooperation in the fields of auto-making and oil industries.
Germany's ambassador also held talks with the chairman of the board of Tehran Chamber of Commerce, Industries and Mines a while ago and expressed his concern over the diminishing relations of the two countries and also explored possible solutions to remain in competition. After all, Iran is a ripe opportunity for foreign economic players and many companies have expressed willingness to come out of the sanctions and do business in Iranian markets. But since the US strictly observes the activities of these companies and their approach towards Iran, they cannot turn a blind eye on the sanctions. As a matter of fact, Iran's market is so important to foreign companies that they eagerly anticipate any new window of opportunity to resume business in Iran.
What was the level and extend of trade transactions with European countries prior to the sanctions and at what level is it standing now?
We made $22 billion worth of imports back in 2011, but the number plunged to around $0.5 million in 2013. Even if the number doubles, it will still translate into a huge $21 billion dollar loss for European nations. So they'd naturally put a lot of effort into reinvigorating relations with Iranians.
Iran turned to the East and third-world countries in the absence of many European firms. How did it influence our economy?
Our dependence on third-world countries had inevitable consequences and detriments for the economy that will become visible only later. Instead of importing European machinery with cutting-edge technology and superb quality, we opted for low-quality machinery from China and India with high maintenance costs. Therefore, I believe it's the right move to look forward to lifting obstacles and developing relations with Europe, as the recent visit of our diplomats and the delegates of private-sector to Berlin clearly show our determination.
Our German counterparts are equally eager to extend ties with Iran. The two nations have a long history of economic relation, while at one point, the number of trade transactions between Iran and Germany comprised one-fourth of all European transactions. I need to stress once more that Germany and other European countries will not give up Iranian markets easily. Foreign delegations travel to Iran to seek mutual interests. The trip of Mr. Nematzadeh and his entourage to Germany was apparently successful. Both sides made agreements for further cooperation in near future. But all these early steps depend on reaching a finalized deal in the next round of negotiations with P5+1 and it's only then that European companies can confidently step forward and do business in Iranian markets without being afraid of possible punishments by world powers.
How did the private-sector evaluate the recent visit to Germany?
Private-sector was at the receiving end of the sanctions and restricted relations. For example, as a result of SWIFT sanctions, the need for liquidity in the industry sector surged as much as a hundred thousand billion Tomans. This enormous amount of money could play a vital role in creating liquidity, while the country was sinking in stagflation and banks were cut off from the rest of the world. Lack of liquidity forced many manufacturers to continue production with low capacity. When a production unit operates with only half of its potential instead of 90% of production capacity, the private-sector will bear a huge loss. I assume that developing relations and resuming international banking operations will help us open letters of credit and alleviate difficulties.
In the past, if you intended to purchase a product, you had to pay a part of the price in advance in order for the seller to use his own bank credits and import your merchandise and only then you paid the whole money. Yet we were stripped off of this simple privilege. In fact with the blockade against Iranian banks, importing low-quality machinery was our only option. The need for liquidity has increased and the level of production has declined. Furthermore most firms are reporting loss of revenue or seeing a dip in their profit and operate with low capacity.
What are the risks of remaining in the same condition without developing relations with the world?
We will certainly continue to experience recession, and if the recession persists, the income of people will plummet, the level of production will decrease due to inflation, economy will shrink and unemployment rate will rise, not to mention that the level of investments will consequently decline.
What was the feedback of the private-sector from the business trip to Germany?
It's still too early to get a feedback and we need to wait a little longer. The real issue is still there and foreign companies are carefully taking the first steps towards reestablishing relations. It's not as though I -as the representative of the private sector- can take a trip to a foreign country and demand that they accept my LC and open a letter of credit. It simply doesn't work like that. Foreign sides are making preparations and once an agreement has been reached, they will know what to do next. But all of these require time and patience. It doesn't happen overnight, yet the current atmosphere is very promising for both the private-sector and consumers as well as for the part of the government that couldn't extend relations with the rest of the world.
Tell us about the private-sector's reception of such trips.
These types of measures are usually met with the warm reception of the private sector. They are the first to benefit from any potential deal with foreign companies. If they cannot import new technologies or receive foreign credits, they will request more Rial credits and their costs will eventually increase. It is absolutely understandable that the private-sector wants to manufacture and wants to manufacture inexpensively and at the same time retain domestic consumers, increase the exports and reduce the imports as much as possible. All of these are possible through developing relations.
What are the major fields of cooperation with Germany at the moment?
Mostly machinery. Germany is one of the leading manufacturers of machinery in the world and we have previously purchased many industrial machinery and equipments from Germany. Let's assume that someone owns a Mercedes and wants to buy another car for their spouse. It would be difficult to choose a car of a different make, but choosing the same car will be an easy task since the person is already familiar with parts and will know how to fix both cars. Then again, if someone owns four cars of the same auto-maker, they will become even more familiar with the technology and will be able to fix every car more adeptly. Therefore, it is much easier for auto-makers to utilize the same tried and tested technology as before. Moreover, if we maintain healthy relations with foreign nations and win the support of their state-owned insurance companies, banks, etc., it will help the private-sector to attract more investors and import high-quality machinery. We supply a lot raw materials and intermediate goods from these countries and therefore, establishing solid ties with Europeans will be crucial for our economy.
We heavily rely on Germans in the electricity sector as well. Is that true?
Absolutely. Many of our generators are made by Europeans, though some of these manufacturers have come and gone and we have also collaborated with Chinese firms in the past.
We need to maintain relations with the world. This approach is also visible in the message of the Supreme Leader of the Islamic Republic of Iran with regards to "the economy of resilience". We need to extend a welcoming hand to European countries and strengthen our industrial relations. We just cannot erect a wall around us anymore. It is time we reached out to other nations with honor. We must carefully observe where our national interests lie and move accordingly. Europeans used to be one of the biggest customers of our oil, but they turned away from us and chose other suppliers once the sanctions were imposed. Reestablishing relations with European nations and resuming oil exports is a strong possibility. Besides, our non-oil exports used to be much more than that of now and one of the principal requests of the German delegation was expanding the export of Iranian pistachio and hand-woven carpets.
Were pistachio and carpets the only items we exported to Germany?
No, we exported more than that, but as far as I recall, hand-woven carpets and pistachio are the most traditional Iranian goods sold overseas. Needless to say, richest countries have always been the main customers of pistachio. That is also the case with Iranian carpets, because hand-woven carpet is a luxurious and a highly-expensive commodity. So having our relations fixed and developed with the world will directly benefit exports. We must do our best to lift the sanctions and remove the obstacles. The countries excluded in our plans for future relations are in minority. We must win the trust of the big community of Iranians in other countries as the first step. We need to attract the Iranians living in the US. Canada, Germany, England and a few other countries to play a more pivotal role in expanding commercial relations and attract them to invest in their homeland.