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Japan and Iran have agreed in principle to refinance $500 million of $2.6 billion in debts owed by the Persian Gulf country to private Japanese companies, to help strengthen bilateral economic relations, government and industry sources said Tuesday.

The sources said the basic agreement was reached after hectic negotiations between the Iranian government and a consortium of 18 major Japanese trading firms and oil wholesaling companies. Tomen Corp. acted as a representative of the Japanese private-sector creditors’ group.

Refinancing is effectively tantamount to debt rescheduling. Under the Iranian debt-refinancing scheme agreed upon in principle, a “special purpose company” will be set up as early as April by the private-sector Japanese creditors, according to the sources.

The newly created company will borrow $500 million from the government-affiliated Export-Import Bank of Japan as well as Japanese commercial banks, and will then lend the money to Iran, the sources said. Up to 50 percent of the new Iranian loan will be covered by the Japanese government-run trade insurance system.

Iran will repay the fresh $500 million Japanese loan in crude oil, instead of in cash, through the National Iranian Oil Co., a state-run entity that regulates everything in the Persian Gulf country’s oil business, from exploration to production to sale. The loan will be repaid over about five years after a 15-month grace period, the sources said.

Iran and the group of private-sector Japanese creditors are expected to finalize the Iranian debt-refinancing agreement by the end of March, the sources added. It will be the second time in several years that Japan has refinanced a portion of Iranian debts owed to private-sector Japanese companies.

Iran, a major crude oil supplier, reportedly had foreign debts worth some $16 billion as of last March. Foreign currency earnings from oil exports are a major source of funds used by Iran to repay its foreign debts.

But the Iranian government faces increasingly dire fiscal conditions and its external debt-repayment burden has grown sharply due to lower revenues from oil exports amid a continued slump in oil prices on the global marketplace.

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