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 per cent year-on-year in the first six months of 2016 to €1.13 billion ($1.3 billion), the Federal Statistics Office said.

This compares with a rise of 1.4 per cent in overall German exports in the same period and a fall of 14 per cent 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 per cent in the whole of 2016 and by 30 per cent 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 per cent to €10.1 billion ($11.43 billion) in the January-June period after having plunged by 25 per cent to €21 billion ($23.7 billion) 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 US and France, its two most important markets, fell 4 per cent to €53.4 billion ($60.4 billion) and 2 per cent to €52.1 billion ($58.94 billion) respectively on the year in the first six months of 2016.

Exports to Britain, Germany's third-most important market, stagnated in the first half of the year at around €44.8 billion ($50.6 billion).

Demand from emerging markets was subdued, with German exports to China only inching up 1 percent to €36.3 billion ($41.07 million), to Brazil falling 18 per cent to €4.4 billion ($4.98 billion) 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 US and France.

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

In 2015, German exports grew by 6.4 per cent 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 per cent 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. – Reuters