Trump Tearing Apart Iran Agreement Will Cost Boeing and Airbus $40bn

US is able to block Airbus sales because its planes are made with over 10 percent US labor and parts

When Boeing announced its $20 billion deal with Iran in 2016, it said it would support 100,000 US jobs

Airplane manufacturers Boeing and Airbus will lose out on a $39bn deal due to new sanctions imposed as a result of US President Donald Trump’s the US would not participate in the Iran nuclear agreement.

Licenses for the companies to sell passenger jets to Iran are going to be revoked, US Treasury Secretary Steve Mnuchin said. Easing sanctions such as this was a major inducement get Tehran to sign the Joint Comprehensive Plan of Action (JCPOA) in 2015 under President Barack Obama and stem the growth of its nuclear weapons programme. However, Mr Trump said today that it was a “rotten deal” and did not go far enough to ensure Iran’s compliance.

As the Washington Post reported: “The aircraft sales were among the most-sought-after contracts for Iran”.

Boeing specifically had signed its deal for the commercial aircraft sale in December 2016, under the nuclear accord, and it was worth $17bn. The Airbus deal, signed the same month, was worth $19bn. The company also has a separate $3bn deal with Iran’s Aseman Airlines. 

IranAir had ordered 200 passenger aircraft – 100 from Airbus SE, 80 from Boeing and 20 from Franco-Italian turboprop maker ATR – and all were dependent on US licenses since more than 10 per cent parts and labour came from US companies like United Technologies, Rockwell Collins and General Electric. This means even European manufacturer Airbus will have to review its sales contracts as a result. 

The US Treasury Department, which controls the licensing of exports out of the US, said the sales of these aircraft have to end in 90 days on 6 August 2018. “Under the original deal, there were waivers for commercial aircraft, parts and services and the existing licenses will be revoked,” Mr Mnuchin noted.

“These are very very strong sanctions; they worked last time. That’s why Iran came to the table,” he said.

After 6 August, the Treasury also said it would revoke a license that allowed US companies to negotiate business deals with Iran. The Boeing license had been valid until September 2020, a person involved in the deal told Reuters.

Boeing spokesman Gordon Johndroe said the company will “continue to follow the US government’s lead” on the matter. It may be possible for the company to request a waiver but the Treasury Department has been unclear about which companies or what kind of waiver could be granted.

“That’s something we’ll consider on a case-by-case basis, but as an overview, I would say that the purpose is to broadly enforce the sanctions,” he said, adding that the administration’s objective was to deny Iran access to the US financial system.

Boeing Chief Executive Dennis Muilenburg said last month the airplane manufacturer had no Iranian deliveries scheduled this year.

Source: The Independent