The fate of Boeing's Iran deal
- Author: Zachary Reyes May 12, 2018,
May 12, 2018, 0:05
Already, Boeing has had to cancel a $20 billion contract to provide jets for Iran's domestic airlines and Airbus, a European company, has a similar sized contract.
Both deadlines are meant to give firms and other entities time to conclude trade and other business activities with or in Iran, the US Treasury Department said on Tuesday.
Boeing and Airbus, its European rival, were able to corner around $40 billion of the new business.
Certain waivers can be negotiated, but the US did not say what goods or countries might qualify.
France's Total, Anglo-Dutch Royal Dutch Shell and Italy's Eni were more active in Iran than USA companies, which were still limited by other sanctions unrelated to Iran's nuclear program, including a trade embargo. It called on the European Union to "effectively protect European companies from the effects of illegitimate and one-sided implementation of US sanctions".
With the US exiting the Iran deal, American companies are set to lose big bucks, keeping them from being able to grow the American economy. The EU has in the past found this unacceptable, he added, though it was unclear still how European leaders would respond.
Iran had ordered 200 passengers planes: 100 from Airbus, 80 from Boeing and 20 from French-Italian turboprop maker ATR.
The European aircraft manufacturer signed a deal to deliver 98 planes to Iran Air after the nuclear agreement went into effect.
Boeing said on Tuesday it would consult with the USA government on the next steps, adding Boeing's 777 production plan "is not dependent on the Iranian orders". According to U.S. Treasury Secretary Steven Mnuchin, export licenses for those two orders will be revoked.
Adam Smith, a Washington-based lawyer with Gibson Dunn and former Treasury official, agreed that if sanctions are imposed then companies will essentially be forced to choose between the US and Iranian markets.
Planemakers have been some of the most exposed, as one of the chief benefits of the agreement for Iran was renewing the ancient fleet of the flag carrier Iran Air and other private airlines. The deal was signature foreign policy achievement of former US President Barack Obama but repeatedly criticised by incumbent President Donald Trump. In an emailed statement, General Electric Co. said it would "adapt our activities as necessary to conform with these changes in USA law".
Under the JCPOA, the Security Council put in abeyance for ten years a raft of sanctions against Iran, but O'Toole said the United States could use its veto power to bring them back into force, which would undoubtedly spark a confrontation not just with Europe but also China and Russian Federation.
Speaking of energy, France's Total tot has a $2 billion deal with China's CNPC to develop Iran's South Pars gas field. With virtually no existing US economic relationship with Iran, the official said, "secondary sanctions", primarily affecting Europe and Asia, are among the best ways to squeeze Iran's economy.
Boeing and the rest of companies may be affected by the loss of the Iran contracts, but not in a major way.
Euro-denominated export finance is still being discussed, an Elysee official said, "but it's not necessarily that simple".
European authorities have been voicing their intention to continue to deal with Iran despite the United States announcement.
The number of aircraft in the Iranian deals is a tiny proportion of Boeing's total order book.
For these multinationals, part of Iran's value lies in its potential for growth-the country has been deprived of investment for years and has a young demographic.
"Boeing played it a lot more conservatively than Airbus", said Richard Aboulafia, vice president of analysis at Teal Group Corporation, a consulting firm in Fairfax, Va.
"The deal could survive in theory", she said.
The growth in business has been most favourable to Iran so far. Exports to the country rose more modestly, from 6.47 billion euros to 10.8 billion euros.
Such legislation would likely mirror action taken by the European Union in 1996 to circumvent a US -imposed embargo against Cuba, as well as unilateral sanctions by the USA against Libya and Iran.
"These sanctions do impact all of the major industries", Munchin added. "These are very, very strong sanctions; they worked last time".
The official said the focus of the talks is to increase pressure on Iran "in a way that is constructive and conducive to bringing them to the negotiating table".
-Angela Charlton reported from Paris.