- Boeing announces deal to sell aircraft to Iran Aseman
- The deal was apparently authorized by the U.S. Treasury Department, but Congressional foes fight to block it
- If the deal goes through, further loosening of sanctions could follow
This story begins in July 2015, when the United States and its allies entered into a now-famous nuclear agreement with Iran which, among other things, paved the way for the United States to scale back economic sanctions on Iran – including those relating to commercial aircraft. Executing that deal, in January 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new, favorable licensing policy for many transactions relating to the sale of commercial passenger aircraft and related parts and services to Iran.
In mid-2016, Boeing capitalized on that policy when it entered into an agreement with state-owned Iran Air for the sale of up to 100 commercial aircraft. As we reported at the time, however, Boeing would need additional U.S. government approval to consummate any contracts with Iranian airlines. In September 2016, Boeing reportedly received just that when OFAC licensed the company’s sale of 80 planes to Iran.
Boeing is now apparently at it again: on April 5, the company announced that it had signed an Memorandum of Agreement (MOA) with Iran Aseman Airlines for the purchase of 30 737 MAX airplanes, and the right to purchase 30 more. Boeing reported that the MOA was negotiated under authorizations from the U.S. government and that the company would seek OFAC approval to perform the contemplated agreement.
On each step of this journey, Boeing has faced not only the significant compliance burden that accompanies any effort to conduct business in a U.S.-sanctioned country, but also dramatic political challenges – particularly from U.S. Congressman Pete Roskam (R-Illinois). In May, Roskam and two fellow Illinois Representatives reportedly sent a letter to Boeing’s CEO discouraging the company from engaging in business in Iran. Separately, senior members of the Washington state Congressional delegation issued a letter to Boeing (and Airbus – which was reportedly already conducting business in Iran at the time) that expressed concerns over the sale of airplanes and related parts and services to Iran and urged the companies to “act cautiously.”
Undeterred (in fact, possibly incensed) by Boeing’s June 2016 announcement, Roskam and Rep. Jeb Hensarling (R-Texas) then drafted a public letter to Boeing that demanded additional information about the company’s negotiations with Iran. In September 2016, the pair reportedly went on to solicit still more information from OFAC – including regarding Iran Air’s leadership and OFAC’s ability to control aircraft and parts after they reach Iran.
In July, the House of Representatives passed the Financial Services and General Government Appropriations Act 239-185, which contained two amendments by Roskam to block the sales of Boeing and Airbus aircraft to Iran. One amendment would prohibit OFAC from using funds to license the sales, and the other would preclude Iran from receiving loans from U.S. financial institutions to purchase militarily-fungible aircraft. Then, in November, with Roskam leading the charge, the House passed yet another Iran-related bill – this time attempting to block OFAC from issuing licenses to finance aircraft sales to Iran. (Both bills, somewhat unsurprisingly, are currently stalled in the Senate.)
More recently, Roskam reportedly called Boeing’s tentative deal with Aseman “outrageous” and alluded to Iran’s use of commercial aircraft to support atrocities committed by Syrian President Bashar al-Assad. Roskam declared that Congress would do everything within its power to prevent the sale of airplanes to Iran. It is clear that he, for one, will not allow the deal to go through without a fight.
Of course, another political contender in this battle is President Trump, who announced during the 2016 presidential campaign that, if elected, he would “dismantle[e] the disastrous [Iran] deal.” Since his election, Trump’s Iran-rhetoric has softened somewhat, though the United States has imposed additional sanctions against individual Iranians during Trump’s tenure, and Iran was among the countries subject to his proposed Muslim ban.
Boeing’s latest announcement has again called the Iran nuclear deal to the fore. Boeing, for its part, has consistently asserted that each step in this process has been authorized, as required, by the U.S. government. And, to our knowledge, there is no reason to think otherwise. (If there were, it seems mighty likely that Boeing would be facing a huge U.S. government investigation.) Moreover, the company has cited estimates that the Aseman Airlines deal could create or sustain approximately 18,000 U.S. jobs – an outcome presumably supported by both Trump and many of his constituents. If the U.S. government were to thwart the deal, there is little doubt that one of Boeing’s non-U.S. competitors would happily move forward in Boeing’s stead, threatening to take thousands of U.S. jobs with it.
With that, the deal pits job creation – Trump’s primary domestic policy objective – against his foreign policy agenda and puts him in the difficult position of having to decide whether to shut down a deal that could boost the U.S. economy.
Nearly two years after finalization of the nuclear deal, the Boeing transaction marks one of the first publicized large-scale business ventures by a sophisticated U.S. company to break into the largely untapped Iranian market. As a practical matter, the deal suggests that the United States is willing to authorize certain business with Iran so long as that business is within the framework of the nuclear deal. While we think such authorizations are still likely to be limited, an optimist might surmise that – should the Boeing transactions ultimately come to fruition – other business opportunities might follow.
It has been a long journey for Boeing so far. And where it will end is anyone’s guess.