Consent on Planes Will Reopen Major Banking Channels

The US green light for Boeing and Airbus sales to Iran has broken a taboo and opens the door to a potential boom in foreign financial dealings with Tehran, experts said.

Financial Tribune- The US green light for Boeing and Airbus sales to Iran has broken a taboo and opens the door to a potential boom in foreign financial dealings with Tehran, experts said.

As well as a long overdue modernization for its aging fleet of passenger planes, Wednesday's announcement of US licenses for Airbus and Boeing serves to reassure other foreign firms and major banks over doing business with the Islamic Republic.

"A taboo has been broken. This deal will ease the fears of major foreign banks and companies which want to work with Iran," an official of an Iranian private bank told AFP, speaking on condition of anonymity.

"It will allow financial channels to be put into place for big foreign banks to work with Iran."

An Iranian financial newspaper, Donya-e-Eqtesad, said experts were now predicting that "major western banks will soon renew ties with Iran's banks".

The approvals from the US Treasury Department allow Airbus and Boeing to proceed with sales worth billions of dollars into a country that had been entirely off-limits prior to Iran's landmark 2015 nuclear deal with world powers.

"We have issued the first two licenses for the export of certain commercial passenger aircraft to Iran under this new policy -- to Boeing and Airbus," a Treasury spokesperson said on Wednesday.

The approval allows Boeing to fulfill a June memorandum of agreement (MOA) with Iran Air that covered the sale of 80 planes, consisting of single-aisle 737 and the long-range 777 aircraft.

The sales will be the US planemaker's first to Tehran since Iran's 1979 Islamic Revolution which was followed a year later by a break in diplomatic ties with Washington.

Iran's deputy foreign minister, Abbas Araghchi, said other licenses would follow "in coming weeks", in comments following a meeting between Iran and major powers in New York on the sidelines of the UN General Assembly.

Before the nuclear deal, which came into effect in January and under which Iran has curbed its atomic program in return for a lifting of international sanctions, an embargo dating from 1995 prevented western manufacturers from selling equipment and spare parts to Iranian companies.

In January, European giant Airbus struck a similar preliminary agreement as its US competitor to sell Iran 118 aircraft, but it also required US approval because some of the planes' components are made in the United States.

The announcement of the licenses comes after repeated complaints by Iranian leaders that Washington was dragging its feet on the lifting of sanctions under the nuclear deal and putting up financial obstacles for the non-US companies and banks lining up to do business with Tehran.

Washington has in fact stepped up its own set of sanctions against Tehran over alleged human rights abuses.

In New York on Thursday President Hassan Rouhani told the UN General Assembly the US Treasury was "complicating transactions" between Tehran and foreign companies and banks, state news agency IRNA reported.

The Boeing deal is estimated to be worth roughly $25 billion, and the Airbus accord was initially valued at $25 billion, although Iranian officials say it is worth nearer $10 billion.

Neither Airbus nor Boeing has announced a schedule for delivering the planes.

Iran's current commercial aviation fleet, which has a poor air safety record, numbers around 140 planes with an average age of around 20 years, with many in desperate need of replacement.

Iran projects a demand for between 400 and 500 commercial airliners over the next decade.

The well-informed Donya-e-Eqtesad said international banks would play a key role in financing the rare contracts with Boeing and Airbus.

Financial Tribune
Publish Date: Sep 24, 2016