Opening Soon: Germans Race to Capture the Iranian Market
Ahead of the planned lifting of Western sanctions against Iran, businessmen from around the world are visiting the country, and as one group from Germany discovered, there is no shortage of opportunities.
Early one morning at the beginning of October, Alfons Diekmann is standing at Tehran's Imam Khomeini Airport. He is wearing his comfortable travel pants and carrying a shoulder bag filled with only the essentials. "And what if they shoot you down?" his wife had asked.
And that's why Diekmann, of Alfons Diekmann GmbH, is standing at check-in counter 40 at Imam Khomeini Airport early in the morning, together with 98 other representatives of small and medium-sized companies from Lower Saxony. They include logistics and waste disposal experts, leading manufacturers of turbofans, plaster products, port cranes, special paints and pumping equipment, dump trucks and reel slitters, and now, at 2:30 a.m., they want the same thing: to get into Iran, at last.
After years of talks, the agreement on the Iranian nuclear program was signed in Vienna on July 14, 2015, paving the way for an end to the embargo against Iran. The country is expected to begin dismantling nuclear facilities by the first quarter of 2016. Then, on what has been dubbed Implementation Day, most of the economic sanctions will be lifted.
These are relatively vague prospects. Nevertheless, when the business owners from Lower Saxony go to breakfast the next morning, they quickly realize that they are not alone. The lobby of the Parsian Azadi Hotel is abuzz with delegations, Frenchmen, Croats on a "fact-finding" mission, Dutch, Italian and British businesspeople. Every day, there are reports in the Tehran Times on the arrival of "groups of high-ranking visitors," "amicable talks" and the exchange of opinions and memoranda. It is literally a run on Tehran.
The various delegations seem to be sizing each other up, eager to determine which competitors are there, who has already established relationships with Iranians and who has quietly taken up positions. Businessmen discreetly peek at the nametags of their fellow passengers in elevators, and everyone behaves as if they weren't there - as if they were in an indecent place.
The first to arrive, in July, was German Economy Minister Sigmar Gabriel, who drank tea with a carpet dealer in Isfahan. Then a group of businesspeople from the southwestern state of Baden-Württemberg arrived, followed by a delegation of lawmakers. Bavarian Minister for Economic Affairs Ilse Aigner and her entourage are arriving in November. There are so many Germans coming to Iran that the German Embassy in Tehran has cancelled practically all employee leave since July.
"In the past, they would have met with every hairdresser. Now it's very difficult to get an appointment at the cabinet level," says Bernd Fedder of the state economy ministry in Hanover.
He looks on with frustration as a group of Croats is guided through Tehran traffic with a police escort. "We have a much bigger population than they do, but they're here at the federal level, while we are not." It also irks him that the business owners from Baden-Württemberg have already branded themselves in Tehran as "The Heart of Europe." The group from Lower Saxony had their own slogan, but by then it sounded a little weak: "The Logistical Heart of Europe."
Fedder says he had to bring along 71,000 ($78,000) in cash to pay for the delegation's hotel rooms. Because of the last tightening of sanctions in 2012, it is not possible to transfer money to Iran through the Swift system. There are also no Hermes guarantees for export deals, and it isn't easy to transfer earnings from Iran to Germany.
A New Time for Iran
So why are they here?
"You've come at a good time," the German ambassador says at the press briefing, as he begins to explain the situation. Next to Turkey, he says, Iran is one of the most stable countries in the region. The ambassador talks about the social networks that are technically banned yet still used by President Hassan Rouhani. He goes on about market opportunities and stable basis data, the high standards at universities ("two-thirds of students are female"), Iran's dormant "human resources" and good infrastructure, and the excellent reputation of the "Made in Germany" brand.
The ambassador also describes a market of 80 million people, one that is largely underused, and where the basic attitude toward all Germans appears to be: Take me!
