The hidden deals behind European leaders’ defending Iran’s Nuke Deal

Airbus, the European airline consortium has a $19B deal threatened, with over a billion dollars in French automobile sales; Germany’s Volkswagen to suffer big-time, so it’s understandable why Germany, Britain and France will likely seek exemptions for their firms should President Trump pull out of nuclear deal.

By Israel Hayom

 

From airplanes to oilfields, billions of dollars are on the line for international corporations as U.S. President Donald Trump weighs whether to pull the United States out of Iran’s nuclear deal with world powers.

The 2015 deal lifted crippling economic sanctions from Iran in exchange for a pledge from Iran to curb its military nuclear efforts. Trump has been a vocal opponent of the deal, arguing that its restrictions are too weak and will not prevent Iran from gaining nuclear capability, and has set a May 12 deadline for the U.S. to reimpose sanctions unless the deal’s “terrible flaws” are fixed.

Meanwhile, regardless of where they are headquartered, virtually all multinational corporations do business or banking in the U.S., meaning that any return to sanctions could torpedo any deals made since 2015.

Iran Air Boeing – Photo: lkarasawa/EP-IAD/Wikimedia

The threat alone has been enough to scare risk-averse firms such as Boeing Co. into slow-walking deals agreed to months ago. A complete pullout by the U.S. would wreak havoc and likely frighten off any firms considering making the plunge.

“I absolutely think those on the fence will not jump in,” said Richard Nephew, a former sanctions expert at the U.S. State Department who worked on the nuclear deal and now is at New York’s Columbia University. “The only ones who will, will be those who see tremendous monetary benefit and no U.S. risk.”

The 2015 Iran nuclear deal opened up opportunities for Iran in the international banking sector and oil trade. For Western businesses, the deal meant access to Iran’s largely untapped market of 80 million people. Most prominently, airplane manufacturers rushed in to replace the country’s dangerously dilapidated civilian fleet.

In December 2016,  Airbus Group signed a deal with Iran’s national carrier, IranAir, to sell it 100 airplanes for around $19 billion. Chicago-based Boeing later struck its own deal with IranAir, for 80 aircraft for about $17 billion, promising that deliveries would begin in 2017 and run until 2025. Boeing also struck a separate 30-airplane deal with Iran’s Aseman Airlines for $3 billion.

But Boeing has yet to deliver a single aircraft to Iran. CEO Dennis Muilenburg recently said Boeing understands the “risks and implications around the Iranian aircraft deal,” which would be the biggest business agreement between an American company and Iran since the 1979 Islamic Revolution.

“We continue to follow the U.S. government’s lead here and everything is being done per that process,” Muilenberg said during a quarterly earnings conference call on April 25. “We have no Iranian deliveries that are scheduled or part of the skyline this year, so those have been deferred again in line with the U.S. government process.”

Iran Air Airbus – Photo: Konstantin Von Wedelstaedt/Wikimedia

Airbus, a European airline consortium based in Toulouse, France, likewise continues its sales at the discretion of the U.S. government. At least 10% of its aircraft components are of American origin, meaning it requires permission from the U.S. Treasury for its sales to Iran. Airbus has already delivered two A330-200s and one A321 to Iran.

When asked about its possible plans ahead of Trump’s decision, Airbus declined to comment.

European airplane manufacturer ATR struck a $536 million deal with IranAir for at least 20 aircraft last year. It has delivered eight of its twin-engine turboprop aircraft to Iran after obtaining permission from the U.S. Treasury.

“To date, we are on track to deliver the remaining ATR aircraft in due time, before the end of the year,” ATR spokesman David Vargas said.

The speed with which Western airplane manufacturers went into Iran contrasts the slow start by Western energy firms despite Iran’s vast oil and gas wealth. The exception is French oil giant Total SA, which in July signed a $5 billion, 20-year agreement with Iran and a Chinese oil company to develop the massive South Pars offshore natural gas field. The natural gas pumped there will go to Iran’s domestic market.

The deal marked a return to Iran for Total, which had pulled out in 2008 as Western sanctions over Iran’s nuclear program began to ramp up. Total did not respond to requests for comment, though its CEO Patrick Pouyanne reportedly told Trump in February to stick with the deal.

“If the framework, the rules of the game, change, of course we will have to re-evaluate,” Pouyanne told the Financial Times.

French carmaker PSA Peugeot Citroen reached a deal in 2016 to open a plant producing 200,000 vehicles annually in Iran. Peugeot, once a major player in Iran’s car market before sanctions, did not respond to a request for comment.

Meanwhile, fellow French automobile manufacturer Groupe Renault signed a $778 million deal to build 150,000 cars a year at a factory outside Tehran.

“The Renault Group is closely monitoring the evolution of the diplomatic situation,” the company said in a statement, without elaborating.

Volkswagen has also begun exporting cars to Iran.

“Currently we are tracking and examining the development of the political and economic environment in the region very closely,” the German carmaker said in a statement. “In principle, Volkswagen adheres to all applicable national and international laws and export regulations.”

Nuclear deal co-signers Britain, France and Germany, which have urged Trump to preserve the deal, may seek exemptions to protect their companies if the U.S. snaps back sanctions, according to Ellie Geranmayeh, a senior policy fellow studying Iran at the European Council on Foreign Relations.

“This should include a series of exemptions and carve-outs for European companies already involved in strategic areas of trade and investment with Iran, with the priority being to limit the immediate shock to Iranian oil exports,” she wrote Wednesday.

 

View original Israel Hayom publication at:
http://www.israelhayom.com/2018/05/07/global-airplane-and-oil-deals-at-risk-if-us-pulls-out-of-iran-deal/

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