China and Iran have signed a contract to build a 32km tunnel as part of a new route from Tehran to the Caspian Sea.

Construction on the US$180M four-lane highway will commence in March 2003, and will be built in participation with foreign firms.

This agreement follows increasing co-operation between the two countries, including China’s involvement in the construction of the Talegan dam and the Sahand and Arak power plants. Furthermore, bilateral trade exceeded US$2bn in 20001.