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German-Iran Trade Collapses under Effective U.S. Sanctions Regime

Trade between Germany and Iran has collapsed under the impact of extensive U.S. sanctions imposed on the Islamic Republic to combat its illicit nuclear and non-nuclear activities, Reuters reported Friday.

Data from the German Chamber of Commerce revealed that trade in the first quarter of 2019 was down 49 percent, or $600 million, compared to the same period last year. Dagmar von Bonstein, the Chamber’s representative in Tehran, said that while 60 German firms were still operating in Iran, they were increasingly working only with local staff.

The Chamber has previously estimated sanctions could cost 10,000 German jobs.

Traditionally, Germany has been Iran’s most important European trade partner, and the government of Chancellor Angela Merkel has gone to great lengths to promote the Iran nuclear accord, formally known as the Joint Comprehensive Plan of Action (JCPOA). Iran negotiated the nuclear accord from a position of strength, knowing its negotiating partners wanted a deal at any cost.

Now a sense of crisis in Iran runs deep and wide. Under the sanctions, the country is blocked from accessing the U.S. market or trading in dollars. As a result, European banks and companies are forced to choose between America’s $19 trillion financial system or Iran’s $400 billion economy. Should they ignore these sanctions, their assets in the U.S.  – which far exceed existing business ties with Iran – would be subject to harsh penalties.

In January, Germany, France, and Britain set up a European mechanism to facilitate non-dollar trade with Iran, the so-called Special Purpose Vehicle (SPV) that will enable trade with Iran. However, so far they have failed to shield Iran from U.S. sanctions, with the Islamic Republic largely shut out from oil markets and all major European companies canceling investments.

Outside the economic sphere, the German government has allowed the Iranian-backed terrorist group Hezbollah, with an estimated 950 members operating inside Germany, to continue fundraising and recruitment efforts in the country.