US sanctions could derail Airbus deal with Syria

DAMASCUS, Aug 28 (Reuters) - Airbus EAD.PA is finalising a deal that could secure it a multibillion-dollar order from the Syrian government, but U.S. sanctions could torpedo the purchase, sources familiar with the talks said on Thursday.

Habib Feqih, president of Airbus Middle East, is in Damascus to sign the cooperation framework agreement, which involves the possible lease and purchase of a total of 54 aircraft between now and 2028, and help by Airbus to restructure Syria’s flag carrier Syrianair, the sources told Reuters.

But the U.S. sanctions, imposed on Syria in 2004 for its support for anti-American groups, could complicate any Airbus sale to Syria, if not make it impossible, since the planes use American components, an industry executive said.

“I cannot see a way for Airbus to sell planes to Syria. I do not think it would be able to obtain export licences for the U.S. manufactured parts,” he said.

A way around the sanctions could be if a limited number of aircraft were to be purchased by another airline or operator outside Syria, and then leased to a Syrian company, the executive added.

Under such a lease, the lessor would also provide the crew and take care of maintenance and insurance. Sham Wings, Syria’s only functioning private airline, has leased at least one aircraft, a medium bodied McDonnell Douglas.

Another source said the cooperation agreement would amount to little if no legal way could be found to conform to the sanctions, with French officials assuring the United States that Airbus had no intention of breaking them.

“Someone has to convince the American government to make an exemption for a deal with Syria to go through. Airbus has a huge business in the United States,” the source said.

Airbus is competing along with a U.S. partner for a $35 billion Pentagon tanker refuelling deal. Its agreement with Syria is expected to be signed before French President Nicolas Sarkozy visits Damascus next week.

France started re-engaging Damascus in recent months after the Syrian government embarked on indirect peace talks with Israel and a protracted political crisis eased in Lebanon.

Sarkozy’s visit will be the first by a Western head of state to Syria since the 2005 assassination of Lebanese statesman Rafik al-Hariri.

Syria, which is seeking rehabilitation on the world stage after years of isolation by the West, would view a deal to renew its sanctions-hit fleet as a diplomatic triumph.

“Syria intends to order Airbuses from France,” Syrian President Bashar al-Assad told Inter Radio during a high-profile visit to Paris last month.

Syrianair has five operating planes and more than 5,000 employees. The carrier was recently granted a 25 percent sake in a new airline being set up by Gulf investors and Rami Makhlouf, a well-connected Syrian tycoon who is under specific U.S. sanctions for alleged corruption. (Editing by Will Waterman)