US Envoy Trying to Untwine German Companies From Iran

EghtesadOnline: Donald Trump’s new envoy to Berlin is on a campaign to remind Germans that the business of America is business.

News ID: ۷۴۵۵۸۶

07 July 2018

In a bid to coax small- and medium-sized German companies active in Iran away from the Islamic Republic, Ambassador Richard Grenell has quietly begun engaging business executives with an offer to help them tap the much larger and lucrative US market, according to people briefed on the talks.

On Tuesday he met with the German Chambers of Commerce and Industry and about a dozen companies to make his pitch, reads an article published by Politico Europe

The campaign suggests the US ambassador is pursuing a softer approach to his host country than it first appeared. Grenell created a stir just hours after he arrived in May by telling German companies via Twitter to “wind down operations in Iran immediately.” Though Grenell felt misunderstood, the perception in Berlin was that he was a bull in a china shop, Financial Tribune reported.

The initiative is part of a broader strategy to convince European companies to voluntarily disengage with Iran in the wake of the US decision in May to pull out of the Iran nuclear deal and reimpose sanctions on the country, which Trump argues still poses a serious security threat.

EU countries strongly opposed Trump’s decision to pull out of the deal, in part because many view Iran, a young country of about 80 million with a large middle class, as an attractive opportunity for European companies.

Robust German Presence

That was particularly true for German companies, which had a robust presence in Iran before world powers tightened sanctions against Tehran in 2012 in connection with its nuclear weapons program.

As soon as the West’s nuclear deal with Iran was signed in 2015, German businesses rushed back in. Germany’s then-economy minister, Sigmar Gabriel, flew to Tehran a few days after the accord was sealed to meet the country’s president and drum up business.

At the time, the Federation of German Industries predicted exports to Iran would surge in the medium-term from €2.4 billion in 2014 to €10 billion in 2017.  Those predictions weren’t borne out, however, with exports totaling just €3 billion last year, mainly due to continued U.S. pressure on the Iranian regime.

Nonetheless, German business never gave up its Iranian dreams. Years of sanctions left the country in sore need of the kind of capital goods and engineering acumen for which Germany is best known.

That was particularly true of the scores of mid-sized German businesses focused on building and maintaining infrastructure. Iran’s proximity — it’s just a 5-hour flight from Germany — and the lack of major competition made it all the more attractive.

Change in Calculus

The US decision to reactivate sanctions changed that calculus, however. Under the sanctions, European companies doing business in Iran could also face US penalties. While the EU has vowed to try to protect European companies, for many, the risks of staying might be too great. Companies have up to six months to wind down their activities in Iran or face potential consequences in the US.

Grenell is offering them another alternative. Whether easier access to the US for German firms is enough of an incentive is unclear. Operating in the US carries its own risks for smaller foreign firms, as the recent showdown between the Trump administration and the EU over trade has shown.

Promise of Improved Saudi Ties

The US is offering German companies another carrot as well, however — improved ties with Saudi Arabia.

Grenell has offered the German government Washington’s help in fixing its trouble relationship with Riyadh. Relations between the two countries have been strained over Berlin’s decision to halt weapons exports to all countries involved in the war in Yemen, including Saudi Arabia. Germany had long been one of the country’s largest suppliers. In November, Saudi Arabia recalled its ambassador to Berlin after Gabriel, by then the foreign minister, criticized the country’s involvement in Lebanon’s domestic politics. The ambassador has yet to return.

Meanwhile, German companies in Saudi Arabia are feeling the pain and believe they face an unofficial boycott.

Washington has its own reasons to push for a thaw in the dispute between its two allies. Bringing Germany closer to Saudi Arabia would help alienate it from Iran.

Saudi Arabia and Iran are sworn enemies, with both countries accusing the other of seeking to dominate the Middle East.

Trump would like nothing more than to bring the Germans solidly into the anti-Iran camp. Yet with transatlantic relations at a new low, amid tensions over both style and substance, winning over the Germans will be difficult.