Japan may fund the development of nearly $1bn of Iran's petrochemical projects.

An initial letter of credit (L/C) based funding deal apparently rewards the Iranian petrochemical sector's efforts to strengthen its financial position to attract foreign investment and more financing from Japan is expected.

L/C fund

Marubeni Corporation has agreed with Persian Gulf Petrochemical Industries Company (PGPIC) that the Japanese company will initially provide as much as EUR 320 million for the development of the Iranian firm's petrochemical projects, according to Iran's petroleum ministry.

A fund is to be created that will make L/Cs available for petrochemical projects as and when they are needed, provided projects meet the fund's preconditions according to a ministry statement.

More anticipated

The statement added that another deal with the Japanese was anticipated soon that would provide a further EUR 640 million for the fund to which PGPIC is also expected to contribute.

In June, investors from Japan and South Korea said they were ready to finance Iran's petrochemical projects. At that time, the ministry of economy and finance said it would provide state guarantees for Iranian companies tapping credit lines provided by other countries.

Financial restructuring

Last year, petrochemical suppliers in Iran said they were strengthening their internal financial processes and contemplating direct L/C transactions in preparation for the anticipated easing in 2016 of sanctions imposed on the Islamic republic (DC World News, 18 December 2015).

The suppliers anticipated correctly when international sanctions imposed on Iran were lifted in January 2016.

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