The first official line of credit (LOC) for the petrochemical industry was opened by Chinese financers, with an additional four to be opened soon, the deputy oil minister announced.
After months of negotiations between the oil ministry, the Central Bank of Iran (CBI), and Chinese investors, the first LOC, valued at $375 million, was opened for a Gachsaran project, Abbas Shari Moghadam was quoted by Mehr news agency as saying.
In addition to the Gachsaran petrochemical complex, there are four other projects anticipated to be funded through Chinese LOC, namely Masjed Soleiman and Lordegan petrochemical complexes, Sabalan methanol unit, Bushehr and Hengam projects. The projects are estimated to eventually cost $2 billion.
A total of 67 contracts with th ecapacity to yield 60 million tons are yet to be completed. China will fund around 30 percent of such projects, should the two countries reach an agreement. The government aims to increase production of petrochemicals to 100 million tons a year worth $40 billion.
A total of $80 billion investments are needed for the development of the key petrochemical industry sector, a part of which will come from Chinese finance, the National Development Fund of Iran (NDFI) and national foreign exchange reserves.
Amendments made recently to the terms of the Chinese LOC oblige a two-fold increase. China, which was expected to provide $23 billion, is now required to allocate $50-52 billion investment for various projects, including water, electricity, oil, gas, petrochemical as well as industrial and construction projects.
As the biggest oil importer from Iran, China has an outstanding balance on previous contracts, owing between $23 billion to $28 billion to Iran; stuck in Bank of Kunlun due to sanctions restricting bank transactions. Iran aims to recover part of its oil revenues from China by allowing the Asian economic giant to fund petrochemical projects.
"The government and the oil ministry seem to have no other option to recover the frozen revenues," Reza Padidar, chairman of the board of the Society of Iranian Petroleum Industry Equipment Manufacturers (SIPIEM), said in October.
The US imposed an array of sanctions on Iran to curb the country's nuclear program, but Iran insists that its program is peaceful. Iran and world powers failed to meet a Nov. 24 deadline for resolving the 12-year-old dispute and gave themselves until the end of June for further negotiations.
