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Italian financing agencies have teamed up to give Iran nearly €5bn in credit lines and guarantees for exports, in one of the most significant financial deals with the Islamic Republic since the landmark nuclear agreement that led to lifting of international sanctions.
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The Cassa Depositi e Prestiti, Italy's state financing agency, which controls more than €350bn in assets, will issue €4bn in credit lines to Iranian public entities for them to fund big infrastructure projects such as railways and motorways. Italian companies such as Ferrovie dello Stato are expected to participate in those contracts.
Sace, Italy's export credit agency, will support the transactions by providing €4bn in guarantees for those deals and an additional €800m in funding for Italian SME's doing business in the country.
"This could be the most substantial development in resuming trade between Iran and Europe after the implementation day [of the nuclear agreement]," said Majid Zamani, managing director of Kardan, an Iranian investment bank.
The agreement in Tehran came during a two-day visit by Matteo Renzi, Italy's centre-left prime minister, who led a large trade delegation.
The centrist government of Iran's president Hassan Rouhani is under pressure by hardline opponents to deliver on a promise to improve the economy after the nuclear agreement came into force in January.
Foreign companies seeking to enter the Iranian market need banks to open letters of credit and insurers to underwrite critical export-related risks, but these do not currently exist - a legacy of the international sanctions over Tehran's nuclear programme, most of which were lifted in January.
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But the continuation of US banking sanctions related to other issues - such as the facilitation of terrorism - has hampered Tehran's reconnection to the global financial system and made many international banks wary of working with Iranian institutions and individuals.
The credit lines issued by the Italian government are "a game changer and a very, very important development for Iran, by which development projects will start moving," said a senior European businessman. "It will open doors to a long line of medium-sized European banks and businesses who were worried about the consequences of doing business with Iran."
But while the credit lines could further encourage European and Asian Exim banks to finance Iran projects, it does not mean major international banks will re-establish relations with Iran in the near future.
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A senior western diplomat in Tehran predicted it would take Iranian nationals at least one more year to be able to open bank accounts with the world's first-tier banks, while Iran's government will have to wait around five years to use the world's debt markets.
The Italian agencies will support trade through three private Iranian banks - Pasargad Bank, Parsian Bank and Saman Bank, according to an agreement made during a visit by Mr Rouhani to Rome in January.
The statement did not specify when the credit lines would be issued but one Italian official said "two very small transactions" had already taken place.