"My goodness!" says Rolf Schnellecke of the Schnellecke Group AG & Co. KG, which provides logistics Services to car parts suppliers. He will have to rethink his image of Iran.
Any questions, the ambassador asks?
A gaunt, somewhat agitated looking man jumps to his feet and says: "I need IT technicians. Where do I find them?" Professor Eberhard Issendorff, from Sarstedt, a town near Hildesheim, is an inventor of building management systems. He can coherently explain technical problems in a few sentences, and he has a solution for everything -- except one thing: "I can't find any good software developers in Germany."
The ambassador refers him to the chamber of commerce, and he also offers him a tip: "The key factor now is to develop relationships and reach out to partners." He sounds like a coach giving his players one last pointer before they enter the finals.
Is there a palpable sense of tension among these small and medium-sized business owners? Not exactly a fever, but a somewhat elevated temperature perhaps? German exports to Iran have shrunk by 50 percent since 2005 to 2.4 billion last year. So there is still plenty of room for growth.
'Behind Him is Our Thorsten's Broiler Farm'
Alfons Diekmann is sitting off to the side. He is a heavyset and trusting man who would come across as self-engrossed if it weren't for his slightly puffy but very alert eyes. He is now 62. In his native Lower Saxony, they say few people know as much about chickens as he does. He may have started out as an electrician, but he made an important realization during that time: "Every negative has its positive side."
The embargo is a case in point, because it made the Iranians realize that not every German product could be replaced with a Chinese replica. Diekmann knows all too well that relationships are critical to doing business in countries like Iran. "We've invited Hassan to visit us twice already. He stayed at the Burghotel in Dinklage."
"Hassan" is Hassan al Suwaidi, a member of one of Abu Dhabi's most prominent families and a friend of the Prince of Wales. After seeing a television special on Al-Jazeera about an air-conditioned poultry farm in southern Oldenburg, Suwaidi invited Diekmann to stay at his luxury hotel in the desert.
They are now friends, says Diekmann. Later in the conversation, he pulls a photo album out of his pocket. "This is Hassan, and behind him is our Thorsten's broiler farm." Thorsten is his son.
For Diekmann, the earth is egg-shaped rather than round. People take him seriously, because it is clear how seriously he takes his work. Perhaps this attention to detail is one of the secrets of the success of Germany's small and medium-sized companies, collectively known as the Mittelstand.
To help people establish relationships with representatives of the "Evil Empire," the German-Iranian Chamber of Commerce set up a "B2B" contact exchange. It's a form of speed dating, in which Iranian businesspeople walk from one table to the next, together with an interpreter and a handful of brochures of the Lower Saxony companies.
The business owners from Hanover are quickly surrounded by Iranians, who treat them like saviors. It feels good to the Germans to be courted this way. "We offer world-class expertise," says Stephan Bergmann, from Vechta in the Oldenburg Münsterland region. "They appreciate our expertise here. In Germany, my industry is usually the target of criticism." Bergmann's profile states that he develops drugs "in Europe's biggest animal finishing region."
At the next table, Frank-Michael Rösch is sitting behind a stack of measuring sticks and company calendars. His company provides rail service technology. "It feels like dancing class here. You have a partner, but if you're lucky a better one will come along." There is also plenty of hot air in the room, he adds. "Many come up to us and say that their cousin has an excellent relationship with the grandnephew of some presidential adviser. It's all nonsense, of course."
Rösch is the only person wearing jeans at this event, and there is no sign of the fact that his company has offices in Shanghai and Manila. He has two Mercedes-Benz cars with gull-wing doors in his garage in the German city of Braunschweig.
"After-sale service is very important," says Rösch, as the businessmen around him talk shop about waste separation, high-frequency technology and sealing rings. "And it's also important to be able to understand other cultures." When it comes to "compliance," as the ban on favors is known, he says: "I'm not talking about corruption. But a bazaar isn't the same thing as Aldi. It's really arrogant to try to export our moral values along with our products."
