Tehran Bucks US Sanctions As China Gives $10 Billion Credit Line To Five Iranian Banks

A Chinese state-owned investment firm has provided a $10 billion credit line for five Iranian banks, in order to support projects in the country.

An agreement was signed on September 14 in Beijing between China’s CITIC Group Corporation and a consortium of Iranian banks that included the Bank of Industry and Mine, Refah Bank, Parsian Bank, Bank Pasargad and the Export Development Bank of Iran. Present at the signing ceremony was the governor of Iran’s Central Bank, Iran's ambassador to Beijing, the chairman of Iran’s Investment Organization and CITIC Group directors, according to reports by the Iranian ISNA news agency.

“The level of economic partnership between Iran and China has significantly increased, so it is necessary to increase financial and banking cooperation to that level as well from now on” Iran’s Central Bank chief Valiollah Seif told IRNA after the signing of agreements, adding that the contracts reflect “a strong will for continuation” of bilateral cooperation.

CITIC has agreed to provide loans to the banks to fund projects in areas such as energy, natural environment, transportation and the management of water resources. The five Iranian banks could start receiving loans from CITIC as early as October. 

In addition to the credit line, the Export-Import Bank of China committed to a an additional $10 billion in loans, while the China Development Bank signed preliminary deals with Iran for $15 billion in infrastructure and production projects. In total, China has agreed to allocate $35 billion in financing and loans for Iran’s economy. 

The credit line will use euros and yuan, rather than US dollars, to help bypass American sanctions against Iran that have continued, despite the nuclear deal, formally known as better known as Joint Comprehensive Plan of Action (JCPOA), according to which Iran would curb its nuclear program in exchange for the lifting of specific sanctions. Although the nuclear deal lifted nuclear-related sanction, the has US kept in place – and even increased this year – sanctions against Iran’s financial sector and individuals linked to the Iranian Revolutionary Guard Corps (IRGC), for its ballistic missile programs and other activities the US claims links Iran to terrorism.

Since the lifting of the nuclear-related sanctions, which went into effect in January 2016, China has opened up two credit lines worth $4.2 billion to build high-speed railway lines that will link the Iranian cities of Tehran to Mashhad, located in Iran’s northeast, as well as Isfahan, in the country’s center.

China is Iran’s biggest oil customer and accounts for a third of its overall trade. The volume of trade turnover between the two countries was $31.24 billion in 2016, a figure that has increased by over 30 percent in the first six months of this year. In January 2016, Chinese President Xi Jinping and his Iranian counterpart, Hassan Rouhani, agreed to increase trade to $600 billion within a decade.

Iran is a key target of investment for China’s transcontinental trade mega-project known as “One Belt, One Road” (OBOR), which will connect Asia to Europe and Africa via high-speed rail networks and massive seaports. China’s initiatives in Iran, aside from transportation, also include energy, steel and chemicals manufacturing. Among the planned energy projects is a production facility that would produce components for nuclear power plants. China is also a major supplier of advanced weapons to Iran, including anti-ship cruise missiles, and has reportedly assisted Iran’s development of land attack cruise missiles.