Congressional Scrutiny Shrouds Boeing’s Agreement with Iran

Lawmakers in Washington are increasingly exerting pressure on Boeing Co.’s historic agreement to provide 109 aircraft to Iran’s national airline.

“I am extremely concerned that by relaxing the rules, the Obama administration has allowed U.S. companies to be complicit in weaponizing the Iranian regime,” Republican Representative Bill Huizenga of Michigan said at a hearing of a House Financial Services subcommittee.

Since the 1979 Islamic Revolution and the U.S. hostage crisis, this deal which was announced in June with Iran Air would be the biggest business transaction between the U.S. and Iran. The agreement with world powers that eased economic sanctions in return for Iran curbing its nuclear program opened the path for Iran to return to global markets and this deal is seen as part of the Islamic Republic’s such effort.

Tim Neale, a spokesman for Chicago-based Boeing said that Iran Air has agreed to buy 80 planes for a list price of $17.6 billion. With Boeing’s support, Iran will lease another 29 planes. This deal was preceded by 118-plane order to Europe’s Airbus Group SE worth$27 billion in January. To upgrade its aged fleet, Iran has inked more than $50 billion in aircraft investments.

Based on Tehran’s record on human rights, support for terrorism, and ballistic missile testing, civilian aircraft sales are among the few exceptions from continuing U.S. sanctions even while a range of European companies have substantial leeway now to do business with Iran.

Barring the U.S. Export-Import Bank from financing any entity that does business with Iran or provides financing to another entity to facilitate transactions with the Islamic Republic was among the three measures discussed to restrict the deal by the panel members. Since conservative critics have blocked confirmation of three nominees needed for its board of directors to have a quorum, the Ex-Im Bank is currently unable to approve major financing deals anyway.

“We’ve made it clear to the Iranian airlines that the Ex-Im bank would not be available to back up the financing. We can’t conclude the transaction until the U.S. government has given the green light to the agreement,” Neale said in an interview.

Barring Treasury Secretary Jacob J. Lew from authorizing certain transactions by U.S. financial institutions connected to the export of aircraft and prohibiting the Treasury Department from licensing the sale are the other measures proposed in Congress.

If proposed bills to restrict the deal became law they would also affect other companies’ sales to Iran, said Democratic Representative Denny Heck of Washington state, where Boeing has major operations. Virtually all modern jets already require export licenses from the U.S. because they have more than 10 percent U.S. content, including those Airbus plans to sell.

The Treasury imposed sanctions on Iran Air in 2011 for using passenger and cargo planes to transport rockets and missiles to places such as Syria. These were sometimes disguised as medicine or spare parts. Iran’s Revolutionary Guards took control of flights carrying sensitive cargo at other times. And hence opposition to the Boeing deal. After the nuclear deal was signed, those sanctions were lifted in July 2015 after the nuclear deal was signed.

Deliveries of the purchased jets by Iran Air are scheduled to start in 2017 and run through 2025 under a “memorandum of agreement”.

(Adapted from Bloomberg)


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