Economy, Domestic Economy

Iran, Russia Enter €2.5b JV to Produce Rolling Stocks

Domestic Economy Desk
Based on the contract a joint venture will be formed between the Industrial Development and Renovation Organization and Russia’s CJSC Transmashholding with the Russian side holding an 80% stake and the Iranian side a 20%
Iran, Russia Enter €2.5b JV to Produce Rolling Stocks
Iran, Russia Enter €2.5b JV to Produce Rolling Stocks
The partnership lasts for 30 years and is extendable

The Industrial Development and Renovation Organization signed a €2.5 billion contract with Russia’s CJSC Transmashholding in Tehran on Monday for joint production of rolling stock in Iran.

Based on the contract a joint venture will be formed between IDRO and the Russian company with the Russian side holding an 80% stake and the Iranian side a 20%.

Transmashholding CEO Kirill V. Lipa told the Financial Tribune after the signing of the contract that the capacity of the joint venture will depend on the depth of localization. “For assembling, we’re thinking about 300-400 units per year.”

The largest manufacturer of locomotives and rail equipment in Russia with Dutch firm Breakers Investments BV and French engineering group as its stakeholders, Transmashholding will be taking over Iran’s Wagon Pars Company to start manufacturing.

The Russian firm has major customers in Bulgaria, Belarus, Kazakhstan, Ukraine, and Serbia. It manufactures and sells subway cars, passenger diesel locomotives, diesel engines, freight cars, flat cars and diesel trains.

“We are thinking about deeper cooperation. We will look more precisely on the equipment which is already installed. But anyway we are ready to develop [the facilities],” Lipa told us.

“We’re here not to bring, let’s say, products just from Russia. We are here to develop local production. Because we really believe that it is absolutely impossible to produce the rolling stock from outside of the country. It is very important to produce the most significant spare parts locally,” he added.

Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh who was present at the signing ceremony referred to the contract as “a partnership agreement that will last for 30 years and is extendable for more.”

This is among the biggest contracts signed with international companies after the removal of international nuclear sanctions against Iran.

The embargoes were lifted in January 2016, as part of a landmark nuclear deal—officially known as the Joint Comprehensive Plan of Action—which Iran signed with the US, Britain, China, Russia, France and Germany in July 2015.

Deputy foreign minister Abbas Araqchi, who was also present at the ceremony, expressed satisfaction that the JCPOA is slowly paying dividends.

“Negotiations and exchange of delegations are gradually bearing fruit,” he said, referring also to a contract with French energy giant Total as well as another agreement with France’s Alstom.

Total, together with Chinese state-owned China National Petroleum Corp, signed a $5 billion deal with Tehran early July to develop Phase 11 of Iran's South Pars, the world's largest gas field, marking the first major western energy investment in the Islamic Republic since the lifting of sanctions.

Alstom signed an agreement with IDRO and Iranian Rail Industries Development Company last week to manufacture 1,000 subway wagons in IRICO facilities.

Another major deal signed recently was a contract China’s Exim Bank signed last week with Iran’s Bank of Industry and Mine to provide $1.5 billion in finance for the electrification a 926km railroad from Tehran to the eastern city of Mashhad. The contract is considered as the first foreign financing in Iran after the removal of nuclear sanctions.

“This shows the diversity of our collaborations with our European partners, our Asian partners and our old friends, notably Russia,” Araqchi said. “We definitely will not forget our friends during the sanctions.”

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