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. Last Updated: 07/27/2016

Aeroflot Downcast on Boeing Deal

Itar-TassBoeing's Russia chief, Sergei Kravchenko, looking at a model of a Boeing 787 Dreamliner in Moscow in May 2005.
Talks on a multibillion-dollar deal for Aeroflot to buy 22 Boeing 787s are on hold, and frosty relations between Russia and the United States could be to blame, an Aeroflot official said.

Aeroflot management last year asked the government -- the company's controlling shareholder -- to approve a deal to upgrade its long-range fleet by buying 22 Boeing 787s and an equal number of Airbus A350s.

CEO Valery Okulov said later that no permission for the Boeing purchase had been received and a deadline for the deal had been missed, though a company spokeswoman said talks were continuing.

Aviation analysts have valued the Boeing order at $2.5 billion.

Aeroflot deputy general director Lev Koshlyakov said Thursday that talks with Boeing were on hold.

"In respect of this contract negotiations have not been held for some time," Koshlyakov said. "However this does not mean that we won't be open to discussion with them in the future. Boeing remains a major producer."

Economic Development and Trade Minister German Gref said las week that Aeroflot's deal to buy two second-hand Airbus A330s this year did not mean the airline would not buy Boeing aircraft.

"Boeing works very well on the Russian market," Gref said.

Officials at Boeing's headquarters could not be immediately reached for comment.

An unidentified Boeing official was quoted by the Seattle Times on Thursday as saying Boeing wrote off the deal "a month or so ago."

Observers speculated that the deal had been caught up in politics -- with relations between Washington and Moscow having taken a sharp turn for the worse in recent weeks.

Last August, the U.S. State Department imposed sanctions on arms exporter Rosoboronexport and fighter-jet maker Sukhoi for their dealings with Iran.

"As with any big deal, obviously the political situation has a certain influence," Koshlyakov said. "As management, we proceed on the basis of economics, though of course our shareholders may have their own ideas about our choice of partner. At the end of the day it's their decision."

Koshlyakov, meanwhile, said that talks with Boeing's main rival, Airbus, were ongoing. On Wednesday, Interfax quoted an Aeroflot source as saying the deal for the Airbus A350s would likely be completed later this year.

French President Jacques Chirac is due to visit to Moscow next month.

Russia is interested in playing a bigger role in Airbus' parent company, European Aeronautic Defense & Space, where it already holds a 5 percent stake through state bank Vneshtorgbank.

On Wednesday, President Vladimir Putin told visiting French Foreign Minister Philippe Douste-Blazy and Defense Minister Michele Alliot-Marie that more cooperation "would be interesting and useful not only for Russian producers but for their European partners."

Airbus is in the midst of a troubled restructuring, however, and has yet to commit to whether it will build the A350s in Germany or France.