Injection of 'Billions of Dollars' of Chinese Investment into Iran in the Absence of Western Companies

Reuters reported on Thursday, December 9, citing some Iranian officials, that while Western companies are still struggling with the challenge of securing funding from banks for developing projects in Iran, China is investing billions of dollars in its projects in the Islamic Republic. The report adds that Iran has been free from nuclear sanctions for two years now, and Chinese companies are entering all economic sectors in Iran, from railway construction to hospitals. Reuters writes that the Chinese state investment group, known as CITIC, recently agreed to open a $10 billion credit line for projects in Iran, and previously, the China Development Bank had agreed to open a $15 billion credit line for Iran. Both entities signed contracts with Iran in October of this year. According to Ms. Faryal Mostofi, an Iranian entrepreneur and head of the Investment Commission of the Iran Chamber of Commerce, who traveled to Italy, 'Westerners better hurry to come, otherwise China will take the lead.' According to the report, Chinese investment in Iran has been greater than that of other countries so far, and unlike Westerners, who fear the return of U.S. sanctions against Iran after Donald Trump's administration came to power, they are moving forward with their work. Reuters, citing Iranian officials, wrote that Chinese investments in Iran are part of Beijing's plan to inject $124 billion in investments for the development of projects and trade beyond the European Union, including railways, ports, power plants, and other infrastructure projects. A source familiar with the opening of the $10 billion credit line by the Chinese state investment group for projects in Iran told Reuters that these projects are strategic in nature. He did not provide details about these projects, but Reuters, citing Iranian media, reported that the projects include sectors such as water management, energy, environment, and transportation. A source from the Central Bank of Iran also told Reuters that these funds will be paid in euros and Chinese yuan. Reuters writes that Iran, with a population of 80 million, mostly middle class, is a very attractive market with good potential for foreign companies, but the risk of sanctions has led Western companies to request government guarantees from Iran to ensure their projects do not remain unfinished in the event of renewed sanctions. Reuters also writes that Iran's economic cooperation with Italy, its largest trading partner in Europe, has also been affected by the risk of sanctions. The report continues that the Italian state railway company, Italfer, wants to launch a 415-kilometer high-speed railway project between Tehran and Isfahan in collaboration with the Chinese state engineering railway company. This company also separately has a similar railway project from Qom to Arak, but it needs to inject 1.2 billion euros into these projects to advance its work. Although it is supported by the state export insurance company, it still says that Iran must provide government guarantees for these projects. The CEO of this company told Reuters that negotiations with Iran are ongoing and hopes to sign the development contract by early spring next year. Another source also told Reuters that the Italian Prime Minister has promised that a 4 billion euro credit line will be opened by the state investment bank 'CDP' to improve the economic cooperation environment and assist companies in developing their projects in Iran, but this bank fears losing the trust of its American shareholders. Reuters writes that only a few European banks are currently cooperating with Iran. Austria's Oberbank is one of these banks that signed a contract with Iran in October of this year. Reuters also writes that South Korea's Export-Import Bank has so far signed an $8 billion credit line contract with Iran and is also interested in entering Iranian projects. The report adds that Fereydoun Haqbin, the director general of economic affairs at Iran's Foreign Ministry, says that 'the train is moving, and the world is much bigger than America.' According to this report, Iran itself has also turned to new ways to attract Western companies, for example, asking these companies to participate in Iranian projects through technology transfer instead of grappling with capital transfer. Iran also aims to attract $2.5 billion in investment for its projects abroad, most of which will be developed by small and medium-sized Iranian companies, but Reuters writes that Western companies are still proceeding cautiously.