Contributor - Middle East

Peter Shaw-Smith

Divining Iran’s intentions in the sphere of civil aviation is a difficult exercise. Despite a formidable Iranian business presence in Dubai, which has become Iran’s “go to” business hub, the effects of sanctions and an innate reticence have led to confusion about its intentions. Just before the Dubai Airshow, AIN asked Dr. Theodore Karasik, a Dubai-based senior advisor to Washington D.C. think-tank, Gulf State Analytics, to comment on Iran’s prospects for reentering the sector. 
“It is not much more different than what you are seeing in the press. Boeing, Airbus, and Russia are all trying to secure slots for the number of commercial aircraft that the Iranians are going to be able to buy,” Karasik said.
“Boeing already has an exemption from April 2014 from the U.S. government to sell spare parts that are for safety purposes, so they are already in negotiations. It looks like Boeing and Airbus are going to split the number of planes. I think the requirement is for about 400 aircraft. I think it is probably going to be about 180 [between Boeing and Airbus] and the remainder going to the Russians.”
Karasik believes talks between Iran and the OEMs started two years ago. “I would say that the negotiations between Boeing and Airbus and Iranian officials really began to take off around the last Dubai Airshow in 2013. You had a presence there of individuals from the Iranian civil aviation authority who started to meet privately with the OEMs. 
“From there, in the West and in Europe, there have been individuals who are old friends of Iran since before the Iranian Revolution [in 1979]. What is happening now is not about politics or religio-politics. It is about rescuing Iran’s civil aviation industry. 
“Their aircraft are so out of shape that it requires restricting or resetting the entire Iran civil aviation industry, and that is a very demanding requirement. That is why there is such a push on both sides, Iran-Airbus-Moscow-Boeing, to get these aircraft orders in.” 
There is some threat of ‘snapbacks,’ should Iran potentially violate international agreements once again. But Karasik said, “Even if the snapbacks happen, there is still a lot of geopolitics to be played out, because the nuclear deal is only about the pursuit of nuclear weapons.”
He said that the Joint Comprehensive Plan of Action (JCPOA), signed in July, doesn’t cover anything other than the nuclear issue. While recognizing that regional tensions could worsen (Syria etc.), and have an impact on Iran’s recovery, he added: “On the other hand, if people continue to see Iran as a treasure chest that needs help, Tehran and Iran’s Civil Aviation Organization (CAO) will start making a lot of deals, because it’s about the money and improving the Islamic Republic’s economy.”
The Iran civil aviation fleet consists of 250 planes. “The Iranians have tried their own domestic production. They used what was called the IR140. It crashed,” he said.
“They want to buy 400 planes by 2025, 100 of which will go to flag-carrier Iran Air. They [currently] spend 25 percent [of revenues] on MRO, compared to a global average of only 6 percent. 
“They want to look at the [Boeing] 777, 787, 747-8 and also [Airbus] A321. They are also getting competition from Canada, Bombardier, Embraer of Brazil, and the Sukhoi Superjet 100.”
It remains unclear whether international finance houses and aircraft lessors will see Iran as a good credit risk, but even once Iranian funds are unfrozen it seems unlikely the country could modernize its aircraft without the help of outside financial institutions. 
However they don’t necessarily have to look west, suggested Karasik. “What is important is where Iran sits in terms of the aviation market, in terms of [the country] becoming a fully-fledged member of the Shanghai Cooperation Organization,” which he characterized as “a Russian-Chinese counter-NATO tactic.” 
Karasik extended his argument, asking, “What is the role of the Asian Infrastructure Development Bank?” In general terms he points to Iran looking east more than west: “In other words, as we see the world economy shift to the east in the next 10 years, will that influence Iran’s decision-making in terms of markets?”
Karasik is clear that a new era of Iranian realpolitik is in the offing. “Iranians are going to be able to do what they want. They didn’t let the sanctions get them down [and they] are now going to be able to be more forward about what their intentions are.”

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