Azernews.Az

By Kamila Aliyeva

Iran is in talks with Britain's export credit agency to facilitate the financing of aircraft sales to state airline IranAir as part of its pact with world powers to lift sanctions over its nuclear program, Iran's Deputy Transport Minister Asghar Fakhrieh Kashan said, Reuters reported.

IranAir's plan to buy more than 180 jets from Airbus [AIR.PA] and Boeing (BA.N) is the most visible economic deal on the table after major powers last year lifted most sanctions on Iran in return for restrictions on its nuclear activities.

But financing for the purchases has been hard to secure because most Western banks are holding back, concerned about the future of the 2015 agreement after U.S. President Donald Trump called it a bad deal and ordered a review.

So far, IranAir has taken delivery of just three Airbus jets, for which it paid cash, industry sources say.

Deputy Roads and Urban Development Minister Asghar Fakhrieh-Kashan said the UK's export credit arm, UK Export Finance (UKEF), had tentatively offered support for least some Airbus jets built in Britain, France, Germany and Spain. It could also offer some support to Airbus's U.S. rival, Boeing, he added.

"We have received some offers from UKEF, that is under review by Iran," Fakhrieh-Kashan told Reuters.

Two aircraft industry sources who asked not to be named also confirmed talks were taking place.

UKEF and both major planemakers declined to comment.

Countries in parts of the world where banks don't invest often turn to European and U.S. governments for export credits or loan insurance when they want to buy big-ticket items like aircraft from those countries' companies.

About 6 percent of aircraft deliveries depend on such support, which removes some but not all of the risks that banks face in lending to airlines with poor credit, helping to grease the wheels of trade.

Iran, UK elections

Speeding up aircraft deliveries is seen as a priority for Tehran as President Hassan Rouhani's government seeks to show results from the sanctions deal ahead of elections on May 19.

Iran says the prospect of buying Western jets to renew its decaying fleet was built into the 2015 nuclear deal and that any barriers to completing the purchases would undermine the accord.

On the UK side, Prime Minister Theresa May's recent decision to hold a snap election in early June means any new funding deal is unlikely to be finalized before then.

UK government agencies like UKEF avoid major new initiatives during campaigning and a deal involving a topic as sensitive as trade with Iran would need approval before it could go ahead.

Airbus said last week on an investors' call that it hoped to receive some support from European export financing agencies this year.

But a source familiar with the process said it remained unclear how quickly UKEF would lift a temporary ban on Airbus funding as the UK and French fraud investigation continues.

If UKEF provides support for Boeing deliveries, it would not be the first time, but it would be rare. The main proviso is that a certain proportion of parts in each jet need to be made in Britain - usually 20 percent.

For Boeing exports, that would typically mean the jets would have to have Rolls-Royce (RR.L) engines. The Boeing planes ordered by Iran all have engines made by U.S. supplier General Electric (GE.N) or GE and its French partner Safran (SAF.PA).

UKEF has said in the past it recognizes the need to be flexible on foreign content in view of global supply chains. People who have dealt with the agency before say it may be able to consider equipment bought by Boeing from British companies.

Iran has several private and public airline companies in operation, among which IranAir is the oldest one. The number of operational airports in the country is 46.

Since sanctions imposed on the Islamic Republic were lifted last year, Iran began to take steps to upgrade its air industry, revamp an aging airline fleet, equipment and airports.

On April 4, Iran signed an agreement with Boeing for buying dozens of the company’s twinjet narrow-body passenger planes.

The agreement involves the purchase of 30 Boeing 737 MAX planes as well as the purchase rights for an additional 30 planes of the same class. It was signed between Iran’s Aseman Airlines and Boeing in Tehran.

Boeing is to provide 50 planes of the same type to Iran Air through a similar agreement. The overall value of Iran Air’s order that also involves 30 long-range wide-body 777 aircraft is estimated to be $16.6 billion.

During a January 2016 visit to Paris by Iranian President Hassan Rouhani, Tehran also signed a major contract with Airbus worth about $27 billion to buy 118 planes.

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Kamila Aliyeva is AzerNews’ staff journalist, follow her on Twitter: @Kami_Aliyeva

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