TEHRAN, March 14: Chinese company Sinohydro has signed a $2 billion deal to build a hydroelectric dam in Iran's southwest, state media reported on Monday.

Under the contract signed with Iran's Farabi, Sinohydro will construct a 315-metre (1,033 feet) high dam with a capacity of 1,500 megawatts on the border between Lorestan and Khuzestan provinces, said the website of state television.

China and Iran have become major economic partners in recent years, partly thanks to the withdrawal of Western companies in line with sanctions against the Islamic republic over its contentious nuclear drive.

Annual trade between the two nations is worth about $30 billion, according to Assadollah Asgaroladi, director of the Sino-Iranian Chamber of Commerce, who added the target was to raise this to $100 billion.

Last month, an Iranian public company said it signed a contract valued at about $13 billion with China to build more than 5,300 kilometres (3,300 miles) of railway lines in the country.

China has also significantly strengthened its presence in Iran's oil and gas sector by signing a series of contracts, in place of companies from the West and even Japan.

Iran is Opec's second largest oil exporter, and also has the second largest gas reserves in the world after Russia.—AFP