Iran Close To Finalizing Several Major Aircraft Purchase Deals With Top Aircraft Manufacturers

In spite of strong opposition from supporters of Israel, the Iran Civil Aviation Commission (ICAO) has announced that Iran is close to finalizing several major aircraft purchase deals with top aircraft manufacturers Boeing and Airbus.

Since sanctions on Iran were lifted earlier this year the country been engaged in negotiations to update and revitalize its aviation industry, which has either fallen into disrepair or been sacrificed for parts and raw materials. The entire Iranian civilian fleet currently consists of less than 250 aircraft, over 100 of which have been grounded due to age or mechanical issues.



While various major aircraft manufacturers have been engaged in highly publicized talks with ICAO over the last few months, it appears no contracts have yet been finalized. Iranian officials have announced the country is seeking to add as many as 500 jets to its fleet, and claim to have signed initial accords with both Airbus and Boeing to purchase close to 200 aircraft worth over $50 billion.

However, final negotiations remain on hold pending the input of the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), which has to date declined to issue the licenses required for the sales to legally take place.

The pending Iranian aircraft sales contracts are subject to approval from OFAC, which oversees the execution of US economic and trade sanctions. Many top US officials have expressed concern over the sale of modern aircraft to Iran, citing both economic, military and ethical reasons. Pending legislation seeks to deny Iran the ability to update its fleet at this rate.

Legislation was recently proposed in the House of Representatives that would block the proposed sales entirely by denying the required export license. The prevalence of US-made materials used in the aircraft produced by top industry manufacturers requires an export license from the US government for both Boeing and Airbus to finalize their contracts. Opponents of granting these licenses warn that the aircraft for sale also contain many US-made parts that could easily be imitated and manufactured in Iran.

In addition to the economic hurdles to Iran’s desired aircraft updates, numerous prominent pro-Isreali politicians strongly oppose selling aircraft of any kind to Iran in light of its terrorist associations. There is concern that the high-capacity aircraft carriers will be used to transport terrorists as well as civilians to nearby countries. Both United Against Nuclear Iran (UANI), as well as the Foundation for Defense of Democracies (FDD), have voiced strong opposition for any sales of aircraft to the country, and enjoy the support of several prominent politicians in the District.



In addition to widespread Congressional opposition to the pending Boeing and Airbus contracts, some speculate OFAC may delay a final decision on licensing until after next year’s Presidential election takes place. Even if approved by OFAC, the Administration could still block the deals from taking place. Both Hillary Clinton and Donald Trump are outspoken supporters of Israel.

OFAC attorney Oliver Krischik commented, “OFAC issued a favorable Statement of Licensing Policy for the sale of commercial aircraft to Iran, which includes aircraft, parts, and services regarding civil aviation.  In addition, General License I authorizes transactions related to the negotiation of and entry into executory contracts conditioned on subsequent specific license authorization from OFAC.”

In light of the continued delay in finalizing its two major contracts, Iran has begun accepting offers from other foreign manufacturers, including Brazilian Embraer, Canadian Bombadier and Japanese Mitisubishi Aircraft.

However, the prevalence of US-made components in the global aircraft market means these deals will likely meet the same roadblocks. US-produced equipment generally accounts for more than 10 percent of the content in most modern jets manufactured around the world, triggering the export license requirement for even these smaller side deals.

Nonetheless, Iranian officials continue to push toward finalizing sales contract with industry leaders, claiming the first planes could be delivered before the end of this year.

 

 

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