Chinese Company Signs Rail Deal With Iran

China Civil Engineering Construction Corp announced on Tuesday it signed a rail contract worth 3.53 billion yuan ($543.6 million) with Iran.

CCECC is a subsidiary of state-owned China Railway Construction Corp, a major construction group with business in more than 60 countries and regions, its website reported.

The subsidiary signed the contract with Iran’s Construction & Development of Transportation Infrastructures Company to develop a 263-kilometer railroad, according to an announcement CRCC sent to the Shenzhen Stock Exchange on Tuesday, the Chinese daily The Global Times reported, without specifying the location of the Iranian rail project.

The company belongs to the Ministry of Roads and Urban Development of Iran, the announcement said.

Following the removal of nuclear-related sanctions against Iran, the country has attracted unprecedented Chinese funding for various infrastructural projects, including in the rail sector.

Chinese state-owned investment arm CITIC Group recently established a $10 billion credit line and China Development Bank is considering $15 billion more.

Iranian officials say the deals are part of Beijing’s $124 billion Belt and Road initiative, which aims to build new infrastructure—from highways and railroads to ports and power plants—between China and Europe to pave the way for trade expansion.

In eastern Iran, Chinese workers are busily modernizing one of the country’s major rail routes, standardizing gauge sizes, improving the track bed and rebuilding bridges, with the ultimate goal of connecting Tehran to Turkmenistan and Afghanistan.

Much the same is happening in western Iran, where railroad crews are working to link the capital to Turkey and, eventually, to Europe. Other rail projects will connect Tehran and Mashhad with deepwater ports in the country’s south.

China has provided a $1.6 billion loan to fund the electrification of the high-speed 926-km railroad from Tehran to the eastern city of Mashhad. That was the first foreign-backed project in Iran after the 2015 nuclear deal was signed.

Tehran-Mashhad Railroad is a segment of the so-called New Silk Road–a 3,200-kilometer rail project that ultimately sees Urumqi, the capital of China’s western Xinjiang Province linked to the Iranian capital Tehran, connecting Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan along the way.

The idea was first proposed by chief engineer of China Railway Corporation, He Huawu, in late 2015, just before international sanctions imposed on Iran over its nuclear program were lifted in January 2016.

From Tehran, the grand project will join Iran’s east-west network leading to Turkey and East Europe. It could also open a way to Europe via a developing rail route from southern Iranian ports to Azerbaijan and Europe.

The Belt and Road initiative–a mega project that seeks to connect Asia, Europe, the Middle East and Africa–put forward in October 2013 by Chinese President Xi Jinping, includes several corridors through land and sea, including the New Silk Road rail route.

Business ties between Iran and China have been growing since the United States and its European allies started pressuring Iran over its nuclear program around 2007.

China remains the largest buyer of Iranian crude, even after western sanctions were lifted in 2016, allowing Iran to again sell oil in European markets.

Chinese state companies are active all over the country, building highways, digging mines and making steel. Tehran’s shops are flooded with Chinese products and its streets are clogged with Chinese cars.