Iranian Energy Minister Majid Namjou announced on Thursday the cancellation of a $2 billion deal with a Chinese contractor to construct a hydroelectric dam and ceded it to its Revolutionary Guard Corps, official news agency Mehr reported.
Iranian President Mahmoud Ahmadinejad is due to visit China next week for a security summit, where he is expected to hold talks with his Chinese counterpart, Hu Jintao, and discuss Iran’s disputed nuclear programme.
Iran’s Central Bank and a governmental committee rejected an offer from China’s Sinohydro Group Ltd. to build the Bakhtiari dam in southwestern Iran, the state-run news agency said while adding that the project was given to Khatam al-Anbiya, the Guards’ engineering arm, instead.
According to Iran’s official IRNA news agency, China’s Sinohydro Corp had signed a contract with Iranian hydro firm Farab in March 2011 to build what’s described as the world’s tallest dam in Iran’s western Lorestan province. It was designed to support a 1,500-megawatt power station.
A Chinese newspaper said the Iranian government had decided to cancel the contract but did not cite sources or give a reason for the cancellation.
Sinohydro was not immediately available for comment.
Iranian media reports suggest the country’s central bank was “dissatisfied” with financing options offered by Beijing.
Guo Xian’gang, vice president of the China Institute of International Studies, a government think tank, dismissed suggestions that the cancellation of a project could affect Sino-Iran ties.
“Some projects may be cancelled due to some technical reasons, other projects are still going on, it is really normal,” Guo said. “The outside world does not need to exaggerate this.”
Guo, a Middle East affairs expert, insisted that the cancellation would not affect Ahmadinejad’s upcoming visit to China.
Beijing and Tehran enjoy close energy and trade ties, and the Communist nation has repeatedly resisted US-led demands to impose tougher economic sanctions on Iran to curb its disputed nuclear programme.
However, China and Iran are facing issues in the development of the Islamic Republic’s oil and gas resources.
Iranian Oil minister Rostam Ghasemi gave state-owned China National Petroleum Corporation a month’s deadline in April to make a serious start on the giant South Pars gas field after 32 months of delay.
Media reports suggest China is reluctant to proceed with oil and gas investments in Iran given the tightening of economic sanctions and threats of attack by the US and its allies.
State-owned Asian firms have deflected Western pressure to stay away from the Iranian market.