China signs up for $1.5bn Iranian rail electrification project

By bne IntelliNews July 26, 2017

China has signed a contract with Iran to finance the electrification of nearly 1,000 km of high-speed track between the capital Tehran and second city Mashhad worth $1.5bn, according to Iranian state television.

The deal is part of China’s investment in its One Belt One Road (OBOR) initiative to build trade infrastructure and ties between Beijing and Western Europe, Russia, the Middle East and other regions.

The loan embraces $1.5bn in initial financing from the EXIM Bank of China. It will be relayed to contractors by Iran’s Bank of Industry, Mining and Trade.

The Mashhad-Tehran railway electrification deal is part of a wider set of projects developed by Iran to upgrade its general infrastructure.

The deal was previously reported at more than $2bn, however, neither side has said why the funding has dropped by more than a quarter.

“Two-thirds of the contract is financed by the Chinese government with a very low-interest rate. And the remaining one-third is covered by Chinese insurer Sinosure [China Export and Credit Insurance Corporation],” Iranian Deputy Transport Minister Asghar Fakhrieh-Kashan, told Iranian media.

The main sticking point in relation to the contract was credit guarantees, but the matter had lately been resolved, he added.

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