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Iranian civil aviation hit again as US sanctions return

Iran has called the sanctions part of an “economic war.” President Hassan Rouhani said Nov. 10, “On the one hand, they [the United States] name an airline company [on its blacklist] and, on the other, they specify the serial number for the planes to fill the pages. This method and the way they inform aims merely to have a psychological impact on the Iranian nation.”

Read more: http://www.al-monitor.com/pulse/originals/2018/11/iran-planes-civil-aviation-iranair-us-sanctions-jcpoa-mahan.html#ixzz5XBht0kpF

Iranian civil aviation hit again as US sanctions return

six months after its withdrawal from the nuclear deal with Iran, the United States has reimposed sanctions on flag carrier IranAir — including every aircraft in its fleet. The move will directly target the safety of ordinary Iranians while at the same time imposing an extra burden on a civilian airline already laden with numerous problems in its structure and business model.

In the aftermath of its pullout from the Joint Comprehensive Plan of Action (JCPOA) in May, the United States has resumed sanctions as part of a strategy to force Tehran to accept more curbs on its nuclear and ballistic missile programs and its regional influence. On Nov. 5, Washington reimposed penalties on hundreds of entities and individuals related to Iran’s shipping, shipbuilding, banking, energy and aviation industries. The latter includes 67 aircraft operated by IranAir as well as the airline itself.

Iran has called the sanctions part of an “economic war.” President Hassan Rouhani said Nov. 10, “On the one hand, they [the United States] name an airline company [on its blacklist] and, on the other, they specify the serial number for the planes to fill the pages. This method and the way they inform aims merely to have a psychological impact on the Iranian nation.”

“It’s a re-establishment of all sanctions that were in place prior to the JCPOA,” Saj Ahmad, chief analyst of StrategicAero Research, told Al-Monitor. “Ultimately, in the case of IranAir, the US government sees the airline as an instrument of Iran’s government and, as such, wants to enact punitive measures that make life difficult for the airline to operate, particularly as it has such an old fleet and now cannot buy new or even used jets anywhere. The same also appears to be the case for Aseman Airlines too.”

The nuclear deal promised Iran’s civil aviation industry a break from decades of US unilateral sanctions. After the 2015 accord was signed, IranAir placed massive orders for 100 Airbus, 80 Boeing and 20 ATR aircraft, but the carrier received only three Airbus and 13 ATR planes before such deliveries ended with the US withdrawal from the nuclear deal. France-based ATR is co-owned by the European company Airbus and Italy’s Leonardo. Another Iranian carrier, Aseman, also signed a contract to buy 30 Boeing planes. These plane makers, including US-based Boeing, had received permits from the US Treasury Department’s Office of Foreign Assets Control (OFAC) to enter such deals. Of note, OFAC licenses are required for sales of aircraft to Iran whose share of US-built components is more than 10%.

As such, Iranians are now deprived of the hope of flying more safely with local airlines that are being forced to use aging planes. “When I flew with one of IranAir’s new Airbus planes from Shiraz to Tehran back in March, it was the first time in years that I felt totally safe during a domestic flight,” Amir, a 32-year-old businessman, told Al-Monitor. Matthias, a Germany-based frequent traveler to Iran, told Al-Monitor that the sanctions would force IranAir passengers to fly with other airlines because of the fear of poor safety as well as extended flight duration due to extra stops in the countries that remain willing to sell fuel to IranAir despite the US sanctions. On Matthias’ last trip to Iran in October, there was a two-hour delay in the Hamburg-Tehran flight simply because the aircraft landed in Belgrade, Serbia, for refueling.

“The message the US is sending is clear — obey the 12 demands that US Secretary of State Mike Pompeo outlined earlier this year or we’ll put sanctions in place that will bring the Iranian economy to its knees,” Ahmad said. “Iran’s aviation industry is really struggling. It is difficult to know how this will play out given that the EU is largely toothless in realistically keeping up its end of the JCPOA,” he added.

The Trump administration’s Iran policy has drawn criticism from European countries, whose aviation companies were among those benefiting from the opening of the untapped Iranian market. The European Union has moved to reduce the impact of the US sanctions in hopes of saving the nuclear deal, which it says curbs Iran’s nuclear activities. In this vein, the EU is working on a “Special Purpose Vehicle” to maintain trade with Iran.

“It seems that the US government is targeting Iran’s economy to make sure it will shrink,” Ali Dadpay, a professor of economics at St. Edward’s University in Texas, told Al-Monitor. “The Trump administration wants to prevent IranAir’s fleet from operating under other call signs. By sanctions on [specific] aircraft, it prevents other airlines from leasing them and generating revenue.”

The US had added IranAir to its blacklist in 2011, four years before the signing of the nuclear deal. Following its withdrawal from the accord, it has also placed sanctions on Iran’s Mahan Air. In September, the United States sanctioned a Thai corporation, My Aviation Co. Ltd., for working with Mahan, which Washington accuses of shipping weapons and military personnel into Syria in support of the government of President Bashar al-Assad.

The renewed US sanctions are likely to halt Iran’s plans to refurbish its lagging aviation industry and to reinvigorate the bloated structure of its flag carrier, whose business model has been costly for the Iranian government. “IranAir has been accumulating losses for the past decades to the extent that one cannot consider it a business anymore. It is more like a public agency in charge of providing air services to Iranians at discounted prices,” Dadpay said. “Even during the JCPOA, it did not expand its international flights, except for a new service to Paris. Its main focus was to provide domestic flights and to serve airports in the less developed parts of the country.”

An Iranian former airline executive told Al-Monitor on condition of anonymity that under the US sanctions, procurement of spare parts would become difficult if not impossible as manufacturers will fear working with Iran. “This will make the situation more difficult for Iranian airlines. The first thing the sanctions target is flight safety. … If the sanctions continue, we will have to purchase aircraft manufactured in the 1990s. This pushes up costs for maintenance and overhaul up to three or four times.” Last but certainly not least, even if foreign sources for parts are found, it will be difficult to complete the transaction given the absence of banking channels, he said.

“[America’s] message is viciousness,” Dadpay told Al-Monitor. “The US government is creating a situation to have a better hand at the [potential future] negotiations [with the Islamic Republic]. If Iran concedes to their demands, the US will go back to the status quo without granting Iran any major concession. Under the JCPOA, IranAir hoped for a full renovation of its air fleet, right now it only can hope to operate its old airplanes.”

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