Iran has canceled a US$2 billion contract for a Chinese firm to help build a hydroelectric dam in the country, Chinese state media said yesterday, a move that risks upsetting Beijing, one of Tehran’s most important economic and political allies.
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 (胡錦濤), on Iran’s disputed nuclear program.
Last year in March, Iran’s official IRNA news agency said China’s Sinohydro Corp had signed a contract with Iranian hydro firm Farab to build the dam, described as the world’s tallest, in Iran’s western province of Lorestan. It was designed to support a 1,500-megawatt power station.
The Global Times, a popular tabloid owned by the Chinese Communist Party mouthpiece the People’s Daily, said the Iranian government had decided to cancel the contract. The report did not cite sources or give a reason for the cancellation.
However, it quoted Iranian media reports as saying Iran’s central bank was “dissatisfied” with financing options offered by China.
Sinohydro was not immediately available for comment.
Guo Xiangang, (郭憲綱) the vice president of the China Institute of International Studies, a government think tank, said he did not see the cancellation affecting Sino-Iran ties.
“Some projects may be canceled 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, who is an expert on the Middle East, added the cancellation would not affect Ahmadinejad’s visit to China.
China and Iran have close energy and trade ties, and Beijing has repeatedly resisted US-led demands to impose tougher economic sanctions on Iran to curb its nuclear ambitions.
However, differences have arisen between China and Iran in the development of Iran’s oil and gas resources.
State-owned China National Petroleum Corporation was given a month’s deadline by Iranian Oil Minister Rostam Ghasemi in April to make a serious start on the giant South Pars gas field after 32 months of delay.
In September last year, foreign media reported China’s reluctance to progress with oil and gas investments in Iran.
A lot of foreign companies have been forced to pull out of the Iranian energy sector due to the fear of sanctions, but state-owned Asian firms are less susceptible to Western pressure to stay away from the Iranian market.