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Iran to sign first contract to barter oil for restoration of power plant

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
File photo shows a view to the Rey Power Plant near the Iranian capital Tehran.

Iran is to sign a contract with a Japanese company for restoration of power plant which will be financed through a barter mechanism involving Iran’s oil.

An official from Iran’s Energy Ministry said that the contract would see Iran barter its oil for “execution” of a restoration project in the Rey Power Plant, an old facility near the capital Tehran which needs renovation.

Mohsen Tarztalab said the contract would be worth €500 million and will be signed in the upcoming week.

“Next week a contract will be signed for funding the restoration of the Rey Power Plant through barter of oil for execution,” said Tarztalab, adding that mechanism has been allowed under a sub-article of an annual draft budget passed by the Iranian parliament last year.

The oil barter contract would be a first for Iran, a country hit by US sanctions which restrict its ability to both sell the oil and receive its revenues in foreign currencies.

The sanctions began last year when Washington unilaterally withdrew from a 2015 international deal on Iran’s nuclear program.

Iran has rejected US claims that sanctions would reduce Iran’s oil exports to zero, saying Tehran would exhaust any possible channel to sell its oil to traditional customers.

The barter contract would come more than a month after Japanese Prime Minister Shinzo Abe, whose country has been a main buyer of Iran’s oil for the past decades, travelled to Tehran for a first visit by a Japanese head of states since Iran's Islamic Revolution of 1979.

It also comes against the backdrop of similar efforts by the Iranian government to diversify its oil export mechanisms, including offering oil futures to major buyers which would enable them to pre-determine the price of imported oil from Iran for deliveries in two or three years time.

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