Boeing finds opportunity in regional tensions
Washington - One of the biggest beneficiaries of the tension in the Persian Gulf over the past few years is an American company that has profited from the drive by Saudi Arabia and its Gulf Cooperation Council (GCC) allies to strengthen their air defence capabilities and is in a position to profit from the lifting of Western sanctions on Iran.
US aircraft manufacturer Boeing announced in June that it had signed an agreement with Iranian state airline Iran Air “expressing the airline’s intent” to purchase civilian aircraft. If the deal — which is backed by the administration of US President Barack Obama — survives US congressional scrutiny and passes muster with the US Treasury Department, it would be the largest deal between an American manufacturer and Tehran since the 1979 Iranian revolution.
Though Boeing has not released specifics about the agreement, it is said to be worth as much as $25 billion and could include about 100 aircraft, including Boeing 737s. One report suggests that Iran Air would buy 80 planes from Boeing and lease another 29 with Boeing’s help. Deliveries would begin in 2017 and continue through 2025.
Iran is desperate to modernise its ageing civilian aircraft. Wasting no time after sanctions were eased, Iran Air in January signed a $25 billion pact to purchase 118 aircraft from Airbus, the European aircraft conglomerate.
US congressional Republicans are trying to derail the agreement between Boeing and Iran Air and there is bipartisan concern that the Boeing sale is tantamount to aiding state-sponsored terrorism, given reports that Iran Air has used its aircraft to supply and support Hezbollah and President Bashar Assad’s regime in Syria.
When the Treasury Department slapped sanctions on Iran Air five years ago, it cited the airline’s aircraft being used by Iran’s Islamic Revolutionary Guards Corps and its Ministry of Defence to transport military-related equipment, including missile or rocket components, to Syria.
During a House of Representatives subcommittee hearing on July 7th to examine the Boeing- Iran Air deal, some Republicans advocated the deal be shot down and recommended legislation that would prevent the Treasury Department’s Office of Foreign Assets Control (OFAC) from licensing the agreement and blocking the Treasury from allowing transactions by US financial institutions connected to the export of the aircraft.
Democrats, on the other hand, would prefer that provisions be tightened in OFAC licensing to ensure that Iran cannot use the aircraft for illicit purposes. Even if a compromise is reached in the House, Senate approval of the sale may be hard to achieve.
While Boeing lobbies on behalf of its proposed deal with Iran Air, it has also taken full advantage of the fears of Tehran’s Arab neighbours about the growing regional military threat that they are convinced Iran poses to them, particularly in the aftermath of the easing of sanctions.
In June, Boeing started preparing for delivery of the first seven of 24 AH-6i light attack/reconnaissance helicopters built for the Saudi National Guard (SNG). The sale of the helicopters is part of a substantial weapons deal negotiated between Saudi Arabia and the Obama administration in 2010 that included Boeing F-15 jet fighters. The US Army in August 2014 awarded Boeing a $234 million contract to supply the SNG with the AH-6i helicopters. As part of that larger package, Boeing is to build F-15s for Saudi Arabia through 2019.
Boeing in June learned that the US Army had awarded it a $667 million contract to supply 24 AH-64E Apache helicopters to Qatar, with work on the contract to be completed by spring of 2020.
It is two larger foreign military deals on which Boeing, Qatar and Kuwait are pinning their hopes, as the Obama administration has dragged its feet over the sale of fighter jets to the two Gulf countries, in part over Israeli fears that such military weaponry could fall into the wrong hands and be used against it. The Qatari sale has sparked more controversy due to Doha’s strong criticism of Israel, its support of Hamas and tepid involvement in air strikes against the Islamic State.
The delayed deals involve the $4 billion sale of 36 Boeing F-15 jets to Qatar — an agreement stalled for three years — and the $3 billion sale of 24 Boeing F/A-18E/F Super Hornet jets to Kuwait. Congressional critics argued that, by holding up the sales, the Obama administration has been ignoring the strategic needs of Gulf allies, particularly after it pledged to strengthen their defence capabilities in the wake of Tehran’s sanctions relief.
The US State Department and Pentagon have both approved the deals, with the National Security Council and White House also expected to sign off on them.