Despite the harsh sanctions imposed by the U.S. government on Iran, the Swiss freight forwarder – unlike many competitors – did not pull out of the country but keeps on doing business there. But in order to avoid any risks, M&M strictly ensures that all activities are 100 percent compliant. It’s an extremely challenging situation for any foreign logistics player engaged in Iran, but worth the effort, says CEO Lothar Thoma of the St. Gallen, Switzerland-based M&M Militzer & Muench International Holding AG in a one-to-one discussion with CargoForwarder Global.
According to CEO Thoma, the volume of his company's Iran business has decreased since the imposition of the latest round of U.S. sanctions.
This is the bad news.
The good news: the margins achieved there have since "developed very satisfactorily." So, in a nutshell, M&M moves smaller quantities, but generates more profits at the same time. This is primarily achieved by supplying solar systems, carrying out various projects and also through the transport of general cargo. Advisory activities round off the services rendered. This all the more since the requirements for doing business with Iranian companies increased significantly as result of difficult political conditions, upping the importance of consultancy activities steadily.
Giving way to threats and harassment
According to manager Thoma, many logistics firms are withdrawing from the Iranian market because of premature obedience and overeagerness. In case they don’t pull out they fear to be hit by the big stick swung by the Trump administration, hence risking losing their U.S. business.
However, despite the Washington initiated boycott, there is still enough room for sanction-free and thus legal business. But this needs specialists with thorough market and product knowledge who are fully familiar with the legal requirements for the transport of commodities.
Compliant with regulatory requirements
"We have been present in Iran for many decades, so we know the market and have the necessary expertise to go on doing legal business there, not violating any sanctions,” the CEO states. In this respect, the long-standing commercial cooperation with the local Iranian PTB Perse International Forwarding Company, proves to be extremely helpful, emphasizes Mr Thoma. The privately owned PTB is the largest logistics company in Iran.
To be on the safe side, "we have each European exporting firm and their Iranian importer confirm that their business is compliant and that they are compliant with current laws and regulations. So we keep clear of any U.S. sanctions,” the manager states.
Less players – higher margins
Put simply, the recent development in Iranian business also has benefits for M&M. Although the Iran activities account for less than 10 percent of M&M’s total turnover, the company benefits to a certain degree from the sanctions imposed by the U.S. Sounds strange but it’s fact, because a large number of competitors have exited the Iran, leaving the ground to specialists such as M&M. Consequently, less players boost the margins of the remaining ones.
Business carried out in euros is no subject to sanctions
A major obstacle are financial transactions, since Washington tabooed all dollar-based businesses. This goes along with the devaluation of the Iranian currency, which lost 40 percent of its value during the past three months, exposing shipping orders or any project business to a high risk. However, in contrast to dollar transactions, the processing of orders in euros is still fully compliant with laws, Mr. Thoma emphasizes.
According to M&M’s CEO, most shipments sent from Europe to Iran run by truck. They are routed via Sofia, Bulgaria where the goods are taken over by Iranian hauliers and forwarded to Tehran, Isfahan or Tabriz.
High-value goods travel by air
Trucking accounts for the lion’s share of all M&M transports, reaching up to 90 percent with running times between central Europe and Iran of 7 or 8 days.
Air freight and sea freight account for the difference. But particularly goods transported by air are of utmost importance for Iran since it’s mostly urgently needed spare parts, tools, pharmaceutical or medical products.
For decades, Iran has developed into a major marketplace for M&M, which the logistics company keeps serving even under difficult conditions evoked by the Trump administration.
Last year, M&M turned over €510 million. It currently runs 100 locations in around 30 countries worldwide and employs a staff of about 2,000.