Reuters reports that Chinese carmaker SAIC-Chery Automobile Co has said that it has signed an agreement with Iranian car components producer SKT to manufacture jointly up to 30,000 cars a year in Iran.

According to Reuters, the company said in a statement that this was the first time the Iranian government had approved a car production venture in almost two decades.

Chery is said to be interested in setting up a plant in Iran to make its A11 model. Reuters said that the factory would be based in Mashad in northeast Iran.

A Chery spokesman told Reuters that the cars would only be supplied to the domestic Iranian market.

Reuters points out that the deal involves the transfer of technology from the Chinese firm to Iran, which has turned to other developing countries because it ability to attract foreign investment has been frustrated by U sanctions.