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K W Hartleb, Commercial Counsellor to the Austrian Embassy
K W Hartleb, Commercial Counsellor to the Austrian Embassy

Pattern

Austria and Iran:

closer economic relations?

Mr Hartleb, the Commercial Counsellor to the Austrian Embassy, is a Master at Law, and speaks German, English, French, Spanish and Italian and is fluent in the first three. Our editor-in-chief had a personal interview with him some time ago in his Tehran offices, in which he found him to be very friendly and pleasant and very knowledgeable indeed.

Events- What is the size of bilateral trade between Iran and Austria?

Karl W. Hartleb- There is, unfortunately, a quite unbalanced trade relation between the two countries. We sell something like 350 million euros of goods to Iran each year. But our imports are only somewhere between 15-25 million euros a year, the reason being that Austria does not buy crude oil from Iran, which results in a trade balance in our favor. This is an issue we have been addressing in our meetings with the Iranian authorities such as the Ministry of Industry and the Chamber of Commerce and others. We have been trying to promote industrial exports from Iran to Austria, but at the moment Iran's exports are confined to some pistachios, carpets, and agricultural products.

E- And why don't you buy oil from Iran?

KH- Apparently there is a technical reason. I understand that OMV, the largest Austrian Oil Company, is now looking into the possibility of adjusting our facilities to use larger amounts of Iranian oil. But, frankly, I hear from the Iranian side that they are more interested in selling oil to Asia anyway, because the price there is higher than the price Iran can charge on the European market.

Cathedral E- What about petrochemicals? I understand this is becoming a large industry in Iran with a promising future.

KH- This is something we are looking into more and more seriously. In fact, over the last few weeks, we had some people here from Austria, who had meetings with Mr. Nematzadeh and his staff.

E- It seems that at present Iran is selling a lot more petrochemicals to Asia than to Europe. What is the reason, in your opinion?

KH- Actually, as far as I know, most of the petrochemicals Iran produces at present are for domestic use. But Iran has ambitious plans to expand production over the coming years, and then this sector will be of great interest to Europe.

E- Does Austria have any plans for long-term economic cooperation with Iran such as large-scale joint ventures?

KH- The economic structure of Austria is mostly made up of small- and medium-scale companies, which are rarely engaged in large-scale economic cooperation projects. Nevertheless, Austria has heavily invested in Eastern Europe, and to a lesser extent in the US, China and Japan. However, in recent years, Iran has taken steps towards attracting foreign investment: measures such as the Act on the Attraction and Protection of Foreign Investment, the new tax laws, etc. So some Austrian companies may become sufficiently interested. In fact, at the end of last September, a seminar was held in Austria on Iran's investment potentials, in which your Deputy Minister of Foreign Affairs, the Head of the Iranian Investment Board of the Ministry of Finance and Mr. Veisse of IDRO participated. This event attracted more than 250 Austrian companies. Of course, these companies had been working with Iran in the past, mainly in trade, but now they seem also to consider investing in this market. But I think we are talking about small investments of 500,000 to one million euros, even two or three millions perhaps. Apart from exceptional cases, honestly, I don't see large investments ahead, as you see in the petrochemical industry in which UK, German, Italian and Japanese companies are getting more and more involved.

E- How, then, do you see the future of cooperation between Austria and Iran? In what areas can we do more trade, at least?

KH- I think one great project that Iran and Austria are working on at the moment is the strategically important gas pipeline, that will carry gas from Iran via Turkey and South Eastern Europe all the way to Austria's capital Vienna, which would be an excellent distribution hub for the entire European market, which is huge. Currently, the Austrian company OMV is performing the feasibility study for this project, which could be launched as early as next year. Now, if this project works out, we will see a large shift in the trade balance between our two countries in favor of Iran.

Austria There is also an increasing demand for Austrian expertise in the Iranian automotive industry, as more and more Iranian private companies become involved in this strategic sector. Austria's world-class firms in the field of machinery production can also do a lot for Iran's plastic and metals industry. As in the past, infrastructure projects ranging from hydro-electric power and water treatment plants to railroads should take advantage of Austria's expertise and technology.

Iran produces a great deal of energy, but it also wastes a lot of it, and I think there is ample room for cooperation in this area, since Austria is a leader in the field of environmental, including energy saving, technologies. Incidentally, we will bring a trade mission to Tehran later on this year, to introduce Austrian energy saving technologies to Iranian organizations and firms.

E- There is a great deal of talk today everywhere about cheap labor in Iran, skilled workers and educated people. Don't you think you could take advantage of these opportunities?

KH- I am not sure that Iran is such a cheap place to invest in. From what I hear from Austrian companies active in Iran, the long delays caused by bureaucracy and red tape, ambiguous regulations and various other problems are very difficult and costly to manage. And interestingly enough, despite the high level of education in various fields, lots of foreign companies also find it hard to find qualified and efficient employees in Iran. Cheap energy and low wages only make up for parts of these costs. So, Iran - in comparison with other countries - is not as attractive with respect to costs as it might seem. But, as I said earlier, due to the potential Iran holds in various fields, Austrian companies are now looking into the possibilities.

E- As you know the Iranian economy is largely controlled or owned by the state. Some economic experts in Iran are pushing and rushing towards a liberalized economy or privatized as they call it. Others, on the other hand, warn against a too rapid shift to privatization and its adverse consequences. As an expert economist, what is your opinion on the subject?

KH- A largely state-owned economy is nothing new in Iran. It has been so for a long, long time. But as you might know we had a similar problem in Austria about 50 years ago, because of the exceptional conditions brought about by World War II. In fact it took us almost 40 years to privatize our state-owned industry and liberalize our economy to be competitive in the European Union, which we joined in 1995. It was at times a painful process, but the results today show that it was the right thing to do. I think Iran should continue the privatization and liberalization process, while using the oil revenues to invest in the human capital and material infrastructure and to manage the social costs such a reform policy will entail.

E- A lot of people seem to think that because of a common language and background there must be a deep understanding and cooperation - including economic cooperation - between Austria and Germany. Is that so?

KH- Austria and Germany are historically two very different entities of course. But there are some similarities in terms of economic structure and activities. For example, like German companies, Austrian firms are very active in the production of special machinery, and in quite a few sectors they count among the technological leaders. For Austrian companies it is not uncommon, with their quality products, to achieve an export ratio of 90% and more, which is also true for some German firms. And, of course, we work together very closely. For instance, Austria is the largest supplier of parts and systems to the German automotive industry, with companies such as Mercedes, BMW, Audi, etc. being among the largest customers.

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