Iran banking on China to finish metro project

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View of a Tehran metro station. Photo – Navid991/

An Iranian government official said on Monday China will come to rescue its long-term ally and help complete its $2 billion worth Tehran metro rail project which has been marred by delays due to lack of financing as a result of sanctions.

Mohammad Montazeri, deputy managing director, planning & logistics, Tehran Urban & Suburban Railway Co said that the phase two of the metro, slated to be completed next year, is on track but two new lines under the third phase may be delayed due to lack of money.

“We are seeing funds from foreign companies. We are in negotiations with China (government, banks and agencies), we are hoping to get financing,” the Iranian official told Reuters on the sidelines of the Middle East Economic Digest’s Rail Projects conference.

“If the loans come we can finish on time,” he said.

The United States and its allies are cutting off funding to Iran after accusing it of working on weapons of mass destruction. Iran insists its program is for solely peaceful purposes, not for weapons.

The Iranian official told the conference earlier that Tehran had initially planned to build 430 kilometres of metro lines with 256 stations at a cost of $18 billion but had to reduced it to 261 kilometres and 175 stations, estimated to cost around $10 billion.

The 89-km, 41 stations phase one is operational and the 70-km, 66 stations phase two is scheduled for completion in 2013. The third phase of two lines, about 102 km and 68 stations is due to be completed by 2015, if financing is secured.

By the end of this year, five lines covering 147 km and 88 stations will be operational, Montazeri added.

Foreign loans which accounted for 43 percent of the approximately $10 billion (for all three phases) metro cost from 1987 to 1997 fell to 10 percent during 1997 to 2005. At the end of last year, foreign loans dried up completely, he said.

“Now, 50% of the funding is from the private sector and the rest from the government,” Montazeri said. The impact of sanctions is less severe on equipment as 80% of Iran’s requirements such as wagons, machinery and other products are produced locally.

“Only for about 20% we may feel the impact but that is not economically viable for us to produce in Iran,” he said, adding some goods such as rail tracks are imported from China, without giving details.

He also claimed that Iran managed to import banned goods from some countries in return for oil shipments despite sanctions.

“Foreign investment is the main problem,” he said, adding the company receives over 70% subsidy from the government.

With a population of 8 million in Tehran, at least 15 million journeys are made on the metro daily, he said.

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