“Two-thirds of the contract are 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 Asghar Fakhrieh-Kashan, who oversees Iranian firms’ talks with international businesses, told Financial Tribune in an exclusive interview.
“Issues regarding the government guarantees were resolved during Minister of Economic Affairs and Finance Ali Tayyebnia’s recent visit to China,” he added.
Tayyebnia arrived in the Chinese capital Beijing last Saturday to represent Iran in the New Silk Road summit, formally known as the “Belt and Road Initiative”. He met with senior Chinese officials, including his counterpart Xiao Jie and Chairman of China Banking Regulatory Commission Guo Shuqing.
"Only drafting and other paperwork remain," Fakhrieh-Kashan said, announcing that CMC representatives will be in Iran in June to sign the contract.
“This is an important project that raises the operational speed of the line to 200 km/hour, meaning passengers can travel from Tehran to Mashhad in about four and a half hours.”
A subsidiary of China General Technology Group, CMC is an international engineering contractor in transportation infrastructure, industrial facilities and power plants. In 2014, the company constructed the Ankara-Istanbul high-speed railroad, together with China Railway Construction Corporation Limited and Turkish companies.
Iran’s MAPNA Group is “the main domestic subcontractor”, Fakhrieh-Kashan said.
The Iranian holding signed a preliminary deal in October 2016 with Germany’s Siemens for the joint manufacture of 70 electric locomotives to be used in Tehran-Mashhad route.
Tehran-Qom-Isfahan High Speed Line
Among other major railroad projects Iran is carrying out with the help of international companies, Fakhrieh-Kashan referred to a high-speed line from Tehran to Qom and Isfahan, for which Iran has already signed a contract with China Railway Group Limited known as CREC.
Although the contract, which is currently in effect, was signed in 2015 with an estimated value of €1.8 billion, its scope and value are expected to expand.
Minister of Roads and Urban Development Abbas Akhoundi has ordered the redesign of the route to make it more efficient and remove the flaws the ministry detected in the previous design, including the location of the train stations in Tehran, Qom and Isfahan.
“The contract has been signed, the letters of credit are open and work on 11 construction sites is currently underway,” Fakhrieh-Kashan said.
CREC is a Chinese construction company listed in Shanghai and Hong Kong stock exchanges. The major shareholder of the company is the state-owned China Railway Engineering Corporation.
By revenue, CREC was the largest construction company in the world in the 2015 Engineering News-Record "Top 225 Global Contractors".
** The full version of this article appears on Financial Tribune's website under the title "Iran Finalizes €2.2b Rail Deal With China’s CMC - Exclusive" published on Sunday, May 21, 2017. available at http://goo.gl/8ME1kq accessed on May 21, 2017.