Wednesday, May 30, 2018

Trump's placing sanctions on Iran cost Boeing a cool $20 billion

Boeing will reportedly lose up to $20 billion in contracts with Iran due to US president Donald Trump's decision to withdraw from the Iran nuclear deal.

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Two Iranian contracts were worth $20 billion
According to a Washington Post article one contract is for 80 aircraft to be built for Iran Air with deliveries expected to be completed by 2025. In addition, there was another agreement between Boeing and Aseman Airlines in Iran worth $3 billion.
Trump has always claimed he is in favor of creating jobs in the US and helping out US companies. However, in this case he is doing the exact opposite. In the future, Iran will no doubt look to countries such as Russia and China when it is considering buying aircraft.
Nevertheless, Boeing Vice President Gordon Johndroe said: “We will consult with the U.S. Government on next steps. As we have throughout this process, we’ll continue to follow the U.S. Government’s lead.” No doubt Boeing does not want to criticize the US government as it does a great deal of business with it.
Trump announced on Tuesday that sanctions would be reimposed on Iran. Steven Mnuchin, Treasury Secretary also announced that the Trump administration was also canceling waivers for the sale of commercial aircraft parts to Iran.
Mnuchin said: “These sanctions do impact all of the major industries. These are very, very strong sanctions; they worked last time. That’s why Iran came to the table.”
However, the deal was with a number of other nations as well including allies, the UK, France, and Germany, and the EU as well as Russia and China. They all wanted to keep the agreement and Iran has been certified as being in compliance with it. The Trump decision will be a definite irritant as far as relations with EU allies is concerned. No doubt the US will try to force its EU allies to agree to honor the US sanctions or face sanctions themselves. This will cause even more tension.
French companies Airbus and Total also likely impacted by sanctions
Together with Boeing the total amount of contracts lost will be about $39 billion. Treasury Secretary Steven Mnuchin told reporters: “The Boeing and Airbus licenses will be revoked. The existing licenses will be revoked.”
In December of last year, Airbus signed a deal to supply the Iranian national carrier Iran Air with about 100 airplanes at around $19 billion. It has already delivered three planes. These are the first new planes acquired by Iran in 23 years.
The French oil giant Total last year signed a $2 billion contract to develop the South Pars natural gas field in Iran. Total hoped it would be given an exemption from the US sanctions as it was signed according to rules in place at the time.
Loss of contract may have minimal negative effect on Boeing
Boeing has a huge backlog of 737 planes on order that still need to be built. Boeing's stock had a marginal decline of just 0.6 percent on the news. Perhaps, the company feels that not complaining and complying with the government will stand it in good stead when the US government needs more planes for its military. Given that Trump's actions no doubt increase the chances of war with Iran and as Israel seems actively trying to provoke one, perhaps Boeing is taking a longer term view..
Previously published in Digital Journal

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