Business And Markets

Chinese Finance for Development Plans

Chinese Finance for Development Plans
Chinese Finance for Development Plans

Details over how Beijing would finance Iranian development projects will likely be discussed in a meeting between President Hassan Rouhani and his Chinese counterpart Xi Jinping  in Dushanbe, Tajikistan, on Wednesday, said a senior official. 

This would be the third time the two presidents have met since last year.  

China, the biggest oil importer from Iran in recent years, owes Tehran €22 billion ($28.1 billion) for its previous shipments, as announced earlier by Mohammad Baqer Nobakht, vice president for planning and strategic supervision.


The money had been stuck in Bank of Kunlun, which is a unit of the state-owned China National Petroleum Corporation, due to sanctions restricting bank transactions, said a Chinese analyst. 

The two nations have been negotiating to find out a mechanism to release the assets. So far, the Chinese government has agreed to finance Iranian projects of up to two or three times as much as the original debt amount. 

On Tuesday, first vice president Es'haq Jahangiri told reporters that the two presidents will hopefully find a solution to the issue, saying that "Iran will soon enjoy billions of dollars of the Chinese finance in its development projects." 

"The Chinese finance will mainly be allocated to the private sector."


Jahangiri criticized the previous administration for what he called the violation of general policies pertaining to the constitutional Article 44 – which urges transferring state-run enterprises to the private sector."

Some critics believe the Ahmadinejad administration's efforts in this regard led to "pseudo privatization."

Jahangiri said the new administration is determined to follow constitutional principles by transferring state-run projects to the "real" private sector through wise mechanism. 

The project, he said, can be transferred to the private sector through three different ways: first, under Note three of the budget law, the private sector is allowed to take projects with less than 50 percent of physical progress, in the form of 10-year contracts; second, the private sector can fully own a project, while the government guarantees the purchase of all final services; third, the government goes even further urging the private sector to invest in infrastructure projects, including construction and railways. So the private companies can benefit from profits. 


The National Development Fund of Iran (NDFI) was primarily founded in 2011 to transform oil and gas revenues to productive investment for future generations. 

According to law, 20 percent of oil income was to be transferred to the fund in the first year of its establishment, while the percentage was set to increase by three percent each year in a five year period. 

Jahangiri said that oil revenues amounted to approximately $100 billion in 2011, of which $20 billion went to the NDFI and the rest were allocated to public spending. 

He estimated that the oil revenues of the current year, ending March 2015, to be less than $60 billion, while 31 percent of which should go to the NDFI. This leaves the government only $25 billion to cover expenditures. 

The government has called on the parliament to allocate only 20 percent of oil revenues to the NDFI for the next five year, enabling the administration with more sufficient financing.