US concerned as Iran signs $3 billion deal to buy airplanes

US concerned as Iran signs $3 billion deal to buy airplanes

Iran’s Aseman Airlines has signed a tentative deal with the US planemaker Boeing to buy dozens of the company’s twinjet narrow-body passenger planes, in the first deal since Trump’s inauguration.

Iran made a historic nuclear deal with P5+1 powers in 2015, in which Tehran agreed to amend its nuclear output in order to lift all nuclear-related economic sanctions, freeing up tens of billions of dollars in oil revenue and frozen assets.

After lifting the sanctions, Iranian president Hassan Rouhani visited Europe and made deals that worth billions of dollars. European companies started looking for investment opportunities in the growing Iranian market.

The Iranian government also sought deals with western companies to develop and maintain its natural resources such as Oil and Gas.

In addition, Iran has made new trade relations with many European and US countries to widen the Iranian market and help in modernizing the country’s infrastructure and its public transport.

New deal with Boeing

Owned by Iran’s civil service pension foundation but managed as a private company, Aseman is Iran’s third-largest airline by active fleet size, according to the CAPA consultancy.

Iran’s official Islamic Republic News Agency said on Tuesday representatives of Aseman and Boeing had signed an agreement in Tehran covering as many as 60 jets, including options, after a year of negotiations.

Boeing described the deal as a “memorandum of agreement,” meaning it is only outlined for the time being and subject to government approvals. It covers plans for Aseman to buy 30 aircraft with options for a further 30, it added.

If completed, the main part of the deal for 30 jets would be worth $3.4 billion at list prices, though airlines typically pay around half that.

In December the European Union banned Aseman from flying to the EU due to safety concerns, highlighting gaps in Iran’s aging fleet following decades of sanctions.

Boeing has already agreed to sell 80 aircraft to flag carrier IranAir under a deal between Tehran and major powers that led to the lifting of most sanctions in return for curbs on its nuclear technology development activities.

Previous airplane deals

European plane manufacturer Airbus, along with U.S. aerospace and defense company Boeing (BA), were both given the green light to sell aircraft to Iran earlier in 2016.

During a January 2016 visit to Paris by Iranian President Hassan Rouhani, Tehran signed a major contract with Airbus worth about $27 billion to buy 118 planes. On January 12, the first commercial airliner purchased from Airbus.

This was the first brand-new Western passenger jet delivered to Tehran in decades. The country’s current fleet is mostly comprised of planes purchased before the 1979 Islamic Revolution and thus considered very old.

Iran sealed another deal in June worth around $25 billion with the US aerospace heavyweight, Boeing, for the purchase of 100 passenger planes.

In December, the deal with Boeing was finalized, allowing Tehran to buy 80 planes within 10 years. The first deliveries are expected in 2018.

While Western plane makers are very keen on trade with Iran, Washington still demands that even non-American manufacturers wishing to sell to Iran obtain an export license if their products include materials made in the United States. Airbus, based in Europe, buys more than 40 percent of all its aircraft parts from the US.

The US concerned, Deal under threat 

Boeing deliveries to Aseman would start in 2022, although the U.S. planemaker must first apply for licenses from the U.S. Treasury allowing it to proceed with the sale.

“Boeing continues to follow the lead of the U.S. government with regards to working with Iran’s airlines and any and all contracts with Iran’s airlines are contingent upon U.S. government approval,” it said.

The Trump administration had come under fire earlier this year for seeming to continue Obama-era policies meant to approve these sales, U.S. officials now said that all past and future deals are coming under review by the new administration as part of a larger assessment of the landmark Iranian nuclear deal.

The review of sales between Boeing and Iran represent a first step to possibly canceling the deals, which have come under criticism by U.S. lawmakers and foreign policy experts who maintain the Islamic Republic will use the American aircraft to boost its air force and illicit weapons trade, according to multiple sources.

“Treasury’s Office of Foreign Assets Control [OFAC] will be reviewing aviation licensing as part of the National Security Council’s ongoing interagency review of the Iran deal,” a Treasury Department official said.

The move represents a departure from the Obama administration’s policy, which promoted the sale of airplanes to Iran across the United States and Europe.

The review of these deals appears to be part of a larger ongoing review of the entire Iranian nuclear deal, which is being undertaken by the White House. The Trump administration could move to reverse many of the promises made by the United States to Iran under the previous administration, including airplane sales and other concessions aimed at promoting business in Iran.

Donald Trump has said during his election campaign that Iran’s nuclear deal as “disastrous” and said it would be his “number one priority” to dismantle it.

These threats became clearer after Trump’s inauguration, as he signed an executive order temporarily barring thousands from seven countries in the Middle East and Africa, including Iran, from obtaining visas to travel to the United States.

The tension was raised again in issues related to Iranian ballistic program, as he said that “Iran is playing with fire” and announced that “we’re officially putting Iran on notice,” after Iran conducted a failed ballistic missile test.

In addition, Trump declared in January applying sanctions on 25 individuals and companies connected to Iran’s ballistic missile program and those providing support to Iran’s Islamic Revolutionary Guard Corps’ Quds Force.