ROME/ANKARA: China is financing billions of dollars worth of Chinese-led projects in Iran, making deep inroads into the economy while European competitors struggle to find banks willing to fund their ambitions, Iranian government and industry officials said. Freed from crippling nuclear sanctions two years ago, Iran is drawing unprecedented Chinese funding for everything from railways to hospitals, they said. State-owned investment arm CITIC Group recently established a $10 billion credit line and China Development Bank is considering $15 billion more. "They (Western firms) had better come quickly to Iran otherwise China will take over," said Ferial Mostofi, head of the Iran Chamber of Commerce´s investment commission, speaking on the sidelines of an Iran-Italy investment meeting in Rome. The Chinese funding, by far the largest statement of investment intent of any country in Iran, is in stark contrast with the drought facing Western investors since U.S. President Donald Trump disavowed the 2015 pact agreed by major powers, raising the threat sanctions could be reimposed. 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 railways to ports and power plants - between China and Europe to pave the way for an expansion of trade. A source in China familiar with the CITIC credit line, which was agreed in September, called it "an agreement of strategic intent". The source declined to give details on projects to be financed, but Iranian media reports have said they would include water management, energy, environment and transport projects. An Iranian central bank source said loans under the credit line would be primarily extended in euros and yuan. The China Development Bank signed a memorandum of understanding for $15 billion, Iranian state news agency IRNA said on Sept.15. The bank itself declined to comment, in line with many foreign investors and banks, including from China, who were reluctant to discuss their activities in Iran for this story. The web sites of banks and companies often carry little or no information on their Iran operations. With a population of 80 million and a large, sophisticated middle class, Iran has the potential to be a regional economic powerhouse. But with the risk of sanctions hanging in the air, more and more foreign investors want Tehran to issue sovereign guarantees to protect them in case the projects are halted. Economic ties between Iran and Italy, its biggest European trade partner, have been affected. Italy´s state-owned rail company, Ferrovie dello Stato, is a consultant in the building of a 415-km (260-mile) high-speed north-south rail line between Tehran to Isfahan via Qom by state-owned China Railway Engineering Corp. The Italian firm is separately contracted to build a line from Qom west to Arak, but it needs 1.2 billion euros in financing. Though backed by the state´s export insurance agency, it says it needs a sovereign guarantee. "We are finalising the negotiations and we are optimistic about moving forward," said Riccardo Monti, chairman of Italferr, the state firm´s engineering unit, adding that the financing should be finalised by March next year. Prime Minister Matteo Renzi´s promise in Tehran last year to oil the wheels of trade with a 4 billion euro credit line from Italy´s state investment vehicle is effectively dead, a source in Italy familiar with the matter said.
