Early Delivery of Iran Air’s First Boeing Jetliner in Doubt

On April 10, 2017, news broke that Iran Air was to receive its first new Boeing jetliner nearly one year earlier than expected, with delivery slated for mid-May. This was to be the first aircraft of eighty for which Boeing and Iran Air signed a $16.6 billion in December 2016. Deliveries for the order, which include fifty 737 MAX 8s and thirty 777s in two variants, were slated to begin in December 2018.

The aircraft in question was originally built for Turkish Airlines with the registration TC-LJK. Deemed superfluous to requirements before delivery, the plane was to be sold by Turkish to Iran Air, where it would fly with the registration EP-IQA. Prior to reassignment, the jetliner, a Boeing 777-300ER, would need to be repainted in Iran Air colors. 

This was to take place in Victorville, California, where International Aerospace Coatings (IAC), a Boeing contractor, operates a program painting liveries for 777 aircraft. Initial reports suggested that TC-LJK would fly to Victorville on April 13 for repainting, following a visit by an Iran Air certification team to ensure the Iranians were happy to acquire the jetliner in its current configuration. 

But new reports suggest that the deal has stalled. 

Flight data shows that TC-LJK, operating as BOE549, remains in Everett, and has not moved since a short test flight on April 7.

This suggests that the repainting has not been completed. It might be that Iran Air requested alterations to the configuration of the aircraft, which would be made at Everett and would have delayed repainting. But the more likely explanation is that Iran Air is no longer able to secure the early acquisition. 

An April 22 post on Paine Field News, a blog site which tracks production of aircraft at Boeing’s Everett factory, cites an unnamed source at the manufacturer to claim that the “Turkish-Iran Air deal for TC-LJK is officially dead” and that Turkish airlines has decided to take delivery of the aircraft as originally intended. 

Yet just two days prior, on April 20, the same website cited the same unnamed source to suggest that deal was still alive and that Iran Air inspection teams had visited Everett to view the aircraft. 

Something must have changed in the calculation of Boeing, Turkish Airlines, and Iran Air on or around April 21. 

It is worth noting that an early delivery of the aircraft to Iran Air became much more difficult on April 19, when Secretary of State Rex Tillerson made an extended address to the press in which he highlighted “Iran’s alarming and ongoing provocations that export terror and violence.” The tone of this address, and the reaction it elicited in the media, certainly meant that there would have been a heightened impact on Boeing’s corporate reputation and that of any facilitating banks had the delivery to Iran Air gone ahead in the subsequent weeks. While Boeing has lobbied that its deal with Iran Air supports American jobs, critics of the deal were buoyed by Tillerson’s apparent acknowledge of concerns over the appropriateness of US-trade with Iran, despite confirmed adherence to commitments under JCPOA. 

It may be that Boeing, Iran Air, and Turkish Airlines decided to take a wait-and-see approach on the Trump Administration's rhetoric on Iran. Certainly, even if Iran Air is unable to receive TC-LJK, there remain other "orphaned" jetliners on the market which Boeing can help direct to its Iranian client. An acquisition during the summer remains possible. Given the importance of the Boeing-Iran Air deal as a landmark contract for Iran's post-sanctions trade, the race will be on to make a successful delivery. 

Photo Credit: Wikicommons

In Letter to Congress, Rex Tillerson Sends Positive Signal on Iran Deal

Update: Several hours after the publishing of this piece, Secretary of State Rex Tillerson gave a press conference in which he outlined a strongly negative outlook on Iran, underscoring that the administration's review of Iran policy will take into account the full breadth of foreign policy concerns including support for terrorism and human rights violations. The statement can be seen here. 

In a letter to House Speaker Paul Ryan sent yesterday, Rex Tillerson, the U.S. Secretary of State, confirmed "that Iran is compliant through April 18th with its commitments under the Joint Comprehensive Plan of Action." The letter represents the clearest confirmation to date that the Trump administration is in agreement with the international community on the fact of Iran's compliance with the JCPOA, also known as the Iran Deal. 

While some outlets misreported that the letter was equivalent to an extension of sanctions relief, it is more accurately a preliminary step, part of the State Department's quarterly reporting to Congress on Iran's compliance with the Iran Deal. The critical date for the extension of sanctions relief arrives in mid-May, just prior to the Iranian presidential elections. At that point, Tillerson will need to formally "waive" the US secondary sanctions on Iran, exercising an authority delegated to him by the President.

The timing of the letter to Ryan, coming just one month before the renewals are required, is a positive signal that the Trump administration will continue to implement the Iran Deal. 

To be clear, the letter was not a total break from the relatively hawkish position taken by the Trump administration towards Iran. Tillerson's missive was titled "Iran Continues to Sponsor Terrorism" and it informs Speaker Ryan that President Trump has "directed a National Security Council-led interagency review" to examine whether sanctions relief afforded to Iran is "is vital to the national security interests of the United States." The invocation of Iran as a "leading state sponsor of terror" and the reference to the pending review have led some to see the letter as consistent with President Trump's negative view of Iran and campaign rhetoric in which he described JCPOA as one of the "worst deals" ever negotiated.  

However, the letter should be seen as a positive signal for three reasons. First, it is a confirmation that the Trump administration trusts established verification procedures, which include the oversight of the International Atomic Energy Agency (IAEA) and American intelligence gathering. Many opponents of the Iran deal have tried to cast-doubt on the trustworthiness of both the IAEA assessments and intelligence estimates dating to the tenure of the Obama administration, which have so far pointed to Iran's compliance with the Iran Deal. Tillerson's letter would seem to confirm that these mechanisms of evaluation hold weight for the new administration. 

Second, the letter demonstrates an increasing willingness for the Trump administration to craft its Iran policy through normal channels.  The interagency review requested by President Trump is a formalized and commonly-used process to determine appropriate national security policy. Given that the composition of Trump's National Security Council has changed considerably since he took office, most notably with the ouster of General Mike Flynn, who had put Iran "on notice" shortly before his demise, there is an improved likelihood that a review conducted at this stage would make a sober assessment of the Iran Deal's consistency with the US national security interest. 

Finally, Tillerson's letter reflects that the Trump administration may now have a grasp on the essential challenge it is facing in crafting its policy towards Iran. On one hand, there is considerable pressure from certain congressional leaders and foreign allies such as Saudi Arabia and Israel for the administration to take a much harder stance towards the Islamic Republic. Indeed, it is worth noting that Tillerson's letter coincided with his participation in a U.S.-Saudi CEO Summit hosted by the U.S. Chamber of Commerce. On the other hand, the administration has seemingly come to understand that JCPOA is an effective foreign policy tool, one that actually addresses much of the complexity in dealing with Iran. To cease its implementation of the Iran Deal in the face of Iranian compliance would both strain relations with European allies and likely cause further destabilization in the Middle East. 

For President Trump, the task will be to remain tough, but reasonable. It remains possible for the Trump administration to be tough on Iran by taking the lead on targeted sanctions designations, such as those levied for Iran's February ballistic missile test. But at the same time, it is also reasonable for the administration to continue the "suspension of sanctions related to Iran pursuant to the JCPOA," as the letter puts it, especially if such suspensions support other Trump administration priorities, such as job creation through limited US-Iran trade.  

At this juncture, key stakeholders, including the leaders of American multinationals which stand to benefit from access to the Iranian market, need step-up their outreach to Trump. Encouragingly, the viability of the Iran Deal is no longer "fake news." 

Photo Credit: Wikicommons