As far as morals are concerned, some things have changed in Lower Saxony recently. In the wake of the Volkswagen diesel emissions scandal, the German carmaker's representative had to withdraw from the trip at the last minute.
"Excuse me," says a young man, interrupting Rösch. He politely introduces himself and says: "I have some very good connections "
An Urgent Need for Investors
The official leader of these scouts from Lower Saxony is the state economy minister, Olaf Lies, from the port city of Wilhelmshaven. Lies became an electronics technician in the navy and later earned an engineering degree. He looks attractive and competent, and he has the ability to give speeches in any situation that contain phrases like "great appreciation," "important signal" and "expectations."
The German businessmen, dubbed "The Mittelstand from Lower-Saxonie" by their Iranian hosts, are taken in busses to the spice bazaar and the "JoJo" brewery, which makes non-alcoholic beer. They also visit a plant that builds Peugeot cars under license. In the meantime, the minister meets with high-level Iranian politicians.
As usual, the meetings begin with a tribute to Allah and end with the Iranian host being presented with a Pelikan fountain pen imprinted with the Lower Saxony crest.
A group of unshaven men without ties sits across from the minister. They give the impression that they have met with many delegations in recent weeks, each of them filled with expressions of sympathy for the Islamic Republic. These men are uninterested in speeches and fountain pens -- they want to reap the fruits of the nuclear agreement, and they want it soon.
"As much as we appreciate the enthusiasm coming from the Germans," says Rokneddin Javadi, head of the National Iranian Oil Company, with a thin and slightly malicious smile, "we hope that you will also put courageous officials in the right positions." The government urgently needs investors from the West. The economy is in tatters and youth unemployment is at 30 percent - and Iran is a country with a lot of youths.
At 7:30 the next morning, Diekmann is still in bed when he receives a call from the Iranian agriculture ministry. "All I told them was that I had turned a former military building in Turkey into an egg farm for one-and-a-half million animals. They apparently liked what they heard. Well, I'm open to everything."
He's off to a running start. Diekmann is familiar with the market. "I said: People, you need to deliver eggs to Abu Dhabi. It's difficult to build a farm there. You need to deliver to Libya, Iraq and Syria." When Diekmann rattles off the names of these countries, it sounds less like the evening news and more like construction plans, laying periods and feed prices.
"Eggs are not just high-quality food products. They are also versatile and easy to ship. And everyone can eat eggs, regardless of their religion." In general, he says, one shouldn't overemphasize the issue of Islam. He believes things will eventually settle down. "There's an area in our part of Germany where the Protestants were once the lepers. It was unthinkable to go dancing in a Protestant village. It's hard to believe, but that's the way it was, as recently as 1970."
Diekmann has already hired a refugee from Syria. He says that he and his wife were also treated as outsiders for many years when they moved from Diepholz to the nearby town of Damme.
'Günter, Do You Do Ports?'
The words "Royal Safar Iranian" are printed on the tour buses that take the German delegation through Tehran's vast suburbs. There are few visible signs of being in the Middle East on this trip, as the buses pass row after row of half-finished concrete buildings. Investors prefer to keep their money in the bank, where it earns a decent amount of interest. The country feels like it's in a holding pattern. German business owners in delegations see the world with different eyes; they see challenges where others see only squalid conditions. The clogged streets, rusty buildings and garbage everywhere, the lake behind the factory building where acids are dumped, the cheap tires from China - for these German businessmen, these things are all opportunities. Rösch, the railroad services technician, takes pictures with his mobile phone. "My eyes practically tear up when I see these old rails."
Many in the group met on earlier trips. One man tells a story about a trip to Tripoli, during the Gaddafi era, when "Gerd" (former German Chancellor Gerhard Schröder) asked a man named Günter Papenburg, who owned a road construction business: "Günter, do you do ports?"
Günter calmly replied: "Yes."
"And Günter, do you do airports, too?"
