China’s EXIM Inks $1.5 bn High-Speed Rail Deal with Iran
EXIM’s Vice President Sun Ping and CEO of the Bank of Industry and
Mine Ali Ashraf Afkhami signed the documents in Tehran on July 25
after “16 months of intensive talks”.
The Export-Import Bank of China (EXIM) has signed a $1.5 billion deal to
finance the electrification of a high-speed rail line between the Iranian
cities of Tehran and Mashhad.
EXIM’s Vice President Sun Ping and CEO of the Bank of Industry and Mine Ali
Ashraf Afkhami signed the documents in Tehran on July 25 after “16 months of
The Iranian bank is about to provide government guarantees for the Chinese
investment. Afkhami described the contract as a “major achievement after the
implementation of the JCPOA some 18 months ago.”
The Joint Comprehensive Plan of Action or Iran Nuclear Deal was signed with
the West and other world powers to have sanctions lifted on Tehran in
exchange for scaling back its nuclear program.
China National Machinery Import and Export Corporation, known as CMC, has
undertaken to electrify the 926-km line from the capital to the holy city in
northeast Iran in partnership with the Islamic Republic of Iran Railways
Iran’s holding group MAPNA is a subcontractor in the project. It has signed
an agreement with Germany’s Siemens for the joint manufacture of 70 electric
locomotives to be used in the route.
China Railway Group Limited (CREC) is carrying out another project worth
$1.8 billion for the electrification of a high-speed rail link between the
cities of Tehran, Qom and Isfahan.
Sun said EXIM has so far provided loans for 26 Iranian projects in the
electricity, petrochemicals, non-ferrous metals, and oil and gas sectors,
worth $9 billion.
Iran has announced plans to splurge up to $25 billion over the next 10 years
on modernization and expansion of its railway network.
Earlier in July, the country signed a deal worth 1.2 billion euros with
Italy’s state railway company Ferrovie dello Stato (FS) to build a
high-speed railway between the central cities of Arak and Qom.
Under its vision plan, Iran seeks to stretch out the nationwide railroad
line to 25,000 kilometers by 2025 from under 15,000 kilometers now.
Much of Iran’s transportation is road-based marked by high accident and
casualty rates. According to a 2012 report by the World Health Organization,
Iran has the highest number of car accidents in the world in which more than
20,000 people are killed every year.
The country, with a population of 80 million, is also struggling to catch up
with a runaway urbanization. Tehran and other major cities are aggressively
developing a mass-transit system in which metro transportation plays a vital
Connectivity is one of the key strengths of Iran, a vast country with a
territory more than 1.6 million square kilometers. It is bounded by the
Caspian Sea in the north and the Persian Gulf in the south, giving it a
unique position to connect the countries of Asia and Europe.
Iran is a major partner in the International North-South Transportation
Corridor (INSTC) project, stretching from Bandar Abbas in the Persian Gulf
to Russia, Eurasia and Europe.
Iran’s Deputy Minister of Roads and Urban Development, Asghar
Fakhrieh-Kashan, earlier said the project was worth €2.2 billion ($2.56
billion) and that two-thirds of the cost would be financed by the Chinese
government at a very low interest rate.
The remaining one-third, he added, would be covered by Chinese insurer
Sinosure (China Export and Credit Insurance Corporation).
“China Exim Bank has financed 26 projects in Iran to date,” Sun was quoted
as saying on the sidelines of the signing ceremony for the financing deal in
Tehran, adding that $8.5 billion worth of loans have so far been granted by
the bank to fund Iranian projects.
According to Fakhrieh-Kashan, Iran’s MAPNA Group is the project’s main
The Islamic Republic of Iran Railways said last month that the
Tehran-Mashhad railroad project was due to get underway, regardless of the
“All obstacles to the implementation of the project have been removed and
next week, operations for the electrification of Tehran-Mashhad line will
begin,” Maziar Yazdani, deputy head of Islamic Republic of Iran Railways,
said on June 13.
A Strand of New Silk Road
In late 2015, He Huawu, the chief engineer of China Railway Corporation,
proposed the so-called New Silk Road–a 3,200-kilometer railroad project that
ultimately sees Urumqi, the capital of China’s western Xinjiang Province
linked to the Iranian capital Tehran, connecting Kazakhstan, Kyrgyzstan,
Uzbekistan and Turkmenistan along the way, according to China’s state-owned
paper China Daily.
The idea came just before international sanctions imposed on Iran over its
nuclear program were lifted in January 2016, as part of a deal Tehran
clinched with world powers months earlier.
From Tehran, the grand project will join Iran’s east-west network leading to
Turkey and Eastern Europe. It could also open a way to Europe via a
developing rail route from southern Iranian ports to Azerbaijan and Europe.
The Belt and Road initiative, put forward in October 2013 by Chinese
President Xi Jinping, includes several corridors through land and sea,
including the New Silk Road rail route.
The route will serve as a tailwind for the transport of goods and energy
between Iran and China, setting a long-term bilateral trade target of $600
billion a year.
In February 2016, both countries tested a train journey on this line. The
32-container train took 14 days to complete the 6,462-mile (10,399-km)
journey from China’s eastern Zhejiang Province through Kazakhstan and
Turkmenistan–one month less than the sea route from Shanghai to the Iranian
port of Bandar Abbas.
For Iran, the electrification of Tehran-Mashhad line is part of its wider
rail development plan to electrify all railroads by 2025.
In a meeting with his Chinese counterpart, Xiao Jie, in China back in May,
Iran’s Minister of Economy and Finance Ali Tayebnia said, “Iran’s position
in Xi Jinping’s innovative plan to revive the New Silk Road is spectacular
and ideal. Therefore, we intend to play an effective role in its
Iran resolved issues regarding government guarantees during Tayebnia’s visit
to China to represent Iran in the New Silk Road Forum.
The two-day “Belt and Road Forum” started on May 14 with China and 29 other
nations reaffirming their commitment to build an open economy and ensure
free and inclusive trade, under the Belt and Road initiative.
Tayebnia noted that Iran has been a part of the ancient Silk Road—a route
contributing for centuries to trade and cultural exchange—stretching from
Japan to the Mediterranean Sea, and intends to play a more important part in
the new plan.
Yazdani said in June the electrification of Tehran-Mashhad railroad will
take four years.
The route is
already double-tracked and both tracks will be electrified as part of the
deal with the Chinese side. This will raise the speed of the line from the
current 160 kph to 200 kph, significantly reducing the duration of a trip
between the two cities.