$10b Chinese Finance for Iran, More in the Pipeline - Update
Five Iranian banks have jointly signed a finance deal worth $10 billion with CITIC Trust, a Chinese state-owned investment company, to fund development projects in Iran.
The CEOs of the Export Development Bank of Iran, Bank of Industry and Mine, Bank Refah, Bank Parsian and Bank Pasargad–a cohort of private and public sector banks–were part of a delegation headed by Central Bank of Iran Governor Valiollah Seif on his landmark visit to Beijing on Thursday.
The five lenders are agent entities through which Chinese funds will be spent on water management, energy, environment and transport projects.
"The construction and repayment periods of 10 to 12 years will be set in proportion to the size of each project," CBI's official news website reported.
The Chinese deal comes on the heels of another watershed contract finalized last month between Iran and South Korea, which secured t €8 billion worth of credits for various Iranian projects.
The agreements are success stories for the administration of President Hassan Rouhani as it endeavors to capitalize on the nuclear deal signed in 2015 with world powers and which the US administration–whose country is a party to the deal–has threatened to subvert.
The finance deal with China will be provided in euro and yuan, as Iran faces restrictions in processing transactions in the US currency.
During his stay, Seif also signed a memorandum of understanding with the Development Bank of China on financing construction and manufacturing projects worth €15 billion.
According to CBI, in addition to setting a framework of cooperation between the two nation's banks, the MoU will be a "basis for long-term relations with the Development Bank of China on technical, operational and educational fronts".
The CBI chief is to discuss expansion of correspondent banking relations and other related topics on payment and transaction of funds between Iranian lenders and their Chinese counterparts.
Mohammad Khazaei, the head of the Organization for Investment, Economic and Technical Assistance of Iran, also accompanied Seif on the trip.
The Iranian delegate is also scheduled to meet and negotiate with officials at the China Banking Regulatory Commission with the aim of developing banking relations. Banking problems faced by Iranian companies and businessmen will be one of the topics of discussion.
Established in 2003 to respond to the supervisory needs of the Chinese banking system, CBRC is the country's independent banking regulator based in Beijing.
Consolidation of Ties
At the ceremony for signing the $10 billion finance deal, Seif said the deal will strengthen the historical and now strategic relationship between Iran and the Asian superpower.
"There exist a variety of services in CITIC Group, which can prepare the grounds for expansion of ties between the two countries," he said, while calling on China to engage other Iranian banks as well.
The official referred to Bank of Kunlun Co Ltd, a China National Petroleum Corp unit, as "one of the longstanding business partners of Iran" that continued to work with the country even under sanctions.
"The CITIC Trust agreement was finalized after a long period of coordination and consultation between CBI and the investment organization experts to remove any ambiguities," Seif told IRNA in a separate talk in Beijing.
According to the CBI chief, the deal was initially supposed to be a $5 billion finance contract that was increased to $8 billion and later $10 billion.
He added that as per the agreement, the agent banks will be able to use the funds within two weeks, as the government has already issued the guarantees.
The CBI governor said he is to meet with the executives of the Export–Import Bank of China to discuss another $10 billion finance deal that was initially negotiated in Tehran when Chinese President Xi Jinping paid a state visit in January.
"The bank had promised to sign the deal in a short time but because disagreements over a number of articles, it was postponed," Seif, said, stressing that "the situation is better now".
Cause for Celebration
According to Seif, the $1.5-billion finance deal signed in Tehran on July 26 between the Exim Bank of China and Iran's Bank of Industry and Mine was the first deal within the framework of the $10 billion finance contract.
As part of the deal, China will finance 88% of the project to electrify a 9,260-km railroad between Tehran and the northeastern city of Mashhad, which will have the capacity to transport 25 million passengers and 10 million tons of cargo per year when it is finished in four years.
Seif also spoke of the problems encountered by Iranian businessmen in China concerning their bank accounts, saying while Chinese banks wish to open accounts for Iranian citizens, they have held out in cases because of "ambiguities in JCPOA" –the formal name given to the nuclear accord.
CITIC Trust Chairman Chen Yisong said Iran-China political ties are rising favorably and the deal has been clinched with guidance from the leaders of both nations.
"We are witnessing a significant event today and I hope that this deal will pave the way for the development of both countries," he declared.