Russia signs €1bn deal to build power station for Iran

Russian state company Rostec has reached a €1bn deal with Iran to build a 1.4 gigawatt thermal power station, becoming the first Russian company to get a firm contract with Tehran since the ending of sanctions, Russian media report.

The plant in the Iranian port of Bandar Abbas will be built by Rostec subsidiary Tekhnopromexport, and will take five years to construct, reports Russia’s state broadcaster, RT, quoting the business newspaper, Kommersant.

According to the newspaper, the plant will have four 350 megawatt generators and a seawater desalination plant with a capacity of 200,000 cubic meters per day.

A Russian state loan offered at 2.77% interest will fund 85% of the project cost, with the difference provided by Iran, says the report.

Analysts polled by Kommersant cast the project as a political move, rather than a purely business one.

"This is a totally political project, and the construction margin is very low," said Vladimir Sklyar from Renaissance Capital.

Despite growing political ties between Moscow and Tehran, economic cooperation between the countries is complicated by project financing, the newspaper said.

It cited a previous agreement between Russian Railways and Tehran over a €1.2bn project to electrify 495km of Iranian railroad, but the contract has not been signed.

Image: An existing power station in Iran, this one nuclear: the Arak IR-40 Heavy Water Reactor (Wikimedia Commons)

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