Iran and Russia have kicked off the construction of a 1.4MW thermal power plant in the city of Bandar Abbas in southern Iran.

Construction of the plant is estimated to cost €1.2bn, according to an agreement signed last year. Russia will finance 85% of the costs via an export loan from Moscow to Tehran, with a five-year tenor, while the remaining will be covered by Iran, reports Russian media outlet Sputnik.

Russia’s Technopromexport, part of the state-owned industrial conglomerate Rostec, and Iran’s Thermal Power Plants Holding Company (TPPHC) will manage the development of the plant. Construction is expected to take four and a half years and will include 350MW energy blocks and a desalting facility with a capacity of 200,000 m3 per day.

Political relations between Iran and Russia are seen as having reached an unprecedented peak on the back of military co-operation in Syria, a shared vision of the global order, and mutual criticism of western policy in the Middle East. Economically however, the relationship is less clear-cut, with market watchers highlighting the deal for the power plant as being the first big Russian win in Iran following the lifting of western sanctions against the Middle Eastern country last year.

The opening ceremony for the plant was attended by Russian energy minister Alexander Novak, who is quoted by local media as saying that bilateral trade between Iran and Russia has improved but is still insufficient, and that measures to further develop co-operation will be undertaken.