Bloomberg- Germany agreed to provide Iran with a 1.2 billion euro ($1.27 billion) credit line to help finance a rail project , according to an official at the Central Bank of Iran.

The facility --�through state-run lender KfW IPEX -- will help fund the development of the Tehran to Mashhad railway, the official said, asking not to be identified. German banks have also agreed to help fund power stations in the country, he said.

Iran has struggled to raise foreign financing for tens of billions of dollars worth of infrastructure projects it hoped it could get started after sanctions were eased 10 months ago. Large European banks have mostly kept their distance, worried that they could fall afoul of remaining U.S. sanctions, Iranian officials have said.

KfW IPEX, in an e-mailed statement, said it could �neither confirm any loan, credit line or similar transaction within Iran nor are we -- due to banking secrecy -- in position to comment on potential business or transactions under negotiation.�

The funding has been agreed in principle and is close to being finalized, Michael Tockuss, chairman of the Germany-Iran Chamber of Commerce, said in an interview in London, adding it would be the biggest credit line Iran has secured from foreign sources since the easing of sanctions in January.

�The idea is to choose projects that change the day to day reality for the average Iranian citizen, to make them feel that it makes sense to make international agreements,� Tockuss said. �It�s a frustration from our ministry of economy that the bigger banks aren�t stepping in.�

Siemens AG has signed several agreements with Iran to develop its railway network, including the electrification of the Tehran to Mashhad line, the state-run Islamic Republic News Agency reported in January.