German exports to Iran drop by half in first 6 months due to U.S. sanctions

US sanctions took a heavy toll on Germany’s export trade with the Islamic Republic of Iran during the first six months of 2019, causing a fall of 48%, according to a Reuters review of new statistics on Monday.

The collapse in business suggests companies are scaling back business ties with Tehran to avoid trouble with the United States after Washington reimposed sanctions.

The US classifies Iran’s regime as the leading international state-sponsor of terrorism. Sales to Iran plunged by 48% to 678 million euros ($758.8 million) from January through June year-on-year, according to data from the Federal Statistics Office. Imports from Iran declined by 43% to nearly 110 million euros.

“The fact that trade between Iran and Germany has collapsed that massively is not a big surprise, unfortunately,” the BGA trade association said.

It pointed to the extra-territorial character of recent U.S. sanctions, which means that companies from other countries are also punished if they do business with Iran.

“German companies are forced to choose between their market activities in Iran and the United States, so it’s clear which market is preferred,” BGA said.

President Donald Trump last year pulled the United States out of a nuclear accord between Iran and major powers. Under the 2015 deal, international sanctions against Iran were relaxed in exchange for Tehran curbing its nuclear program.

Despite the U.S. decision to reimpose sanctions, Germany, France and Britain are trying to rescue the agreement by setting up a barter-based trade conduit with Iran, but an Iranian mirror mechanism has yet to be established.

If the mechanism, also known as Instex, goes ahead, it would initially deal only in products such as pharmaceuticals and foods, which are not subject to U.S. sanctions.

Iranian officials have repeatedly said Instex must cover oil sales or provide substantial credit facilities for it to be beneficial.

Instex suffered a setback on Thursday when Germany’s appointed director Bernd Erbel, a former ambassador to Iraq and Iran, was forced to resign. Erbel appeared on a radio program with a host who has denied the Holocaust and is known for his hardcore antisemitism. 

Erbel said on the program that for “psychological reasons,” Israel was incapable of feeling empathy towards others. “They give you the feeling that only others can commit an act of injustice, because they were on the receiving end of injustice.” Erbel also showed enormous sympathy for the Iranian mullah regime and praised the terrorist entity Hezbollah’s war against Israel.

Chancellor Angela Merkel’s administration celebrated Iran’s regime at an event in February at Tehran’s embassy in Berlin.

Last year, Germany exported mainly machinery, chemical products, cars and car parts to Iran.

Reuters contributed to this report.