Russia will develop an Iranian zinc deposit that is one of the largest in the world, according to a newspaper.
The two countries reached an agreement to develop the Mehdiabad zinc and lead deposit at a trade meeting this month that brought Russia's Energy Minister Sergei Shmatko to Iran, Russian business newspaper Kommersant reported.
The project's cost is estimated at $1 billion-$1.2 billion, the paper said, citing a source close to the talks.
Shmatko's office did not immediately comment on the report.
Kommersant said the deal, shepherded by powerful Deputy Prime Minister Igor Sechin, calls for a joint venture linking state conglomerate Russian Technologies with Iran's Saderat Bank, which faces U.S. and U.N. sanctions.
The source said Iran was insisting on participation of the state-owned export-focused Saderat Bank, which was named in a 2008 U.N. Security Council resolution, approved by Russia, that tightened sanctions on Tehran for its nuclear activities.
The Security Council urged states to "exercise vigilance" over the bank's activities abroad to avoid contributing to "proliferation-sensitive nuclear activities, or to the development of nuclear weapon delivery systems."
Two years earlier, the United States had barred the bank from any direct or indirect dealings with U.S. institutions citing it as a "significant facilitator" of the financial activities of the Islamist group Hezbollah.
Veto-wielding permanent member Russia has backed four successive rounds of Security Council sanctions against Iran over its nuclear programme, which Western nations fear is aimed at acquiring weapons.
But it has worked with China to water down the resolutions and has criticised additional sanctions imposed by the United States and European Union, saying they could undermine efforts to persuade Iran to rein in its nuclear activities.
While Russia is a member of the six-nations seeking to engage Tehran on its nuclear programme, it has warmer ties with Iran than Western nations do and has built the Islamic state's first nuclear power plant, which went on-line this month.
Under the U.N. resolution, vigilance over the bank's activities is limited to its activities abroad, limiting the scope for opposition to the reported project.
"Because the project is in the interest of Russian Technologies, I think the two sides will find a way out of the situation that has developed," the source said.
Russian Technologies declined to comment on the report.
The structure of any potential joint venture is not yet clear, Kommersant said.
Deposits at the Mehdiabad reserve, near Yazd in central Iran, amount to 394 million tonnes of zinc, lead and silver, it said.
Development rights until recently belonged to Mehdiabad Zinc Co, which had Australian partners, but the report said that its licence had been recently revoked.