Chinese firms are pushing for multi-billion dollar deals with Iran to build a high-speed railway and modernize its shipping fleet following the lifting of most sanctions against Tehran, sources with knowledge of the negotiations said.
State-run China National Transportation Equipment & Engineering Co Ltd (CTC) is close to finalizing an agreement on the $3 billion rail project to connect Tehran with the northeastern holy city of Mashhad, a Chinese source told Reuters.
Dalian Shipbuilding Industry Co, which is also controlled by Beijing, has likewise been in discussions on building container ships and oil tankers for Iran, according to two sources who declined to be identified because the talks are still continuing.
China, Iran’s largest trading partner and long-time ally, has agreed to boost bilateral trade by more than 10 times to $600 billion in the next decade. With Iran no longer subject to international sanctions since January following its nuclear deal with world powers, Beijing sees the country as part of its policy to increase trade and open new markets for its firms as the domestic Chinese economy slows.
For the 930-km (580 mile) rail project, China’s Export and Import Bank (EXIM) is expected to fund 85 percent of the cost, with CTC providing engineering, procurement and construction services, said the source.
China EXIM Bank is Beijing’s designated policy lender for large trade deals and overseas investments by Chinese firms.
Neither the bank nor CTC responded immediately to requests for comment.
Iran’s Tasnim News Agency last month reported a lower cost of $2 billion for the project, which it said would take 42 months to build.
A spokesman at China Shipbuilding Industry Corp, parent of Dalian Shipbuilding, did not immediately respond to a request for comment.
However, one of the sources estimated Iran would need $8-12 billion to modernize its fleet of container, cargo and oil tanker ships by around 2022.
Top Dalian shipyard executives have visited Tehran three times since January, meeting their counterparts at the Islamic Republic of Iran Shipping Lines (IRISL) – Iran’s top container and cargo carrier – and the country’s oil shipping operator National Iranian Tanker Co (NITC), the sources said.
IRISL and NITC were not immediately available for comment.
“We’ve had lots of contact with NITC,” said a Chinese shipbuilding executive, declining to be identified because he is not authorized to speak to the media. “Advanced ship models and solid technical support make Dalian Shipping a strong suitor for Iran.”
Previously Chinese shipyards, including Dalian, had built large oil tankers for NITC in an order worth $1.2 billion between 2012 and 2013, Reuters has reported.
State financing and lower costs would make China a dominant player in the Iranian shipping industry versus Asian rivals South Korea and Singapore, said Reza Mostafavi Tabatabaei, president of London-based ENEXD, a firm involved in oil and gas equipment business between the Middle East and China.
“They (IRISL) hope to become one of the biggest shipping lines in the world,” said Tabatabaei, adding that NITC wants to double its tanker capacity within the next six years by buying new ships and overhauling existing ones.
Major international companies are also rushing to establish a position in Iran as the Islamic Republic re-opens for business.
With 80 million people and annual output of about $400 billion, Iran is the biggest economy to rejoin the global trading system since Russia did so following the breakup of the Soviet Union over two decades ago.
(Reporting by Chen Aizhu in BEIJING and Bozogmehr Sharafedin in DUBAI; additional reporting by Engen Tham in Shanghai; Editing by David Stamp)
This post was originally published on Reuters UK