Germany’s government-owned development bank KfW Import-Export Bank (Ipex) is to provide Iran a €1.2bn ($1.27bn) credit line to help finance the redevelopment of a railway line, according to a report on 27 November by news agency Bloomberg.

The rail line to be funded is most likely the one that links the capital Tehran with Mashhad, Iran’s second largest city.

Germany’s Siemens signed in January several agreements with Iran to develop its railway network, including the electrification of the Tehran-Mashhad railroad.

“The funding has been agreed in principle and is close to being finalised,” the Bloomberg report said, citing an interview with Michael Tockuss, chairman of the Germany-Iran Chamber of Commerce.

Once finalised, the KfW Ipex credit line would be the largest that Iran has secured from foreign sources since the easing of nuclear-related sanctions in January.

The German bank has declined to confirm the transaction citing banking secrecy policies.

Siemens, through its local partner Mapna Group, is expected to provide the signalling equipment, electric locomotives, passenger train coaches and the related maintenance services for the proposed railroad projects.

The state earlier signed a $1.2bn financing deal with the Russian government to upgrade an ageing rail line that links north-central Iran with its northeastern border with Turkmenistan.

Iran has a mainline rail network covering more than 10,000 kilometres, merely 181km of which is electrified.

On 25 November, two trains collided in Iran’s northern province of Semnan resulting in more than 40 fatalities with nearly 100 injured, local and international media have reported. Mohsen Poor-Seyed Aghaie, head of Iranian Railways and a deputy transport minister, has resigned as a result of the accident.