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From Germany To Japan, Race To Be First To Do Business With Iran

As the lifting of sanctions appears to move closer to reality, business and government leaders from leading economies are eager to restore trading ties with Tehran

Foreign currency is still highly valued in Tehran
Foreign currency is still highly valued in Tehran
Cerstin Gammelin

BERLIN — Credit cards don't work. Remittances require complicated special authorizations. Financial institutions are banished from international banking systems. No, we're not talking about Greece or some obscure tiny nation in Asia, but a major player in the Middle East: the Islamic Republic of Iran.

Still, in all likelihood, it will not be like this for long. Iran is being courted as a significant business partner with the Western world. After the signing of July's nuclear treaty, longstanding economic sanctions imposed by the West are expected to be lifted by 2016. European countries have spent the past few months looking to rekindle business relations with Iran. Beyond its large deposits of natural gas and oil, Iranian society places a high value on education and personal economic advancement.

With the recent signs of a slowdown in the Chinese economy, Iran starts to look even more attractive; and Western countries are now embroiled in stiff competition to forge the best contacts.

Iran, which has one of the highest population densities in the world, has been isolated for years from the West as a result of the international sanctions imposed as punishment, both for striving to build nuclear weapons and its disregard for human rights. Foreign policymakers and economics experts describe the sanctions as "the most complicated ever imposed."

Jockeying begins

The race for the best trade relationships with Iran has already begun. German Foreign Affairs Minister Frank-Walter Steinmeier announced that he would be in Iran in October "to personally form an opinion." German Economic Affairs Minister Sigmar Gabriel already traveled to Iran in July, shortly after the nuclear treaty was signed, to lead a delegation of German business leaders.

The goal of that trip was to "forge a first political contact," Gabriel said in response to criticism that he didn't observe an appropriate diplomatic waiting time after signing the treaty.

Since then, however, French, Italian and other delegations have visited Tehran. This week, Austrian President Heinz Fischer became the first European head of state to visit Iran since 2004.

Germany's Ministry of Economic Affairs cites Iran's traditionally strong industrial base, which is made up not only of oil and gas but also automotive construction. In addition, compared to China, Iranians are thought to have more collective self-confidence and the society is more developed over all.

Unhappy Israel

Still, despite the economic opportunities, geopolitics continues to weigh on the West's evolving relationship with Iran. Tehran recently canceled a concert featuring the famous conductor Daniel Barenboim, who is an Israeli citizen.A day later, Israeli Prime Minister Benjamin Netanyahu again vehemently criticized the anticipated lifting of international sanctions against Iran.

The German government, on the other hand, believes that the nuclear treaty signed in Vienna will provide more security throughout the region, in addition to opening up new diplomatic channels.

Meanwhile, government ministries are preparing executive orders that would legally invalidate the sanctions, which would connect the Iranian banking system with international payment systems. The Federal Bank describes this integration of Iranian banks as a "technical task that can be solved within 48 hours."

But the most difficult part of the operation will be the coordination between Europe and the United States. The U.S. has created such a tightly knit net of sanctions that foreign companies can easily get entangled. Companies that have business relations with Iran and inadvertently breach sanctions could then be sanctioned by the U.S. and severely punished.

It's "a very big risk, to only go one step too far," said one source from the Ministry of Economic Affairs, who cited Commerzbank as an example. As part of a legal settlement, the German financial institution had to pay a fine of $1.5 million at the beginning of 2015.

To avoid such situations in the future, European officials are meticulously coordinating "legal mechanisms and instruments for companies, banks and financial institutions" with their American counterparts, said the German ministry source.

Still, all of this is contingent on the U.S. Congress approving the treaty signed in Vienna. Legally speaking, these conditions only come into force in mid-October, but the grace period given to fulfill these conditions will be counted down from then onwards.

Official grace periods are one thing, but economic interest another. Americans, Europeans and Iranians are already preparing for the day the sanctions are lifted. So too are the Japanese, Koreans and Swiss. As one official in Berlin said: "We want to avoid that the sanctions will be lifted without trade resuming immediately."

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