Why Germany will Struggle to Take on Iran’s Export Market

(The Market Mogul, London, 11 March 2016) Before the embargo, Iran was Germany’s most important European trade partner with almost $5bn in exports going to the country in the Middle East. Today, Germany wants to live up to earlier commercial successes after a considerable drop in exports during the trade embargo... Currently, there is no big European bank that engages in the financing of Iranian trade deals. European and specifically German banks are holding back export financing due to uncertainties in the market. One reason certainly is the missing due-diligence information about Iranian clients. More important, however, is the lack of export credit guarantees for the designated trades from Iran. Export credit guarantees are an essential part of German foreign trade policy, which protects German companies in the event of non-payment from its debtors. Many Iranian companies still hold old debt with German firms from trades before the embargo. Only when Iran has paid back its old debt of $560m are German banks willing to provide further export guarantees. While this issue should not be an obstacle, in the long run, it has and will certainly limit exports in the coming months.