German Lender to Extend €1.2b for Railroad Project

Germany agreed to provide Iran with a €1.2 billion ($1.27 billion) credit line to help finance a rail project, according to an official at the Central Bank of Iran.

The facility–through state-run lender KfW IPEX–will help fund the development of the Tehran-Mashhad railroad, the official said, asking not to be identified, Bloomberg reported.

"German banks have also agreed to help fund power stations in the country," the official added.

Iran has struggled to raise foreign financing for tens of billions of dollars worth of infrastructure projects it hoped to get after sanctions were eased 10 months ago. Large European banks have mostly kept their distance, worried that they could fall afoul of remaining US sanctions, Iranian officials have said.

KfW IPEX, in an emailed statement, said it could “neither confirm any loan, credit line or similar transaction within Iran nor are we—due to banking secrecy–-in a position to comment on potential business or transactions under negotiation”.

"The funding has been agreed in principle and is close to being finalized," Michael Tockuss, chairman of the Germany-Iran Chamber of Commerce, said in an interview in London.

"It would be the biggest credit line Iran has secured from foreign sources since the easing of sanctions in January."

Tockuss said the idea is to choose projects that change the day-to-day reality for the average Iranian citizen to make them feel that it makes sense to make international agreements.

“It’s a frustration from our ministry of economy that the bigger banks aren’t stepping in,” he said.

Siemens AG has signed several agreements with Iran to develop its rail network, including the electrification of the Tehran-Mashhad line, IRNA reported in January.

Iran and Germany signed six memorandums of understanding for cooperation in the transportation sector last month. The agreements were signed following a meeting between Iran’s Minister of Roads and Urban Development Abbas Akhoundi and his visiting German counterpart, Alexander Dobrindt, in Tehran on October 23.

Dobrindt arrived in Tehran at the head of a trade delegation. The visit came a few weeks after German Economy Minister Sigmar Gabriel visited Iran.

During Gabriel’s stay, the largest engineering company in Europe, Siemens, agreed to supply components for 50 diesel-electric locomotives to Iran’s MAPNA Group.

Another agreement was also signed between the two companies to jointly manufacture 70 electric locomotives to be used in the 926-km Tehran-Mashhad railroad.