Economy, Domestic Economy

Iran: Any Attempt to Block Plane Sales Violates JCPOA

A Thursday legislation passed by the United States House of Representatives requires Treasury Department officials to report to Congress on Iranian purchases of US aircraft and how those sales are financed
Iran: Any Attempt to Block Plane Sales Violates JCPOA - (Photo Alireza Izadi Financial Tribune)
Iran: Any Attempt to Block Plane Sales Violates JCPOA - (Photo Alireza Izadi Financial Tribune)
of the clearest clauses of JCPOA stipulates aircraft sales to Iran …Not only aircraft sales, but also sustained provision of parts, after-sales services and related technology

Any attempt by the US  to block the sales of aircraft to Iran is tantamount to blatant violation of the Joint Comprehensive Plan of Action (the formal title of the nuclear deal Iran signed with world powers in July 2015), says deputy minister of roads and urban development in international affairs Asghar Fakhriyeh-Kashan.

"One of the clearest clauses of JCPOA stipulates aircraft sales to Iran," he was quoted as saying by IRNA. "Not only aircraft sales, but also sustained the provision of parts, after-sales services and related technology."

The JCPOA led to the removal of international nuclear-related sanctions against Iran on January 2016. In exchange, Tehran has committed to limit the scope of its nuclear program.

 Fakhriyeh-Kashan was referring to the recent legislation passed by the United States House of Representatives, requiring Treasury Department officials to report to Congress on Iranian purchases of US aircraft and how those sales are financed. The Thursday legislation needs the approval of US Senate before it can take effect.

The Iranian deputy minister says should the Senate approves the bill, Iran will have the option to file a complaint with a joint commission affiliated with five permanent members of the United Nations Security Council (the UK, China, Russia, France as well as the US) plus Germany – known as P5+1.

His views were echoed by Rep. Jim Himes, D-Conn. Who said "[This bill] would impose a new condition … A new condition which would require certification by [the executive branch] and all of the process which would ensue. It is not a stretch, in fact it is fairly clear, that if [this bill] were to pass, the Iranians and others could credibly claim that we have violated our obligations under the JCPOA.”

Republicans emphasized that the legislation does not bar any aircraft sales to Iran. Instead, it requires the Treasury Department to notify Congress about the activities of the Iranian company that purchases the planes, as well as the financing used for the deal. The bill doesn’t create a mechanism for blocking the sales, lawmakers emphasized. The most immediate practical effect of the legislation might be felt in the courts rather than the national security arena, according to one observer as reported by The Washington Examiner.

Nonetheless, Wall Street Journal reported on Friday that the Trump administration is advancing a strategy that could derail efforts by Boeing Co. and Airbus SE to sell hundreds of jetliners to Iranian airlines.

"President Donald Trump’s team hasn’t yet presented him with options for addressing the sales, but months of interagency discussions have grown out of administration concerns that Iranian airlines could use the new jets, or old ones, to ferry weapons and military personnel into Syria," the report quoted the US officials as saying, adding that the options to be presented to Trump include banning sales, imposing stringent conditions that could halt any aircraft deliveries, or slow-walking approvals.

Trump disavowed the nuclear deal in October, though he did not withdraw from the agreement. He must decide by mid-January whether to extend sanctions relief for Iran. He is expected to once again say that Tehran is not complying with the deal.

Two Goals Pursued

Fakhriyeh-Kashan explained that the recent House bill has two goals at its core: first to scare off financial institutions from dealing with Iran and second to track or confiscate Iranian payments.

He reiterated that there is no discussion of any sales ban on Iran.

In December 2016, Iran Air agreed on separate contracts to buy 100 Airbus aircraft worth an estimated $27 billion and 80 Boeing jets valued at $16.6 billion. Earlier that year, in February, it signed a deal to buy up to 20 ATR turboprop passenger planes (with the option of adding 20 more in the future). The Iranian flag carrier has received 3 Airbus and 6 ATRs so far. The first Boeing aircraft are not scheduled to be handed over until sometime in 2018. According to the chairman of Civil Aviation Organization of Iran, nine more aircraft will have been delivered to the Islamic Republic by the end of the current Iranian year (March 20, 2018).

Iran Air is just one of several airlines in the country to have made significant orders for new aircraft since the lifting of many (if not all) international sanctions on the country in January 2016. In total, local carriers have placed orders for more than 300 new aircraft and options for a further 50. These orders are twice as large as the collective existing fleet of the country’s 17 commercial carriers. 

"We have included the provision [in the deal with Boeing and Airbus] to be entitled to refund in case of complication pertaining to any sales ban. As such any prepayments made for the sake of guarantee shall be refunded to Iran," Fakhriyeh-Kashan noted.

No Problem in Commercial Sense

The deputy minister also made it clear that no problem is expected the way of Iran's deals with Boeing and Airbus in the commercial or transactional sense and that all uncertainties are political.

Speaking on the sidelines of an exhibition in Tehran on Sunday, CEO of Iran Air Farzaneh Sharafbafi said Airbus has expressed readiness to finance its deal with Iran.

"Although Airbus has agreed to finance the deal, we are looking for other options as the backup," she was quoted as saying.

Earlier, Massoumeh Asgharzadeh, the head of Iran Air Public Relations Office, the airline has reached promising conclusions regarding the financiers of the plane deals. “Our preference is to use domestic financial resources, but we also have the option to finance the purchases through Airbus and Boeing themselves,” she was quoted as saying by ILNA.

Asgharzadeh said the result of negotiations will soon be publicized.

Executives from Boeing and Airbus were due in Tehran this week to negotiate and decide on the financing of the planes on order. Sharafbafi said an Airbus delegation had arrived in Tehran on Sunday and that negotiations were underway.

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