Rouhani Scores Political Points as Iran Set to do Business with Airbus

The Iranian government is getting close to securing a deal with French aircraft manufacturer Airbus, IranWire has learned.

An official from Iran’s Ministry of Transportation and Urban Development, who spoke under condition of anonymity, told IranWire that either President Hassan Rouhani or an official from the ministry will sign a contract to purchase commercial airplanes during a scheduled visit to France in November.

The deal will mean the purchase of 10 to 12 new Airbus airplanes, most likely Airbus 320/321, a much-needed addition to Iran’s aging air fleet. Though IranWire's senior source wished to remain anonymous, some authorities have already gone public on the deal, and made various promises on the back of the news. In mid-October, Asghar Fakhrieh Kashan, the deputy minister for international affairs at the Ministry of Transportation and Urban Development, announced that Iran’s air fleet will see the addition of 15 airplanes over the next two months, though he stopped short of providing details.

According to our source, preliminary negotiations to place the order were conducted last summer at the Paris Air Show, during meetings between Abbas Akhoundi, the minister of Transportation and Urban Development, and French officials. Akhoundi apparently scheduled meetings with Airbus executives and French authorities at the same time as nuclear talks between Iran and the P5+1 countries were taking place. During his visit to Paris, Akhoundi announced that Iran required 400 airplanes to renovate its air fleet, and portrayed it as a unique economic opportunity for Airbus. To step up the pressure, he said if France did not take decisive action, it risked being losing out on a deal worth US$ 20 billion. 

Following this, the head of Iran’s Civil Aviation Organization announced that Iran would purchase 40 airplanes in the first stage of its plan to upgrade the fleet.

Since then, however, declining oil revenues and a deepening economic recession have reduced the number of airplanes Iran can reasonably afford to buy. For the time being, Iran is purchasing 10 to 15 airplanes, a much smaller number than had been announced — at one point there was even discussion of 400 new airplanes being secured. What is significant now is that Airbus has won the contract. Whatever plans Iran has for further modernizing and boosting its commercial air industry, Airbus has won the first round of the competition.

Faramarz, a veteran pilot who works for a private airline, considers the Airbus success to be a natural and expected outcome. “During the last year, the French embassy’s economic attaché held several meetings with executives from Iranian airlines in Tehran,” he said, adding that the French attaché literally went door to door during his visit to the Iranian capital. Delegates from Airbus participated in these meetings, offering to sell or to lease Airbus aircraft to Iran.

Airbus has already a considerable presence in Iran’s aviation industry. Iran Air and Mahan Airlines, the two largest airlines in Iran, have quite a few Airbus aircrafts in their fleet already. Last May, Mahan Airlines alarmed authorities in Washington when it purchased eight Airbus airplanes via an Iraqi airline. The purchase was valued at around $300 million.

As French authorities and Airbus executives courted Iranian officials and airline executives, Boeing stood back — it did not send a delegation to Iran, and there were no discussions between company executives and officials about potential purchases or business in Iran. Iranians working in the industry say that from time to time they have come across individuals claiming to be Boeing agents in Tehran. “Individuals offering Boeing aircraft for sale were mostly dealers who were working on their own initiative,” one of them told IranWire, adding that the people who presented themselves as representatives lacked credentials and could provide no evidence of their links to Boeing. Their advances cannot have been made any more palatable given the lack of US diplomatic presence in Tehran. Most Iranian businessmen tended to stay away from such situations, refusing to enter into any serious negotiations with these individuals.

This does not mean Boeing does no still have a chance to enter the Iranian market. After all, Iranian airlines are still eager to buy Boeing products. “Airbus will work well in Iran if it has to compete with Boeing,” said an executive from an air charter agency.  

The same executive said he did not think Airbus’ success at this stage was due only to the diplomacy and dynamism of Airbus executives. “Airbus executives know Iran’s market, and they are not afraid of paying certain people involved and promising kickbacks to officials in airline companies," he said. He believes that if Boeing wants to act, it can still succeed in Iran.

Iran’s ability to purchase much-needed aircrafts and equipment from France also puts President Rouhani in a good position — particularly as the Supreme Leader Ayatollah Khamenei takes steps to ban the import of consumer goods from the United States as a means of controlling and constraining the implementation of the Joint Comprehensive Plan of Action (JCPOA). Rouhani’s administration faces increasing pressure as it struggles to cope with the economic recession, which is not being reversed quick enough for anybody, whether it is the Iranian public or politicians, whatever side of the divide they are on. Given the current atmosphere, it is crucial that Rouhani demonstrates that the JCPOA has had immediate economic benefits for the country.

Throughout the nuclear talks, the impact sanctions had on Iran’s aviation industry was persistently highlighted — to the point that the industry became a symbol for the victims of sanctions. Airplane crashes were presented in both domestic and international media as tragic accidents that might not have happened if Iran’s industry had not been so paralyzed by sanctions. Any positive change in the industry now would not only signal the end of the sanctions era, it would also be a powerful symbol that  an age of economic prosperity had truly begun — a promise routinely meted out by the government. The true economic impact of such changes will not matter as long as the government can use them to its political favor.

A purchase order for 10 airplanes is a far cry from one for 400. But it is significant, serving political agendas in Tehran well enough. And it will be particularly important for a government that has placed all its hopes for a successful economic recovery on sanctions relief, while systematically ignoring the role economic reforms might play. 

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