Sunday, December 18, 2016
Iran Defends Deal to Buy U.S. Jets: Officials say Tehran would try to recover lost payments if deal collapses
The Wall Street Journal
By ARESU EQBALI in Tehran and ROBERT WALL in London
Updated Dec. 18, 2016 2:14 p.m. ET
Iranian officials defended their deal to buy dozens of American jets, amid unease about the agreement’s fate under the administration of President-elect Donald Trump.
Last week, Tehran completed a deal to buy 80 jets from Boeing Co., for a list price of $16.6 billion. The agreement represents one of Iran’s biggest post-sanctions, economic spoils.
Iranian officials, providing fresh detail about the accord on Sunday, asserted that by signing with Boeing before Mr. Trump’s inauguration next month, it had a better chance of withstanding critics in Washington, D.C. They said they were confident of winning financing for the purchase, and warned that if Mr. Trump or the U.S. Congress tried to scuttle the deal, Iran would seek to recover lost payments.
“Both they [Boeing] and we were willing to reach the conclusion sooner, and fortunately it took place before the new government [in the U.S. takes office],” Farhad Parvaresh, the chief executive of state-owned carrier Iran Air, said Sunday. “Both sides are committed, and there are scenarios in the contracts for violation of commitments or in case of force majeure to deal with those cases.”
No money has yet changed hands. Still, the tough talk from Iranian officials, who announced the deal with fanfare in Tehran last week, underscored new questions swirling around the Boeing transaction—and concerning a handful of other commercial agreements between Iran and western companies—after Mr. Trump’s Nov. 8 election.
Last week’s announcement of the deal came days after Mr. Trump criticized the potential cost of replacing the jets that serve as Air Force One. Boeing said last week that the Iran sale had the potential to sustain thousands of U.S. jobs. It has also said it will work with Mr. Trump on the cost of the Air Force One deal.
Iran Air is aiming to buy about 200 jets from Boeing and Airbus Group SE to refresh its aging fleet amid years of economic sanctions involving its nuclear program.
Mr. Trump was an outspoken critic of a deal with Tehran that lifted those sanctions in January, and he has since elevated critics of closer ties with Iran to key national-security positions in his future administration.
But Mr. Trump hasn’t weighed in meaningfully on the Iran deal since his election, and it remains unclear how he will view it as president. The Trump transition team didn’t immediately respond to a request for comment.
The value of the Airbus deal, once put at about $25 billion at list price, may not exceed $10 billion now, Mr. Parvaresh said.
Airbus didn’t immediately respond to requests for comment.
Financing the planes also remains a key issue, no matter what Mr. Trump decides. Iran would require about $1 billion in plane financing during the next four years to pay for aircraft deliveries from Airbus and Boeing, deputy transport minister Asghar Fakhrieh-Kashan said Sunday.
He said Iran’s sovereign-wealth fund would help pay for the planes. Iran Air would try to raise about $120 million through Islamic bonds and $500 million would come from overseas, he said. Boeing would provide financing for six of the planes, he added.
U.S. lawmakers opposed to closer ties with Iran have tried to block the agreement by barring U.S. banks from financing the deal.
Mr. Fakhrieh-Kashan said that if sanctions are re-imposed invalidating the contracts with Airbus and Boeing “we will take back all the pre-payments, with interest.”
Airlines typically make regular installment payments to the two big plane makers as they build the aircraft, though the bulk of the money changes hands on delivery. Still, the so-called pre-delivery payments are a key source of cash flow for both companies.
Mr. Fakhrieh-Kashan said Iran would make an initial payment of about $226 million for the first 15 Boeing planes, but didn’t say when.
Mr. Parvaresh said Airbus would deliver seven or eight planes next year. Boeing deliveries wouldn’t start until April 2018.
Iran Air said it has also scaled back the size of its plane purchase from Airbus, the Toulouse, France-based European company. It has dropped a plan to acquire 12 of the flagship A380 superjumbos.
Original article can be found here: http://www.wsj.com
Posted by Kathryn on 3:16:00 PM