"Yes," he replied again.
Günter, do you do ports? Alfons, do you do eggs? That's the way business owners from Lower Saxony talk to each other -- so down-to-earth that you can practically smell the manure. "Sure, we do airports. And in Tripoli? Of course, no problem."
Most of the men in the group have platinum-level frequent flyer memberships. One earned a degree in mechanical engineering in night school and learned Chinese in the process. Another one is married to a Nigerian woman from the Igbo people, while a third man says things like: "When I fly back from Singapore, I prefer to book seat 2A, because it's easier to pull out the TV screen in that seat."
These small and medium-sized business owners from Lower Saxony are just as worldly as tattooed and bearded executives from Silicon Valley, they just happen to wear light-colored socks.
The factory buildings of the Mammut Group outside Tehran are on the agenda of almost every German delegation. That's because Mammut is considered the most successful Iranian family-owned company. It also doesn't hurt that Mammut's co-owner and managing director, Behrooz Ferdows, has a bit of a Swabian accent. His mother is German.
The Germans feel at home the minute they walk through the main gate. The borders are cleanly defined and the trucks are parked with Prussian accuracy. "It's nice to see you," says Ferdows. "For the last 10 years, I've only seen Asians."
Mammut produces large numbers of trucks, cars and cranes, builds hotels throughout the Persian Gulf region and manufactures telephone systems and precast concrete components. According to Ferdows, half of Dubai was made using parts from his company. In Iran, the embargo kept the competition off Mammut's back. "We also make portable buildings," says Ferdows, and asks whether he should send a few thousand to Germany for the refugees.
The delegation is impressed, especially when they look out the window and see workers playing soccer during their lunch break.
Of course, they have also heard about the corruption in Iran, as well as the bureaucracy, power outages and creative approach taken by customs officials. But now they are talking to a manager who speaks with a Swabian accent and isn't all that different from them. It seems possible to do business here after all.
"It isn't always possible to get what you want, even when you're entitled to something. But if you know the ropes, things happen more quickly than in Germany," says the company's chief financial officer, whose German was also accent-free. Mammut apparently has an excellent relationship with the country's political leadership.
The Asians took advantage of the embargo, says Ferdows as the delegation gets ready to leave. He mentions a material that BASF used to supply and that now comes from China. "It's cheaper, and by now the quality is just as good."
He couldn't be sending a clearer message. "It simply isn't enough to constantly wave the 'Made in Germany' label," says Issendorff, the professor, over breakfast the next morning. "They're all already here," he says, pointing with his thumb over his shoulder, where a group of Asians with nametags are spooning scrambled eggs onto their plates.
A business contact called him from Isfahan to report that all the hotels there are fully booked. He was also astonished when he visited an industrial trade show in Tehran, says Issendorff. "You can find everything there. German machine technology, but made in India. Or Korea. Horrifying!"
The business owners take every opportunity to emphasize how special the relationship between Iran and Germany has always been. Goethe treasured the Persian poet Hafiz and wrote a collection of poems called the "West-Eastern Divan." There is a large Iranian community in Hamburg, and many academics in hospitals and at universities have Iranian names. Many Iranians built their careers at German universities. The story of Germany and Iran is a Romeo-and-Juliet tale, much like Germany's relationship with Russia: They belong together, but their relationship is forbidden, and yet they yearn for it to be allowed.
Of course there has been trade between Germany and Iran, trade that has included businesses from Lower Saxony. It's just that containers took a little longer to reach their destination. The shortest distance between two points was no longer a straight line. Reliable partners in China and Dubai were needed. And the money eventually arrived, even if it had to be transported in suitcases.
"We've been here the whole time," says Carsten Braun of Hartmann Valves in Burgdorf, a leading manufacturer of ball valves, pigging valves, and base flanges. "We didn't sell any systems, but at least we maintained a presence. They recognize that." Spare parts were shipped through Italy or Dubai. In this respect, the Italians and the Spaniards take what Braun calls more of an "off-road" approach.
