Economy, Business And Markets

Boeing, Airbus Deals Hold; All Sides Remain Committed

Boeing, Airbus Deals Hold;  All Sides Remain Committed
Boeing, Airbus Deals Hold;  All Sides Remain Committed

Iran brushes off speculations that the multibillion dollar agreements it signed with US-based planemaker Boeing and its French rival Airbus are threatened by delays resulting from financial and political issues.

“All sides are committed [to the preliminary deals] and there have not been any changes in the procedures,” Mehr News Agency quoted director of Iran Civil Aviation Organization’s Foreign Affairs Office, Reza Jafarzadeh as saying.

The official said Iran's diplomatic corps and the Ministry of Roads and Urban Development are following through with finalizing contracts with the two plane manufacturers.

The remarks come after The New York Times, citing aviation lawyers and analysts, reported that the delays in finalizing the contracts could unravel the deals.

Iran’s access to new planes were part of negotiations leading to the nuclear pact Iran reached in July 2015 with six world powers. The deal went into effect in January, putting limits on Iran’s nuclear program in exchange for the lifting of western anti-Iran sanctions, including those on the country's aviation industry in place since 1979.

Soon after the nuclear deal, President Hassan Rouhani signed a memorandum of understanding with Airbus to purchase 118 planes worth at least $25 billion for flag carrier Iran Air.

The airline later reached another accord with Boeing for the purchase of some 100 aircraft worth more than $20 billion to rejuvenate its dilapidated fleet of more than 23 years.

Both agreements, however, remain to be enforced into contracts amid large financial institutions’ reluctance to fund them. Despite the lifting of sanctions, big European banks have been slow in engaging with Iran, fearing punishment by the United States.

As a case in point, French bank BNP Paribas had to pay a record $9 billion in fine in part for dealings with Iran during sanctions.

Boeing and Airbus need licenses from the US Treasury Department’s Office of Foreign Assets Control to sell aircraft to Iran.

Many parts of Airbus planes, including some engines, are made in the United States.

Both Boeing and Airbus have repeatedly said they are awaiting the licenses and cannot proceed without them. Treasury officials have declined to comment on when the licenses might be issued.

A legislation passed by the US House of Representatives on July 7 to block the agreements with Boeing and Airbus adds insult to injury.

While US President Barack Obama is expected to veto that legislation, it has pushed back the clock for the airplane deliveries, much to the annoyance of Iranian officials.

“It’s very consistent with past efforts by Congress to undermine the nuclear deal,” said Farhad R. Alavi, managing partner at the Akrivis law group, a Washington firm that specializes in sanctions compliance.

Boeing’s chief executive, Dennis A. Muilenburg, speaking this month at the Farnborough International Airshow in Britain, said if his company could not sell planes to Iran Air then “nobody should”.

Iranian officials, impatient to begin rejuvenating the country’s aging fleet of 250 aircraft—of which more than a third are said to be grounded—have hinted they may go elsewhere to buy planes.

They have expressed interest in a midsize jet under development by Japan’s Mitsubishi conglomerate.

In another possible sign of reduced expectations, there is speculation that the Iranians may cancel orders for 12 Airbus A380 jumbo jets, part of the 118-plane deal with Airbus that President Hassan Rouhani announced seven months ago.

Embraer of Brazil and Canada’s Bombardier are also marketing their aircraft in Iran.