Azerbaijan and Iran have reached a preliminary agreement for Azerbaijan to fund the construction of one section of a railway line that will eventually link the two countries.

The International Bank of Azerbaijan is understood to have agreed to issue $500m to fund the construction of the Rasht-Astara railway, a section of the railway line that will run from the Qazvin province, some 150 kilometres northwest of Tehran to Astara in the Islamic Republic’s Gilan province, close to the border with Azerbaijan.

While the general framework for the loan has been agreed between the two countries, discussions are ongoing with regard to the loan’s details and conditions, according to an Azerbaijan-based news agency, citing Ali Noorzad, deputy minister at Iran’s Roads and Urban Development Ministry.

It is estimated that the Rasht-Astara railway section could cost $1.1bn.

A railway in Astara that passes through territories in both countries is understood to be currently under construction.

Noorzad said the Qazvin-Rasht section of the railway “is 93 per cent complete” and is understood to be scheduled for completion by March 2017.

The construction of the Rasht-Astara railway link is expected take between three and four years, subject to the availability of funding and foreign investments, Noorzad said.

The Qazvin-Rasht-Astara railway is envisaged to become part of the so-called North-South international transport corridor. It aims to link Northern Europe and South-East Asia by connecting railways of Iran, Azerbaijan and Russia.

Preliminary estimates from Iran indicate that the corridor could initially transport three to five million tonnes of cargo annually, which could increase up to 10-12 million tonnes in future.