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Boeing’s Agreement With Iran Comes Under Congressional Scrutiny

July 7, 2016
The deal announced in June with Iran Air would be the biggest business transaction between the U.S. and Iran since the 1979 Islamic Revolution and the U.S. hostage crisis.

Boeing Co.’s historic agreement to provide 109 aircraft to Iran’s national airline is coming under increasing pressure from lawmakers in Washington.

“I am extremely concerned that by relaxing the rules, the Obama administration has allowed U.S. companies to be complicit in weaponizing the Iranian regime,” Republican Representative Bill Huizenga of Michigan said Thursday at a hearing of a House Financial Services subcommittee.

The deal announced in June with Iran Air would be the biggest business transaction between the U.S. and Iran since the 1979 Islamic Revolution and the U.S. hostage crisis. It’s part of the Islamic Republic’s return to global markets under the agreement with world powers that eased economic sanctions in return for Iran curbing its nuclear program.

Iran Air has agreed to buy 80 planes for a list price of $17.6 billion, said Tim Neale, a spokesman for Chicago-based Boeing. Iran will lease another 29 planes with Boeing’s support. It follows a $27 billion, 118-plane order to Europe’s Airbus Group SE in January. Iran has inked more than $50 billion in aircraft investments to upgrade its aged fleet.

While a range of European companies have substantial leeway now to do business with Iran, civilian aircraft sales are among the few exceptions from continuing U.S. sanctions based on Tehran’s record on human rights, support for terrorism, and ballistic missile testing.

Panel members discussed three measures to restrict the deal, including one that would bar the U.S. Export-Import Bank from financing any entity that does business with Iran or provides financing to another entity to facilitate transactions with the Islamic Republic. The Ex-Im Bank is currently unable to approve major financing deals anyway, because conservative critics have blocked confirmation of three nominees needed for its board of directors to have a quorum.

‘Green Light’ Required

“We’ve made it clear to the Iranian airlines that the Ex-Im bank would not be available to back up the financing,” Neale said in an interview. “We can’t conclude the transaction until the U.S. government has given the green light to the agreement.”

Other measures proposed in Congress would prohibit the Treasury Department from licensing the sale, and bar Treasury Secretary Jacob J. Lew from authorizing certain transactions by U.S. financial institutions connected to the export of aircraft.

Democratic Representative Denny Heck of Washington state, where Boeing has major operations, said that if proposed bills to restrict the deal became law they would also affect other companies’ sales to Iran. Because virtually all modern jets have more than 10 percent U.S. content, including those Airbus plans to sell, they already require export licenses from the U.S.

Opponents of the Boeing deal pointed out that the Treasury imposed sanctions on Iran Air in 2011 for using passenger and cargo planes to transport rockets and missiles to places such as Syria, sometimes disguised as medicine or spare parts. At other times, members of Iran’s Revolutionary Guards took control of flights carrying sensitive cargo. Those sanctions were lifted in July 2015 after the nuclear deal was signed.

Under a “memorandum of agreement,” deliveries of the purchased jets by Iran Air is scheduled to start in 2017 and run through 2025.

‘Industry Complicit’

“Boeing is signing a deal with an Iranian aviation company and an industry complicit in the regime’s weapons proliferation and destabilizing adventurism,” Mark Dubowitz, executive director of the Foundation for Defense of Democracies, a Washington-based public policy group, testified at the hearing.

Dubowitz said that Iran Air made three trips to Syria just last month carrying weapons and supplies for Bashar al-Assad’s regime in Syria that’s opposed by the U.S.

“The deal between Boeing and Iran risks implicating major U.S. companies in the Islamic Republic’s support for terrorism and regional adventurism,” said Dubowitz, who has advocated tough sanctions against Iran and helped lawmakers craft them.

Although Iran remains one of the principal strategic adversaries of the U.S in the Middle East, the agreement “has significant value in the U.S.’s overall national security strategy,” Zachary Goldman, a law professor at New York University School of Law, said at the hearing.

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Licensed content from Bloomberg, copyright 2016.

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