Back in January, Airbus announced an agreement with Iran’s flag carrier, Iran Air, for 118 new aircraft at a list price total of around $27 billion. On Tuesday, word got out that a similar deal between Iran Air and Boeing Co. (NYSE: BA) will be announced shortly.
A report at Bloomberg News put the value of the Boeing deal at about $25 billion.
Both the Airbus deal and the reported Boeing deal require approval from a relatively obscure Treasury Department agency called the U.S. Office of Foreign Assets Control (OFAC). Because more than 10% of the parts used on the Airbus airplanes are sourced from the United States, Airbus needs OFAC approval for the deal.
Boeing had to receive approval from OFAC even to talk to Iranian officials and will also need the agency’s approval in order to sell any planes to the country’s airlines.
Even with OFAC permission, however, the deal between Iran and Airbus must find financing from non-U.S. sources. U.S. Secretary of State John Kerry has said the United States has no issues with foreign banks doing business with Iran, but the details of how that might work are still unclear. The U.S. maintains restrictions on Iranian banking due to Iran’s ballistic missile program and the country’s alleged support for terrorism.
How Iran could finance a purchase of 100 or so Boeing jets may also be problematic. Even if the Chicago-based company receives OFAC’s permission to do business with Iran, Boeing is going to have to help Iran come up with financing for the sale.
The problem for both companies is getting money out of Iran through the international banking system. Many big banks got slapped with U.S. fines for doing business with Iran during the period before sanctions were lifted. That has made every bank wary of working with Iran until it is crystal clear that the United States fully supports the transactions.
It’s hard to see how federal officials could do anything to block either of these sales without causing a major uproar in the United States. But stranger things have happened.