The Boeing Sale to Iran Runs Into Turbulence

No wonder the House moved last week to try to block Boeing’s tentative agreement to sell 80 passenger jets to Iran’s government-owned airline, Iran Air. Congress is rightly concerned about what could be a $25 billion deal with an Iranian aviation industry that has been complicit in Iran’s weapons proliferation and support for terrorism.

The amendments, attached to a financial-services spending bill, would in effect prevent the Treasury Department from granting or funding export licenses for commercial aircraft, parts or services, and ban the participation of any U.S. financial institution in a deal to export passenger aircraft to Iran. The amendments are unlikely to become law. President Obama will probably threaten to veto any legislation that would dent his nuclear agreement with Iran. But they are a sign of mounting concern on Capitol Hill about the implications of the plane sale.

Boeing and U.S. financial institutions considering banking the deal should take a closer look at what they’re getting into. Once the planes are in Iran, there would be no way to prevent the regime’s Revolutionary Guards from using them for airlifts to support Syria’s President Bashar Assad and the Lebanese Hezbollah.

When sanctions were in full force before last year’s nuclear deal, Iran Air carried missile components to Tehran and weapons to Syria, according to the Treasury Department. The airline flouted a U.N. global arms embargo and, according to Treasury in its 2011 sanctioning of Iran Air, violated civil-aviation rules by disguising military shipments as civilian.

Since 2011 the sanctioned Iranian airline Mahan Air has been the main conduit for sending the Revolutionary Guards’ weapons and military personnel to Syria, Treasury says. These airlifts prevented the fall of the Assad regime, abetted the slaughter of Sunni Syrians and fueled a refugee crisis in Europe.

Lifting sanctions on Iran Air (but not Mahan) last year helped pave the way for the nuclear deal, but the airline continued to conduct illicit business. As recently as June 9, an Iran Air jet landed in Abadan, Iran, the logistical hub of the Revolutionary Guards’ airlifts to Mr. Assad and Hezbollah in Syria. After about an hour on the tarmac, it flew to Damascus.

Iran Air’s flight can be tracked online, so we know that Iran Air regularly flies to Syria. We also know that, as recently as June 7, Iran Air’s flight to Damascus had its transponders broadcasting an outdated Najaf-Tehran flight number, making it appear that the flight was between Iran and Iraq.

Iran remains the world’s most-prolific state sponsor of terrorism, and its airline industry is so infected that four other Iranian airlines are still sanctioned by the U.S. Treasury. Iran’s transport minister, Abbas Akhoundi, said last year that Iran wants to buy up to 500 new planes to rejuvenate its aging airline industry. But Iran Air lacks the capacity to absorb such a large order. More likely, it plans to sell or lease new aircraft to other Iranian airlines.

The U.S. government could cancel the license authorizing the sale of Boeing planes if they aren’t used “exclusively for civil-aviation end-use” and if the aircraft don’t end up being operated by sanctioned airlines. That’s what the Iran nuclear deal stipulates and it is also how State Department spokesman John Kirby has described the licensing conditions. But such a cancellation is unlikely. The Boeing deal was produced by one of America’s most powerful corporations, its banking partners and a Washington lobby that advocates U.S.-Iran trade regardless of Iran’s bloody history. This triumvirate was spearheaded in its plane-sale efforts by retired U.S. diplomat and former Boeing executive Tom Pickering.
Another solution, equally unlikely to have much effect, would be for the U.S. government to bless the sale while retaining the right to sanction specific aircraft if Iran violates the license terms after the planes are sold. The Treasury has already shown a willingness to target specific planes. It sanctioned eight Airbus A340s last year when Mahan Air bought them through an Iraqi- and a Maltese-owned intermediary from British-registered owners. But these aircraft are still taking off and landing at major European destinations, where they are serviced despite U.S. sanctions.

For Iran, the Boeing deal is doubly attractive: Gaining dozens of new aircraft and possibly conducting the sale in dollars, either directly or indirectly through a euro currency conversion using the U.S. dollar. The Obama administration recently signaled that it may allow banks to finance the deal through dollars—a major post-nuclear-deal concession to a country previously barred from using the dollar. Iran wants to get the planes now, borrow from Western lenders, pay later, and set a precedent for using the dollar in other financing arrangements.

In making a deal like the one with Boeing, Iran would also be buying an insurance policy against the nuclear agreement’s sanctions-snapback provision, which the Obama administration touted as an enforcement mechanism against Iranian cheating. Snapping back sanctions would jeopardize billions of dollars of unpaid contracts to American and European companies and banks. White House and European capitals would come under intense lobbying not to restore sanctions, or at least to protect existing deals. In other words, Iran is exploiting the tension between national security and Western commercial interests.

The Boeing deal puts the sale of aircraft over statecraft. It would increase Iran’s leverage over the nuclear deal while diminishing the U.S. appetite for rigorous supervision. Before the Boeing sale is allowed to take off, Congress should require the Obama administration to certify that none of Iran’s commercial airlines is implicated in supporting terrorism or rogue regimes.

Mark Dubowitz is executive director of the Foundation for Defense of Democracies (FDD) and head of its Center on Sanctions and Illicit Finance. Follow him on Twitter, Facebook, and LinkedIn. Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies.Follow him on Twitter @eottolenghi.