Siemens values partnership in Iran’s economic development

Drawing on their long-standing presence in a wide-range of sectors in Iran, German firms have been among the first to plan for the resumption of their engagement in the Iranian market following the nuclear deal Iran signed last year, and the ensuing removal of sanctions against the country over its nuclear energy program.

Iran is Germany’s top economic and trade partner in the Middle East and North Africa, said state secretary of Germany’s Federal Foreign Office at a German-Iranian Economic Forum organized by the German Chamber of Industry and Commerce (DIHK) in Berlin back in May.

Germany has sent 13 business delegations to Iran after the July 14 nuclear deal, according to Trade Promotion Organization of Iran. The first of such missions was a 60-member high-ranking delegation headed by Germany’s Vice Chancellor and Minister of Economy and Energy Sigmar Gabriel who traveled to Iran a few days after the nuclear deal.

Representatives from major German companies, such as Linde, Siemens, Mercedes, BASF, Volkswagen Group and GIZ, accompanied Gabriel to meet Iranian officials and business owners to discuss potential areas of cooperation.

German exports to Iran sank from €4.7 billion to €2.1 billion ($5.1 billion to $2.3 billion) between 2010 and 2013. According to the Customs Administration of The Islamic Republic of Iran, Iran exported $320 million worth of goods to Germany over the past Iranian year (March 2015-16), showing a 13% decline compared to the year before. Imports from that country was billed at $1.8 billion, registering a 26% decline.

IRICA’s latest data on bilateral trade show $87 million worth of non-oil goods were exported to Germany during the first four months of the current Iranian year (March 20-July 21), recording a 1.4% rise, while $671.3 million worth of goods  were imported, indicating an 18% increase year-on-year. Animal intestines and guts, pistachios, carpets, caviar, saffron and dates were among the main exports. industrial machinery, grains, pharmaceuticals and steel products were the main imports.

DIHK says it expects exports to Iran to double to 5 billion euros ($5.5 billion) in the coming years and reach twice that figure in the long term. This could compensate, at least partially, for waning demand for German goods from China, Russia and other emerging markets.

“German companies have lost important market share in Iran. We must revive German-Iranian ties as quickly as possible,” DIHK head Volker Treier said.

Siemens, the largest engineering company in Europe, has perhaps been one of the most proactive German firms in pursuit of opportunities in post-sanctions Iran.

The industrial group revised upwards its valuation of its backlog of orders from Iran in early May, citing resurgent business prospects in the country following the easing of nuclear sanctions. Present in Iran since it built the Indo-European telegraph in the 19th century, Siemens said the revaluation had boosted second-quarter revenue by €174 million ($200 million) and profit by €130 million. The revaluation partially reversed a 2012 writedown of the value of its Iranian business after restrictions were tightened, causing a hit of €347 million to its profit.

Siemens stopped doing new business with Iran in 2010, albeit reluctantly, under pressure from the West, due to the nuclear sanctions, but continued to service existing contracts as long as they did not contravene the sanctions.

The Munich-based firm maintained an office in Tehran throughout the sanctions regime.

Siemens signed memoranda of understanding in March on rail infrastructure and gas equipment projects potentially worth billions of euros, as well as an energy agreement with Iranian power and infrastructure group MAPNA.

The Financial Tribune interviewed the CEO of Siemens in Iran, Mohsen Nayebzadeh, to learn more about the activities of his company in Iran and its future plans for the Iranian market.

Nayebzadeh refused to respond in specific terms to some of our questions, perhaps understandably due to the perceived sensitivities of working in and with Tehran. Below is the full text of the interview:

As the representative of Siemens in Iran, what exactly is your mandate?

Siemens has contributed technology to key infrastructure projects in Iran since 1868. As the CEO of the business in Iran, it is my ambition to ensure Siemens is positioned to support Iran’s sustainable economic development with innovative technology, and to continue its role as a partner in the areas of electrification, automation and digitalization. Siemens also remains a responsible member of the society in Iran, investing in jobs, education and training.

What timeframe are we talking about when it comes to translating negotiations and agreements into effective action?

As you know, we are constantly looking at new business and sustainable growth opportunities in Iran. We want to support Iran in the future development of its infrastructure. We also see great demand in the local market, especially when it comes to infrastructure projects in the rail, oil, gas and petrochemicals sectors and in the generation and distribution of electricity. Modernizing infrastructure will raise living standards for Iranians and we want to contribute to that.

We have already signed an initial memorandum of understanding in the railway sector. Earlier this year, Siemens also signed agreements with MAPNA Group to strengthen cooperation in the energy sector. We look forward to further developments in these areas.

Could you tell us about the impediments and the possibility of resolving them soon?

We hope you’ll understand that, as a matter of principle, we’ll not be commenting on our individual customers, contracts or agreements.

What about the project to electrify the Tehran-Mashhad railroad and construction of the high-speed train between Tehran and Isfahan?

These two are significant projects for Iran, accommodating a very high density of passengers over long distances to connect major cities. They indicate the importance placed on the continued development of a fast, efficient, reliable and safe mobility network in Iran. We have positioned our portfolio with this in mind, and we are proud to have world-class technology for high-speed rail, signaling, communications and electrification available to the Iranian market.

Chinese firms have also claimed stakes in these rail projects. Does Siemens see them as rivals?

Iran is an important market for Siemens and we have always maintained that strong competition is a key driver for a healthy, quality-driven business environment. We have been working in Iran for many decades; we understand the requirements and our portfolio is well placed to help drive sustainable development in Iran.

Experts from Siemens recently visited the Tehran subway. What is your plan regarding urban trains in Iran?

The development of urban rail networks in Iran goes hand-in-hand with expanding intercity mobility infrastructure. We recognize that mature urban rail networks are already in place, and our intention is to support Iran Rail (Islamic Republic of Iran Railways otherwise known as IRIR) with advanced technology to further develop these systems, accommodating both the influx of passengers into major cities and the fast, efficient transport of cross-city passengers.

By Financial Tribune