Baghdad will purchase 10 long-haul 787 Dreamliners and 30 medium-range 737-900 aircraft. The first planes will be delivered in 2013.

The deal will be financed by the Iraq government, with the aircraft owned by the Finance Ministry rather than Iraqi Airways. This ownership structure was put in place in an attempt to give the planes sovereign immunity and save them from seizure by Kuwait Airways, which is seeking compensation for aircraft and spare parts stolen during the 1990 Iraqi invasion (MEED 21:03:08).

However, sources in Iraq say Baghdad now accepts it will not be able to sidestep the Kuwaiti claim.

“The Iraqi government fully understands that these planes will be subject to possible seizure and will negotiate on a ministerial level to solve the dispute,” says a source close to the government.

The US State Department is expected to promote the deal as a sign that progress is being made in rebuilding Iraq.

General David Petraeus, commander of the multi-national forces in Iraq, will be in Washington on 8-9 April to brief US President George Bush and address Congress on developments.

“The US government is keen to demonstrate tangible signs of progress in Iraq and this deal is something they can show to Congress and show Baghdad is spending a large amount of its own money,” says a source in Baghdad.