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Boeing-Iran deal likely to hit turbulence

Jun 21, 2016, 12:57 PM EDT
(Source: Pieter van Marion/flickr)
(Source: Pieter van Marion/flickr)
Boeing announced on Tuesday that it had signed a tentative deal with Iran Air to sell the state-owned airline 100 passenger aircraft. While the U.S. firm didn't specify the price, state media quoted Iranian transportation minister Abbas Akhoundi stating that the deal is valued at up to $25 billion. Iran has its eyes on the Boeing 737 and 777 models, although any possible arrangement could include some leased Boeing aircraft or older existing models, lowering the final price tag. 
 
This deal faces obstacles on both sides, including the need for U.S. governmental approval, but if it goes through it would be the first major deal between a U.S. firm and Iran since the lifting of many Western sanctions in January. 
 
Still, while financial and oil-related sanctions were eased, and the case-by-case sale of commercial passenger aircraft and parts to Iran was allowed, the main U.S. trade embargo against Iran remains in place. This means that Iranian banks cannot clear U.S. dollars through New York or do business with U.S. financial institutions -- potentially a major, if not insurmountable, obstacle to the deal's financing.
 
Recognizing this uncertainty -- and with many regime hardliners opposed to or wary of any direct deals with U.S. firms -- Tehran has not placed all of its aircraft modernization hopes at Washington's doorstep. Iran Air recently signed a similar deal with Airbus to buy 118 aircraft, and one with French-Italian aircraft manufacturer ATR to buy 20. Akhoundi said in January that Iran needs about 400 long-range planes and 100 shorter-haul jets to get back to par after decades of sanctions and ageing aircraft. 
 
Tehran has even expressed a desire to resume daily flights to New York, which were stopped after the 1979 revolution. And the country's ambitions don't stop there. "Iran will compete in 5 to 7 years with all the major regional airlines," Akhoundi vowed in January.
 
Boeing insists that it will follow Washington's decision, which is sure to go through a gauntlet of criticism. Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee, said that institutions considering financing the sales “should ask whether it is in their long-term interests to profit from doing business with the world’s foremost state sponsor of terrorism. It’s not American jobs that are on the line, but potentially American lives.”
 
A great deal of scrutiny and conditions should be placed on this deal before Washington considers signing off on it. Direct flights from Iran to the U.S. should be out of the question, for carrying too high of a terrorism or general aircraft safety risk. And Iran needs this deal more than Boeing or the U.S. does, so perhaps some geopolitical concessions can be wrested from Tehran as a precondition. If the deal falls apart, well, less revenue will go to the Iranian Treasury from tourism and air trade. There's already plenty of bad blood to write this one off.
 
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