China to Increase Funding for Energy Projects

China to Increase Funding for Energy Projects
China to Increase Funding for Energy Projects

China is to open a credit line for energy projects in Iran, a deputy energy minister said Saturday.

The government is to amend and extend its previous terms for a line of credit (LOC) by China for different industrial, construction, and energy projects, Esmael Mahsouli was quoted by Mehr news agency as saying.

The amendments present a two-fold increase.  Whereas China was expected to provide $23 billion, is now required to allocate $50-52 billion, Mahsouli said.

The projects include water, electricity, oil, gas, petrochemical as well as industrial and construction projects.

China accepted the new arrangements made by the government and the Central Bank of Iran.

"Water and electricity projects are the highest priority," the official said, adding that from the total Chinese fund $1.5-2 billion will be allocated for these projects.

Ali Majedi, former deputy oil minister, had announced earlier in September that 12 new projects in the petrochemical industry will be developed with the help of Chinese funding. He said that a $4-4.5 billion LOC was opened for that purpose.

As the biggest oil importer from Iran, China has an outstanding balance on previous contracts, according to Mohammad Baqer Nobakht, vice president for planning and strategic supervision.

China owes between $23.2 billion to $28.3 billion to Iran and has been committed to finance Iranian projects triple this amount.

Iran aims to recover part of its oil revenues from China by allowing China to fund petrochemical projects, said the chairman of the board of the Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM), in October.

"The government and the oil ministry seem to have no other option to recover the frozen revenues," Reza Padidar said, adding that turning to Chinese products and equipment is not good news for domestic manufacturers.

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, a Chinese analyst said.