Many Asian countries boycotted the Iranian boycott. As a result, they had free rein in the market for nine years, along with high profit margins and no competition. Western companies were forced to look on as China, India and South Korea developed infrastructures and, with growing success, copied Siemens turbine components.
American courts have also been vigilant in ensuring that foreign companies comply with the terms of the embargo. Some financial institutions, including Commerzbank, stretched the rules and had to pay billions in fines as a result.
This is why major banks have steered clear of doing business with Iran, preferring to wait until Implementation Day. Implementation Day will be like Christmas, only better.
A Successful Trip
On the last day of their trip, the members of the delegation receive a message on their smartphones, and for a moment the reality of life in Germany catches up to them. The tageszeitung newspaper has published a story on defense companies from Lower Saxony that have made their way to Tehran. The article points out that the Iranian regime funds Hamas, and that the occasional promising "human resource" is executed by public hanging.
When the subject is broached, people are quick to point out that their consciences are clean -- a bit too vehemently for it to be entirely convincing.
By the end of the delegation's four-day trip, the minister has handed out about a dozen Pelikan fountain pens with the Lower Saxony crest, and he discussed human rights openly. It was a successful trip, and the businessmen from Lower Saxony even managed to make it to Iran before Ilse Aigner and the Bavarians.
"We were here with the biggest business delegation from Lower Saxony to date, and we were in the right place at the right time," says Minister Lies. He is already thinking about tomorrow's board meeting at VW in Wolfsburg.
Road construction magnate Günter Papenburg plans to open an office in Iran, and Frank-Michael Rösch has already looked at a piece of property. Stephan Bergmann, who develops drugs for animals, talks about his future business partner's impressive whiskey collection. Carsten Braun, a market leader in ball valves and well flanges, says that he already has his ducks in a row. "Everything needs to be in place come Implementation Day. It'll be important to be able to say I've spoken with the minister."
The men make one last trip to the bazaar. Now it feels like they're in Iran again.
Hanns Zülch, who owns a specialty paint business in Osterode and likes to wear bow ties, says: "I have been shown fake factories in India. In China, top properties suddenly turned out to be garbage dumps. But things are different here." He says that he sensed a "German way of thinking" among his contacts. And Prof. Issendorff is still impressed by the "brilliance of these 25-year-old female engineers."
"I've noticed the sort of euphoria you don't usually see in Lower Saxony," says the minister's press secretary. Now this Implementation Day just needs to happen.
'You Want to Move Forward'
Alfons Diekmann is wearing his travel jacket again, as he waits in the lobby of the Parsian Azadi Hotel for the bus to the airport. "My father-in-law never forgave me for not being a farmer. To the day he died. In his view, I was just an electrician."
And because his father-in-law died at an early age, he wasn't there to see Diekmann build his first egg farm in southern Oldenburg, along with everything that followed - all the result of diligence and hard work. He wasn't there to see Diekmann travel to the convention in Vilnius, for fun more than anything else, as he puts it, and how his business there now produces a million and a half eggs. He wasn't there to see people come from as far away as Malaysia and Australia to tour his egg farms, his two-story buildings with ventilation filters and cages in which chickens can scratch around in the dirt. A model for Germany. Nor was he there to witness his son-in-law receiving a call from the Iranian agriculture ministry at 7:30 a.m. in Tehran.
Diekmann has become so successful that he no longer has to listen to the kinds of things his father-in-law used to say. Look forward, don't look back, he says. Keep your head down. Work hard and be better than everyone else. Use every opportunity. Talk to everyone. Have a clear conscience. These are the things that have helped him make it through life.
Diekmann is lost in thought as he looks at his carry-on bag. Perhaps he is thinking about the nuclear program or human rights - or about sorting machines and a very, very large number of eggs.
Translated from the German by Christopher Sultan
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