Skip to main content

Iran's president Hassan Rouhani, center, stands with with German Vice Chancellor and Economy Minister Sigmar Gabriel at his office in Tehran, Iran, Monday, July 20, 2015.Ebrahim Noroozi/The Associated Press

Just five days after Iran reached a deal to limit its nuclear program, one of Germany's top leaders was on a plane to Tehran. The path-breaking trip included representatives from major German corporations and business associations. Not to be outdone, officials in France and Italy said they too would organize official visits to Iran in the coming weeks.

The message of such trips is clear: Europe is eager for Iran to transition from pariah to partner. That desire is especially strong among businesses which have seen their access to the Iranian market impeded or blocked by a progressively stricter sanctions regime. And while Iranian oil is a major item on the agenda, there are a host of other sectors where European businesses also see opportunity, from cars to aviation to machinery.

Experts caution that businesses will need to exercise patience and tread cautiously. The sanctions regime is unlikely to be dismantled before early 2016 at the earliest. The time frame depends on Iran taking a series of steps to curb its nuclear program and the verification of those measures by the parties to the deal. Should Iran fail to hold up its end of the agreement, the deal provides for an automatic reimposition of sanctions – the so-called "snap back."

Michael Tockuss, the managing director of the German-Iranian Chamber of Commerce, said he had witnessed a sea change in attitudes since international negotiators reached a preliminary agreement in April. German businesses were once again eager to find potential clients in Iran and less afraid of the possible risks that might entail, he said.

Even though the removal of the sanctions remains months away, "we are happy that the train is on the right track," Mr. Tockuss said. "You can be sure the planes to Tehran and from Tehran to here are full."

Germany's government was eager to be the first to organize an official visit to Iran once the agreement was concluded. On his trip to Tehran earlier this week, Germany's vice-chancellor and economy minister Sigmar Gabriel was careful to promote a renewal of economic ties while acknowledging that fundamental issues remain unresolved.

"For Germany, it must be clear: Whoever has a lasting relationship with us cannot question Israel's right to exist," he said, according to the newspaper Die Welt. Mr. Gabriel also met with opponents of the regime and raised concerns about human rights.

But the commercial opportunity presented by the country of 80 million people is undeniable. Eric Schweitzer, the president of the Association of German Chambers of Commerce and Industry, travelled with Mr. Gabriel to Iran and said he thought that trade between the two countries could swiftly double to €5-billion ($7.1-billion), increasing to €10-billion in the medium term.

Matthias Uhl, managing director of Riedhammer GmbH, a maker of industrial furnaces in Bavaria, said that his firm was once again exploring possible contracts in Iran, which used to be one of the firm's top 15 markets. Under the sanctions regime, the company was restricted to supplying spare parts for existing furnaces, a negligible source of business.

Earlier this year, a Riedhammer sales executive visited Tehran and checked in with former customers. "The old connections are still working, I have to say," said Mr. Uhl. "They are just waiting for us to come and begin again."

Not all the news was good: In the intervening years Chinese suppliers have begun selling industrial furnaces to Iran at lower prices. But overall Mr. Uhl sounded optimistic. The visit by Mr. Gabriel was "a clear political signal that now we want to go forward together again and find solutions for the open problems that we have."

Some European companies began making overtures to possible Iranian partners and customers long before an agreement emerged earlier this month in Vienna. They include firms that previously had a sizable presence in the country, like French carmakers Renault SA and PSA Peugeot Citroën. Iran was Peugeot's second-largest market after its home base of France before it stopped operations in the country in 2012. Now it is once again in talks to manufacture cars there in collaboration with a local partner.

Aircraft manufacturers Boeing Co. and Airbus are also keen to do business in Iran, where the fleet of commercial airplanes is in dire need of updating. Last fall, with the permission of the U.S. government, Boeing sold a token amount of manuals and charts to Iran Air. The deal was tiny in business terms – worth just $120,000 (U.S.) – but large in symbolism, marking the firm's first sales to the country since the 1979 Islamic Revolution. Iran's airlines could buy up to 400 planes over the next decade as they replace old models, reports have indicated.

Of course, many hurdles remain before Iran is reintegrated into global trade in a normal fashion. Chief among them is a host of financial restrictions: Iranian banks are shut out of the electronic-messaging system that underpins international finance, and Western banks risk harsh penalties from the U.S. government if they run afoul of the sanctions regime. The removal or relaxation of those measures remains months away.

"The main problem is the finance sanctions, they make it very difficult," said Sasan Krenkler, founder of Krenkler & Partners, a consulting firm in Dusseldorf that advises German companies on the Iranian market. "Now we are optimistic that everything will change."

Follow Joanna Slater on Twitter: @jslaternycOpens in a new window

Report an error

Editorial code of conduct

Tickers mentioned in this story