- Leading aircraft manufacturers obtain U.S. government authorization to sell planes to Iran.
- Issuance of authorizations is notable but may be hard to duplicate in other industries.
- Even if authorized, companies face practical challenges if pursuing business in Iran.
Boeing and Airbus have overcome another hurdle to tapping into the Iranian market. According to news reports, on September 21, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) issued licenses to both companies to sell aircraft to Iran. Boeing’s license is said to authorize the sale of 80 planes; Airbus reportedly has been permitted to export 17 aircraft as part of a larger plan to sell 118 aircraft to Iran. (Although Airbus is a non-U.S. company, to the extent its aircraft contain more than a de minimis amount of U.S.-origin equipment, Airbus would need a specific authorization from OFAC.)
The authorizations OFAC issued to Boeing and Airbus are arguably the most significant steps yet toward improving economic relations between the United States and Iran following last year’s nuclear deal.
Background. In July 2015, the United States and its allies entered into a Joint Comprehensive Plan of Action (JCPOA) with Iran. Under the JCPOA, the United States and its allies agreed to ease long-standing nuclear-related sanctions on Iran.
In January 2016, in accordance with the JCPOA, OFAC announced a new policy to permit the issuance of licenses for certain sales of commercial passenger aircraft to Iran. (As we explained in June, Boeing and Airbus have been targeting the Iranian market.) In June 2016, Boeing announced that it had signed a Memorandum of Agreement (MOA) with state-owned Iran Air to engage in negotiations – reportedly with OFAC’s approval. While the MOA contemplated negotiations with Iran, Boeing apparently needed separate OFAC authorization to execute the current deal.
It is not clear whether Airbus sought authorization from OFAC to engage in negotiations. It is possible that no such authorization was needed: as a non-U.S. company, Airbus would not have been subject to U.S. jurisdiction while merely negotiating a possible deal – so long as no U.S. persons were involved.
Analysis. Notwithstanding the issuance of these new licenses, unanswered questions and challenges remain. From a practical perspective, it is unclear how the recent purchases will be funded, particularly in the face of continuing U.S. banking restrictions on Iran. In addition, authorization may be needed for U.S. citizens providing technical support, maintenance and training on the aircraft to travel to, provide services in or reside in Iran. And Congressional concerns about national security could impede the deals’ execution.
Moreover, the path into Iran for Boeing (and Airbus) has been relatively easy in light of the current U.S. licensing policy that favors exports of commercial aircraft and related parts and services. Most U.S. companies seeking to enter the Iranian market will not be so lucky, as licenses to export other products may be harder to obtain. (Non-U.S. subsidiaries of U.S. companies are better situated in that they can engage in many types of business with Iran, but only so long as sometimes onerous conditions are met.)
As the Boeing and Airbus deals make clear, there are some real opportunities for U.S. companies – and non-U.S. companies that deal in U.S.-origin goods – in Iran. But it is essential to proceed carefully. And even when the utmost care is used, a deal that is permitted today could be prohibited tomorrow – particularly if the upcoming U.S. presidential election results in the nuclear deal being blown up altogether.’
We would like to thank Lidiya Kurin, a Bass, Berry & Sims law clerk based in our Washington, D.C. office, for her assistance in drafting this alert.