Dispute Stalls Ukrainian-Iranian Aircraft Project

KIEV, Ukraine -- More than a decade after signing a nearly $200 million contract with Ukraine’s aviation industry for help in manufacturing a passenger aircraft, Iranian officials say the terms of the contract have not been fulfilled.

An-140 aircraft

With Iran increasingly isolated by the West over its controversial nuclear program, countries like Ukraine stand to forge stronger trade ties in high-tech industries like aviation, but the 1995 licensed production deal between the two countries has hit a snag.

An Iranian diplomat in Kyiv and a representative of the Islamic republic’s state aircraft production company have accused Ukrainian state aviation industry players such as the Kharkiv State Aircraft Manufacturing Company of holding up their country’s plans to build dozens of Ukrainian designed An-140, a short-range turbo-prop jet.

In response, Ukraine’s Antonov Design Bureau has charged that the Iranians delayed contract payments.

Besides Russia, Iran is the first country with which Ukraine has contracted to facilitate the licensed production of one of its aircraft designs.

Ali Asghar Mehrabi, a counselor at the Embassy of Iran in Ukraine, said that his country has already paid Ukrainian state-owned companies $120 million for assistance in launching the serial production of an Iranian An-140 aircraft, the IRAN-140, but that the money could have been spent better.

“Eleven years after the contract was signed, only four aircraft have been manufactured. Starting in 2000, there should have been 12 produced per year,” he told the Post.

The 15-year contract was signed in 1995, and, according to Mehrabi, Iran was to have started putting out An-140s with increasing frequency, but parts from Kharkiv have become more expensive and delivered with less reliability.

“Given all the price increases, the cost of assembling one aircraft is now higher than buying a Western one,” said Mehrabi.

The contract, signed by Iran Aircraft Manufacturing Industries Company, or HESA, obligated Ukrainian state-owned companies not only to supply parts, but to renovate Iran’s production facilities, train Iranian personnel and license the planes.

According to Iranian officials, a plant in Isfahan, central Iran, began producing their country’s version of the An-140 in 2001 – two years later than provided by the contract.

Sources told the Post that the contract is worth $192 million and stipulates the manufacture of at least 24 passenger planes.

Mohammad Moazzam, the director of HESA’s representative office in Ukraine, said the contract gives Iran the option to assemble some 80 aircraft over 15 years, Moazzam said, adding that manufacturing of some parts was to be gradually shifted to Iran.

According to Moazzam, the making of one IRAN-140 was originally to cost no more than $6.5 million, but 11 years later the price has climbed to $12 million.

The Iranian aviation official said HESA now plans to sign direct contracts with Ukrainian parts manufacturers instead of relying exclusively on Kharkiv.

Moazzam said aircraft buyers in his country are “thirsty for aircraft.”

For its part, Ukraine’s aviation industry blames the Iranians for the delays, citing slow receipt of payments.

Andriy Savenko, a spokesman from the Antonov Design Bureau, which designed the planes, said the price changes cited by the Iranians were due to their delays in payments for parts.

Antonov representatives who recently returned from Iran heard no complaints from Iranian officials, he added.

“There were periods when they [HESA] did not make any payments … literally for years … and therefore no work was being done,” Savenko said.

The Iranians have picked up the pace in making payments only recently, as their country’s problems with the West have made it even more politically isolated and thus at a loss for Western trade partners, he added.

The U.N. Security Council voted unanimously on Dec. 23 to impose sanctions on Iran for refusing to suspend uranium enrichment, increasing international pressure on the government to prove that it is not trying to make nuclear weapons.

In the meantime, the Kharkiv plant, which the Iranians have blamed the most for holding up production of the IRAN-140, is less sour about the deal.

Kharkiv plant spokesman Serhiy Araslanov told the Post that the misunderstanding was due to the fact that the licensed production agreement was something new for the two sides, but declined to discuss the contract details.

“As long as both parties are interested in making the project work, all the problems associated with it will be solved,” he said.

Source: Kyiv Post