Iran has cancelled a $2 billion contract with China to build a hydro-electric dam and handed the project over to its Revolutionary Guards, media reported on Tuesday.

"The Iranian Central Bank has rejected the financial package proposed by the Chinese, and the energy ministry has decided to attribute the deal to Khatam al-Anbiya," the industrial branch of the Guards, Energy Minister Majid Namjou was quoted as saying by the Kayhan daily.

The project was for a 1,500-megawatt electricity plant and dam called Bakhtiari in southwestern Iran.

The decision represented a fresh blow to China's ever-closer economic relationship with sanctions-hit Iran, which has been seeking to fill the investment void left by departing Western companies in recent years.

Iran has already scrapped several big projects with China.

In October last year, for instance, it "suspended" a $15 billion deal with the China National Petroleum Corporation to develop the major North Pars gas field in the Gulf, saying the Chinese were not investing sufficiently quickly.

Western experts in Tehran estimate Chinese companies have so far injected less than 10 percent of the $50 billion dollars they have promised over the past five years to invest in various Iranian projects, most of them in the oil and gas sector.

Many contracts abandoned by Western firms have been attributed to Khatam al-Anbiya, which accounts for most of Iran's major infrastructure development, such as the building of roads, bridges, dams, ports and pipelines.

The Guards' company has contracts worth more than $25 billion in Iran's oil and gas sector, according to a figure given in 2001 by deputy oil minister Ahmad Qalebani.