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German exports to Iran soar after removal of sanctions

[August 22, 2016] By Michael Nienaber

BERLIN (Reuters) - German exports to Iran, mostly machines and equipment, jumped in the first half of the year following the removal of international sanctions against the Islamic Republic, official trade data showed on Monday.

Exports to Iran surged by 15 percent year-on-year in the first six months of 2016 to 1.13 billion euros ($1.3 billion), the Federal Statistics Office said.

This compares with a rise of 1.4 percent in overall German exports in the same period and a fall of 14 percent in German exports to Iran in 2015.

"There is a huge demand in Iran for plant and equipment", said Michael Tockuss, head of the German-Iranian Chamber of Commerce, adding that chemical products and electrical engineering were also doing well.

"And there is growing demand for technology from the renewable energy sector, mainly wind power stations," Tockuss said, adding that the reluctance of banks to finance bigger deals between German and Iranian businesses was slowly eroding.

Tockuss said exports to Iran would further pick up in the coming months and are expected to rise by as much as 25 percent in the whole of 2016 and by 30 percent in 2017.

"The sanctions against Iran were built up over several years and it now will take some years to reverse them and establish new business ties," he said.

In another positive sign, German exports to Russia fell only 3.5 percent to 10.1 billion euros in the January-June period after having plunged by 25 percent to 21 billion euros in 2015.

This indicates that the impact of international sanctions imposed against Russia over the conflict in Ukraine is bottoming out.

CLOUDED OUTLOOK

Overall trade prospects are more clouded, however.

German exports to the Unites States and France, its two most important markets, fell 4 percent to 53.4 billion euros and 2 percent to 52.1 billion euros respectively on the year in the first six months of 2016.

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Exports to Britain, Germany's third-most important market, stagnated in the first half of the year at around 44.8 billion euros.

Demand from emerging markets was subdued, with German exports to China only inching up 1 percent to 36.3 billion euros, to Brazil falling 18 percent to 4.4 billion euros and to South Africa down 11 percent to 4.4 billion euros.

The head of Germany's BGA trade association has said exports will grow less than expected this year due to external risks, including Britain's vote to leave the European Union and uncertainties ahead of elections in the United States and France.

Anton Boerner said late in June that BGA would update its official forecast for export growth of 4.5 percent at the end of the summer and he expected 4.1 percent at best.

In 2015, German exports grew by 6.4 percent on the year, mainly driven by strong demand from other EU countries. This led to net foreign trade contributing 0.2 percentage points to an overall growth rate of 1.7 percent last year.

The German government expects the economy to grow by the same amount this year, helped by soaring domestic demand, while exports are unlikely to contribute much to overall growth.

($1 = 0.8857 euros)

(Reporting by Michael Nienaber,; Additional reporting by Rene Wagner; Editing by Paul Carrel)

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