It may be a unilateral call from President Trump to pull the US out of the Iran deal, but the new policy the US government has now installed in place are now having some unforeseen effects on American companies. For Boeing, that means dropping out of $20 billion worth of contracts to modernize Iran's aging fleet of passenger planes.
On Tuesday, President Trump declared that the US is now pulling out from the so-called Iran Deal, an international agreement for lifting sanctions on Iran in exchange for the cessation of its nuclear weapons program. The agreement, signed in 2015, has several signatories that are now split between wanting to extend the deal or giving in to calls from the US to pull out, as Fortune noted.
In the years that the agreement was in place, American companies like Boeing were able to do business in Iran. One of the biggest and most sought-after contracts were for new planes that will upgrade Iranian airline fleets, which are mostly composed of outdated planes.
Boeing and Airbus, its European rival, were able to corner around $40 billion of the new business. With Tuesday's announcement, all these are now for naught.
"The Boeing and Airbus licenses will be revoked," Treasury Secretary Steven Munchin told a group of reporters Tuesday. "The existing licenses will be revoked," he repeated, as quoted by The Washington Post.
Boeing has not yet delivered any of the 100 planes it promised under its $20 billion deal with Iranian airlines, according to the New York Times, so this new development may not have that much of an impact on the company.
Airbus, on the other hand, had already delivered three planes to Iran Air. While Airbus is a European company, it still announced that they will comply with the new US sanctions. More than ten percent of Airbus parts come from the US, after all, so manufacturers in the country are also affected by Airbus losing its share of the $40 billion contract.
Boeing and the rest of companies may be affected by the loss of the Iran contracts, but not in a major way. "The total number of orders affected represents just 2% of the companies' combined order backlogs," Bernstein Research pointed out. There's also a chance that renewed tensions between US and Iran may even help Boeing sell more defense technology.
The Treasury Secretary pointed out that any waivers allowing the sale of commercial aircraft parts and services, and not just whole planes, will be canceled as well.
"These sanctions do impact all of the major industries," Munchin added. "These are very, very strong sanctions; they worked last time. That's why Iran came to the table," he pointed out, adding that there might be some exclusions as needed.