German Auto Giant Volkswagen is Pulling Out of Iran, Says US Ambassador

By Patrick Goodenough | September 20, 2018 | 7:23am EDT
‘Coming soon’ say signs in the window of a Tehran outlet of the Iranian importer Mammut Khodro, which signed a contract last year to import and distribute Volkswagen brand vehicles into Iran. (Photo: Volkswagen AG)

(CNSNews.com) – In a significant symbolic blow to the Iranian regime, the Volkswagen Group – the world’s biggest selling car manufacturer last year – has reportedly agreed to end almost all of its operations in Iran, in line with the restoration of U.S. sanctions on Tehran.

The news was disclosed by U.S. Ambassador to Germany Richard Grenell, who since taking up his Berlin posting in May – he presented his credentials on the same day President Trump announced the U.S. was exiting the Iran nuclear deal – has been encouraging the host government to isolate Iran and urging German companies to stop doing business there.

“Volkswagen has told us they will comply with U.S. sanctions on Iran,” Bloomberg quoted Grenell as saying. “We are pleased with this decision because Iran diverts its economic resources away from its people to spread violence and instability across the globe.”

Bloomberg said according to Grenell, Volkswagen would still be able to do some business in Iran, under a humanitarian exception. (Historially the “humanitarian exception” in U.S. Iran sanctions has related to the sale of agricultural commodities, food, medicine, or medical devices from third countries to Iran).

Queries sent to the Volkswagen Group did not bring direct confirmation, but head of global corporate communications Marc Langendorf did provide a brief statement.

“Volkswagen complies with all applicable national and international laws and export regulations,” he said. “Volkswagen closely monitors the development of the political and economic situation in Iran and the region. In this context, we also consider possible implications in connection with the re-imposition of US sanctions.”

The giant automaker, based in Wolfsburg, Germany, only returned to Iran last year – more than 17 years after pulling out – and began moving Passat sedans and Tiguan SUVs under contract to a large Iranian company, Mammut Khodro.

News that it will withdraw follows similar decisions by other major German companies, including Daimler, Siemens and – just this week – the chemical giant BASF.

The U.S. Embassy confirmed on Twitter Tuesday that BASF had confirmed to Grenell that it will comply with U.S. sanctions.

“This is the right decision,” the embassy tweeted. “Iran diverts resources from its people to support Hezbollah and the Assad regime spreading violence across the globe.”

Germany, Europe’s biggest economy, is one of the three E.U. countries that negotiated the Joint Comprehensive Plan of Action (JCPOA) along with the U.S., Russia and China. The 2015 deal with Iran eased sanctions in exchange for curbs on Tehran’s nuclear program.

Following Trump’s withdrawal, the remaining negotiating partners have been trying to salvage the deal.

Last month, the U.S. reinstated some of the sanctions that had been lifted under the JCPOA. A second round, targeting Iran's oil and banking businesses, are due to be reimposed in November.

“Come November 4th, there will be a different set of rules for anyone who wants to engage in economic activity with the regime in Iran,” Secretary of State Mike Pompeo tweeted early this week. “Many countries are already taking actions to leave Iran.”

European companies are pulling out of Iran rather than risking U.S. secondary sanctions, which would close the U.S. marketplace to companies and banks that do business with Iran.

Volkswagen and its subsidiary brands (which include Audi and Porsche) sold 10.7 million vehicles worldwide last year, edging its biggest rival, Toyota, into second place. Of those sales, 625,000 were in the United States, a 5.8 percent increase on the previous year.

According to company reports, one Volkswagen-owned brand whose sales have already been affected by the Iran situation is the Swedish truck and bus maker Scania.

“Order bookings in the Middle East have decreased due to the reintroduction of sanctions in Iran,” Scania said last month in an interim report for the January-June period. “The reintroduction of sanctions in Iran has had a negative impact on the demand situation in the Middle East, which reduced order bookings in the Asia region.”

It attributed the Iran situation in part to a 32 percent fall in truck orders in Asia during the second quarter of 2018, and an 85 percent drop in bus orders in Asia.

Interest in Volkswagens was evidently strong after the announcement it would return to Iran.

Iran’s Financial Tribune reported in January that Mammut Khodro pre-sold 2,000 units of the Passat and Tiguan models in less than 24 hours.

It also quoted a survey taken on the sidelines of the Tehran International Auto Show late last year, in which 27 percent of respondents said they favored German-made cars, following by Japanese (20 percent), French (19 percent) and South Korean (14 percent) brands.

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