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Iranian Railway Projects Chug Along, Thanks To Nuclear Deal

By Kazem Sarabi August 3, 2017


Transmashholding CEO Kirill Lipa and Iran's IDRO Group Managing Director Mansour Moazzami pose for photos at a signing ceremony in Tehran, July 31, 2017. / IRNA.IR

The Industrial Development and Renovation Organization of Iran (IDRO) and Russia’s largest railway machine-building company, CJSC Transmashholding, signed one of Iran’s largest international business agreements in Tehran on Monday since the lifting of nuclear-related sanctions in January 2016.

The Russian side has agreed to bankroll what will be a joint venture established in Iran, putting up €2.5 billion (around $3 billion) in capital, in order to help meet Iran’s growing urban transportation and infrastructure demands.

“This partnership rather is likely to last for the next 30 years or be extended even further,” Iran’s Minister of Industry, Mine and Trade Mohammad Reza Nematzadeh said before the signing of the deal.

Under the terms of the deal, Transmashholding will have an 80 percent stake in the venture and acquire the Iranian railroad car manufacturing company Wagon Pars Company. IDRO will hold the other 20 percent, and management of the venture will be rotational. The company is expected to churn out 2,000 new subway cars for Iran.

Based on a joint agreement reached last year, Iran will import 1,100 freight cars from Russia and jointly produce another 5,000 units in Iran. The joint venture is expected to bring Iran’s rolling stock manufacturing, or railway car production, to 55 percent.

“We’re here not to bring, let’s say, products just from Russia. We are here to develop local production,” said Transmashholding CEO Kirill V. Lipa on Monday. “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.

“This shows the diversity of our collaborations with our European partners, our Asian partners and our old friends, notably Russia. We definitely will not forget our friends during the sanctions,” Deputy Foreign Minister Abbas Araqchi said at the ceremony in Tehran.

According to the Joint Comprehensive Plan of Action (JCPOA), better known as “the nuclear deal” and signed on July 14, 2015, Iran would curb its nuclear program in exchange for the lifting of nuclear-related sanctions and access to frozen capital. The embargoes were lifted in January 2016, as Iran shut down many of its centrifuges used to develop bomb-grade uranium, but it retained the right to enrich uranium to a level of 3.5 percent and sell it abroad.

Deputy Foreign Minister Abbas Araqchi said the JCPOA is slowly showing how it economically benefits Iran.

“Negotiations and exchange of delegations are gradually bearing fruit,” Araqchi said at the signing.

While Monday’s agreement marks Iran’s first railway manufacturing venture with Russia, it is not Iran’s first with foreign giants.

In June, Iran signed a $1.3 billion deal with Italy’s state railway company Ferrovie dello Stato Italiane to build a high-speed, 135 km-long railway line that will link the Iranian central cities of Arak and Qom. The two countries are also expected to construct a high-speed rail corridor between Tehran, Qom, and Isfahan, and electrify already-existing railways between Tehran and Tabriz, on the way to the Caucasus region and Turkey. 

Just last week, the French transport company Alstom inked an agreement with Iran for the construction of metro and suburban railroad cars. Alstom will have a 60 percent stake in the project, while IDRO and Iranian Rail Industries Development Co (IRICO) will each invest 20 percent. As part of the deal, a railroad car construction factory will be built in Abhar, located in western Iran, where 1,000 rail cars will be built.

The Export-Import Bank of China also signed a deal last week, worth $1.5 billion, to finance the electrification of a 926-km high-speed rail line between the Iranian cities of Tehran and Mashhad in northeastern Iran. EXIM has been an active player in Iran and has to date provided loans for 26 Iranian projects in the electricity, petrochemicals, non-ferrous metals, oil and gas sectors, worth $9 billion. 

Another Chinese company, China Railway Group Limited is carrying out another project worth $1.8 billion for the electrification of a high-speed rail link between the cities of Tehran, Qom, and Isfahan. 

In 2015, Tehran announced plans to invest $25 billion over the next 10 years in the modernization and expansion of its railway network and to develop 25,000 km of tracks by 2025, up from Iran’s current capacity of 15,000 km. More than 7,500 km are already under construction, and plans are underway to link with regional networks in the Persian Gulf and Central Asia.