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Last week, representatives from Boeing visited Tehran to hammer out the details of a proposed multibillion-dollar sale of commercial aircraft to Iran. The possible sale of these planes has sparked fierce debate in the U.S. Congress, with many on both sides of the aisle rightly concerned that the Iranian government and the Islamic Revolutionary Guard Corps (IRGC) may use these planes to send arms and illicit goods to Syrian President Bashar al-Assad’s forces or to the international terrorist group Hezbollah. With the Senate prepared in the next few weeks to consider legislation on this topic and the Treasury Department poised to provide Boeing (as well as Airbus, which reached its own deal with Iran earlier this year) the necessary permission to proceed with the sale, the fight appears headed for a second round.
Critics of Boeing’s and Airbus’ sales are justifiably focused on the risks: in 2011, the U.S. Treasury added Iran Air, the proposed recipient of the aircraft, to the Specially Designated Nationals list because of its work on behalf of the IRGC. (The list identifies organizations and individuals that the U.S. government believes are involved in terrorism.) Although the airline was delisted as part of last summer’s nuclear deal, called the Joint Comprehensive Plan of Action (JCPOA), Iran Air planes have been implicated in sanctions evasion and have flown known weapons resupply routes to Syria as recently as June.
Nevertheless, the United States appears to be obligated to allow the sale of these aircraft to Iran under certain conditions. Annex 2 of the JCPOA, which identifies key concessions the United States and its partners agreed to grant Iran in exchange for limits on the Islamic Republic’s nuclear program, specifies that “the United States commits to allow for the sale of commercial passenger aircraft and related parts and services to Iran . . . provided that licensed items and services are used exclusively for commercial passenger aviation.”
But even if the United States is obligated to allow the sale of Boeing and Airbus planes to Iran, the United States does not need to give up its leverage in ensuring that the aircraft are used exclusively for civilian purposes. By carefully thinking through how to structure these contracts, the United States can pressure Iran Air to abstain from using the new aircraft to support the IRGC and also limit the Islamic Republic’s ability to use the tens of billions of dollars it can now access under the terms of the JCPOA to support terrorism.
In particular, Boeing and Airbus could require that Iran Air place the bulk of the funds necessary to purchase these planes in escrow accounts at the beginning of the contract periods. For example, Boeing could require Iran Air to put $10 billion of the $17.8 billion deal into an escrow account up-front. The contracts could further specify that if an independent investigatory or intelligence service determines that Iran Air is engaged in transporting any military goods; supporting the IRGC; leasing aircraft to airlines, such as Mahan Air, that are still on the Specially Designated Nationals list; or flying these particular aircraft to specific prohibited locations, such as Damascus, Iran Air will immediately forfeit those funds and the remainder of the contracts will be nullified—including maintenance services and the delivery of additional aircraft. The scope of these provisions could also be expanded to ensure that Iran Air or other Iranian airlines using these planes not fly to other sanctioned jurisdictions; Iran has well-documented illicit networks stretching as far as countries such as North Korea.
By requiring up-front payment and making the provision of the aircraft contingent on Iran Air’s agreement to verifiably use them solely for commercial purposes, these contracts could help allay a major concern about the nuclear deal among its supporters and critics alike: that the billions of dollars of relief provided to Iran in the deal is front-loaded instead of being gradually doled out as long as Iran proves that it is abiding by the terms of the agreement.
The Treasury Department could require Boeing and Airbus to include such restrictions in their contracts, since imposing strict conditions on these types of sales is allowed as part of the nuclear agreement. Indeed, such contractual provisions would give teeth to the parts of the agreement that say aircraft cannot be used for illicit purposes. Likewise, Congress could pass legislation—similar to what it passed last month—requiring that any regulatory approval for these sales be contingent on their including such contractual language.
This approach would represent a larger shift to thinking more carefully about how the United States can unwind sanctions in a targeted way to achieve strategic goals. And if the Iranians will not agree to such provisions, then the sale of these aircraft looks even riskier and the regime more recalcitrant.
Such strict contractual limitations could have an unexpected upside: they could help channel Iran’s nuclear-deal windfall of between $50 billion and $150 billion in a way that would make it more difficult for the Islamic Republic to directly support Hezbollah, Assad, and its own ballistic missile development. If Iran must put up significant funds for the purchase of these planes at the beginning of the contracts, it will become harder for the country to use such funds to pay militants, buy arms, and continue to export instability throughout the region and beyond. In this way, careful contractual requirements may allow the United States and its partners to redirect much of the value of these airplane contracts—estimated to be $50 billion—away from illicit activity and toward improving the safety of Iran’s civilian aviation sector.
Even with rigorous monitoring and aggressive enforcement, there are risks in allowing the sale of these commercial aircraft to Iran. At the same time, by having the companies structure the contracts to ensure that the impetus remains on Iran Air to use the aircraft only for commercial purposes—and penalizing the company and Iran heavily if Iran Air does not so limit their use—the United States can maintain significant leverage and channel Iran’s funding windfall from the JCPOA away from its support for terrorism and its other destabilizing regional activities.