German Vice-Chancellor Sigmar Gabriel has embarked on a visit to Iran in order to promote German businesses and start working towards an opening up of the country. But many experts still doubt whether his “change through trade” mantra will bear fruit. EURACTIV Germany reports.
Sigmar Gabriel is probably all too aware that his Iran trip has many detractors, but the minister is probably used to dealing with the public controversy that follows state trips intended to broker deals with Middle Eastern regimes.
There have already been numerous critics of the arms deals he has signed off on between Germany and Saudi Arabia, as well as of his assertion that Egyptian leader Abdel Fattah al-Sisi is an “impressive president”.
During his two-day trip to Iran, the minister defended his position with typical bravado. He conceded that the differences regarding the war in Syria, Iran’s hostility towards Israel and the death penalty for homosexuals are significant problems, but insisted that Germany’s economic interests should not be “shamefully hidden away”.
He added that “many thousand of jobs in our country” rely on being active and successful in other countries. His “change through trade” credo is also intended to bring about change in Iran’s internal modernisation process.
Gabriel’s visit to the Middle Eastern state comes at a logical time, in the vice-chancellor’s mind at least. Ever since the conclusion of the Iran nuclear deal, Iran has been high on the wishlist of German companies.
Just a few days after the deal was finalised, in July of last year, Gabriel was the first of several high-profile European politicians to make the trip to Tehran, with a trade delegation in tow.
Gabriel, who is also Germany’s economics minister, does not want to waste any time in filling the investment vacuum in Iran left by the lifting of sanctions. “There is huge interest from Germany,” explained the ministry’s Middle East expert, Rudolf Gridl, ahead of the trip. Representatives from each of Germany’s regions, or Bundesländer, have already been dispatched to Iran.
Gabriel’s renewed charm offensive is almost certainly due to increased pressure from German industry to normalise relations as soon as possible, as there are hopes that it could mean billions of euros in trade.
Technology giant Siemens, which has been active in the Middle East region for the last 150 years, claims to retain a “close dialogue” with Tehran and insisted that German products still have an “outstanding reputation” in Iran. There is a “long tradition” between the two countries, a company spokesperson told EURACTIV.de.
Germany’s chamber of industry and commerce (DIHK) also doesn’t want to lose out on its slice of the Iran business pie either. In recent years, the German economy has wasted a lot of opportunities, so now there is a pent-up demand in the mechanical engineering and energy sectors, DIHK’s foreign trade director Volker Treier told EURACTIV.de. The DIHK is already hopeful that German exports could increase “five-fold” within the next “few years”.
German-Iranian economic ties have always been close; under the last Shah, Reza Pahlavi, West Germany was the preferred trading partner of the Persian monarch, a tradition that was continued by the Islamic Republic after the 1979 revolution. According to the German foreign office, trade volume topped €2.4 billion in 2015.
The main obstacle to Germany’s investment dreams is the continued reluctance of European banks to fund anything to do with Iran, following the United States’ strict enforcement of the sanctions it had imposed until only very recently.
Commerzbank and Deutsche Bank have already been slapped with billions of dollars worth of fines for doing business with Iranian companies while the sanctions were in place.
Whether Gabriel’s jaunt will change this reluctance remains to be seen. Commerzbank, which was fined $1.45 billion for doing business with Iranian shipping company IRISL, declined to comment on the issue. Deutsche Bank indicated that it would still approach investment requests “cautiously”, but on a case-by-case basis.
But Gabriel’s quest to open up Iran to external economic forces is not just a question of cold hard cash. Iran experts maintain that even if the Middle Eastern country could be coerced into making its economy more open, it would be a hard ask for the regime to become more politically open.
According to Ali Fathollah-Nejad from the German Council on Foreign Relations (DGAP), it is a common misconception that Iranian President Hassan Rouhani is a “reformer”, because despite enjoying support from the reformist camp, he still belongs to the centrists.
Ultimately, Rouhani’s perceived willingness to open up the economy could be more down to a desire to “stabilise the regime and protect it against potential social unrest”, which could build up if an economic downturn made life even more difficult for Iranians.
Iran researcher Adnan Tabatabai believes that the conditions for political change are not in place in the country. The years of isolation inflicted by the sanctions “maximised the economic problems” and as a result social pressure for more freedom and rights stalled. “Currently, people just want to secure their income,” standing up for political rights is, at the moment, just a “luxury”, explained Tabatabai.
Additionally, internal pressure from the Iranian elite could put the brakes on attempts to open up the economy. Opposing Rouhani’s aim of opening up the economy to international actors are forces associated with the Islamic Revolutionary Guards Corps (IRGC), explained Fathollah-Nejad.
More openness would ultimately “endanger their privileged position in the Iranian economy,” he added.