Boeing's Russian titanium deal beats US sanctions anxieties

By Aimée Turner in London
With additional reporting by Vladimir Karnozov in Moscow and Guy Norris in Los Angeles

Boeing seals titanium joint venture despite backlash fears

News that Boeing has sealed its joint venture with Russia's largest titanium producer has calmed fears that recent sanctions imposed by the USA would provoke a backlash against the aircraft manufacturer.

The initial agreement with Russia's titanium giant VSMPO-Avisma to supply finished titanium components to Boeing had appeared to be compromised by the US State Department's decision to impose two-year sanctions under the Iran Nonproliferation Act 2000 on two Russian companies, sparking fears of repercussions for Boeing. The sanctions are against state arms firm Rosoboronexport and Sukhoi because of their alleged co-operation with Iran.

Sukhoi Civil Aircraft's (SCAC) project to build the Superjet 100 also looked vulnerable as the regional jet was developed with support from Boeing, which is also competing to supply $3 billion-worth of aircraft to Aeroflot.

Rosoboronexport is involved in the acquisition of a majority shareholding in VSMPO and the US action against the arms agency could have had a serious impact on vital future supplies of Russian titanium, which Boeing estimates to be worth $18 billion over the next 30 years.

Last week, however, VSMPO and Boeing cemented the initial April agreement, under which the Russian business will produce rough machinings of titanium forgings for Boeing.

Mike Cave, Boeing vice-president of aircraft programmes, says the pact between Boeing and VSMPO-Avisma remains valid despite the sanctions, adding: "Boeing will continue to work closely with all government agencies to ensure our joint venture and all other activities in Russia remain compliant with all US and international obligations, including the sanctions recently announced by the US State Department."

While three of the six US firms involved in the Superjet programme have already notified Sukhoi via formal letters that they intend to stay with the programme, Sukhoi says it will replace US suppliers with either European or Russian equivalents if the Superjet programme is hit by the sanctions.

The exact effect will depend on how the US State Department views the US Superjet content and the implications of exporting dual-purpose US technologies.

Blacklisted by the USA
The US State Department's Public Notice 5483 relating to the alleged violations of non-proliferation commitments also lists companies from Cuba, India and North Korea. Sanctions can apply to "any successor, sub-unit, or subsidiary thereof", which in Boeing's case affects Sukhoi Civil Aircraft and, potentially, VSMPO-Avisma. Sukhoi programmes that could be affected include the Superjet 100, the Su-80 30-seat regional turboprop powered by General Electric CT7-9 engines, the Beriev Be-103 six-seat amphibian with US engines and avionics and the Antonov An-38-100/120 20-seat regional turboprop with Honeywell TPE-331-14 powerplants. The contracts or deliveries that prompted the sanctions are thought to be a recent agreement to upgrade Iranian air force Su-24MK interdiction aircraft and delivery of six Su-25s between 2003 and 2006. Sukhoi says it has not sold "a single bolt" to Iran since 1996, either directly or through Rosoboronexport. It says the Su-25s were sold through the independent UUAZ Ulan-Ude aircraft factory, which supplies Iran's national guard.

Blacklisted by the USA

The US State Department's Public Notice 5483 relating to the alleged violations of non-proliferation commitments also lists companies from Cuba, India and North Korea. Sanctions can apply to "any successor, sub-unit, or subsidiary thereof", which in Boeing's case affects Sukhoi Civil Aircraft and, potentially, VSMPO-Avisma. Sukhoi programmes that could be affected include the Superjet 100, the Su-80 30-seat regional turboprop powered by General Electric CT7-9 engines, the Beriev Be-103 six-seat amphibian with US engines and avionics and the Antonov An-38-100/120 20-seat regional turboprop with Honeywell TPE-331-14 powerplants.

The contracts or deliveries that prompted the sanctions are thought to be a recent agreement to upgrade Iranian air force Su-24MK interdiction aircraft and delivery of six Su-25s between 2003 and 2006. Sukhoi says it has not sold "a single bolt" to Iran since 1996, either directly or through Rosoboronexport. It says the Su-25s were sold through the independent UUAZ Ulan-Ude aircraft factory, which supplies Iran's national guard.

Source: Flight International