Context: Iranian government had recently decided to proceed with the construction of the Chabahar-Zahedan railway project on its own, citing delays from the Indian side in funding and starting the project.
More on the news:
- Along with the rail link the ONGC’s foreign arm OVL is also out of the Farzad-B gas field exploration project.
- Iran also inaugurated the track-laying process for the 628 km Chabahar-Zahedan line, which will also be extended to Zaranj across the border in Afghanistan.
- The project is aimed at connecting Chabahar with Zahedan, the capital of southeastern Sistan-Baluchestan province.
- Iran cited policy changes by the Iranian government, Iran’s precarious finances, and the U.S. sanctions situation as the reasons for the above decisions by Iran.
Chabahar port project
- The project was signed in 2003, and it has been a symbol of traditionally important India-Iran ties.
- Connected by sea lanes to ports on India’s west coast, Chabahar would form the fulcrum of India’s outreach to Russia and Central Asia.
- The project is expected to enhance connectivity, energy supplies, and trade.
- Bypassing Pakistan
- Given that Pakistan had blocked Indian aid to Afghanistan and all trade over land, the Chabahar port provided India an alternative to permanently bypass its troublesome neighbor.
- Fast-tracking of project through MoU
- Indian PM was in Tehran in 2016 to sign a trilateral trade and transit agreement with Iran and Afghanistan.
- According to the MoUs, India would be granted a 10-year lease to develop and operate two terminals and five berths, access to the Chabahar free trade zone, and the opportunity to build the 628 km rail line from Chabahar to Zahedan.
- Progress of India’s main investment in the Chabahar Port
- India’s main investment in the Chabahar Port where it has taken over operations of one terminal, had progressed well in the last few years.
- The Indian government acted quickly to develop Chabahar port facilities and sent exports to Afghanistan in 2018.
- It has moved over half-a-million tonnes of cargo, including grains and food supplies, for Afghanistan again, through the port.
- The port is currently handling 82 ships with 12 lakh tonnes of bulk cargo in 8200 containers since December 2018.
- Proactive measures are also currently underway to increase the usage of Chabahar Port, both for Afghanistan and Central Asia.
- Along with that, it was India’s Border Roads Organisation that helped build the 218 km Route 606 in Afghanistan, known otherwise as the Delaram-Zaranj highway, that cut road travel time between Afghanistan and Iran.
Chabahar-Zahedan railway project
- Indian Railways Construction Ltd (IRCON) had promised to provide all services, superstructure work, and financing for the project (around $1.6 billion).
- Fear of US sanctions and no beginning of the actual work
- The U.S. government in fact had provided a sanctions waiver for the Chabahar port and the rail line to Zahedan.
- However, it has been difficult to find equipment suppliers and partners due to worries they could be targeted by the U.S.
- On the other hand, India has already “zeroed out” its oil imports from Iran due to U.S. sanctions.
- There is a difficulty under the sanctions regime in finding international suppliers for material.
Farzad-B gas field project
- For the project ONGC had originally signed an agreement for exploration in 2002, investing approximately $100 million.
- However, In January 2020, India was informed that in the immediate future, Iran would develop the field on its own and it would like to involve India appropriately at a later stage.
Background of Iran-China relations
- The nuclear program
- Through the 1980s and ’90s, China provided direct assistance to Iran’s nuclear and missile development programs.
- After a 1997 commitment to US President Bill Clinton by Chinese President Jiang Zemin, China stopped further assistance to the program and sales of complete missiles, but Iran by then had progressed sufficiently to carry on.
- With the US under the Trump administration walking out of the nuclear deal with Iran in 2018, Beijing has moved in to negotiate broader and deeper ties with Iran.
Growing nexus between Iran and China
- Strained relations of both countries with U.S
- Currently, both countries are at odds with the U.S and this common ground has enhanced closeness between the two.
- Strategic Partnership
- Iran and China are close to finalizing a 25-year Strategic Partnership which will include Chinese involvement in Chabahar’s duty-free zone, an oil refinery nearby, and possibly a larger role in Chabahar port as well.
- It is a long-term strategic partnership agreement with energy, economic, logistical and military aspects.
- It will allow China to expand its presence in banking, telecommunications, ports, railways, and several other sectors in Iran in return for heavily discounted oil for 25 years.
- China and Iran would launch joint training exercises, joint research and weapons development and intelligence sharing.
- China will also offer its GPS to Iran, build infrastructure for 5G rollout and develop free trade zones.
- Iran will also commit oil and gas supplies to China during that period.
- This agreement could be an economic lifeline for Iran, and China could enhance its strategic influence in a region where the U.S. has built a strong presence since the Second World War.
- Currently, Iran is grappling with a struggling economy hit by sanctions following the unraveling of the nuclear deal.
- Iran is already a signatory of China’s Belt and Road Initiative (BRI), and this is in line with China’s “debt-trap diplomacy”.
- Tie-up between the Pakistani port at Gwadar and Chabahar
- Iran had also proposed a tie-up between the Chinese-run Pakistani port at Gwadar and Chabahar last year.
- Iran has offered interests to China in the Bandar-e-Jask port 350km away from Chabahar, as well as in the Chabahar duty-free zone.
Iran’s Look East Policy
- Such agreements are fully in the line with Iran’s publicly declared ‘Look East Policy’ and suggest that Iran is determined to expand its relations with all Asian partners and in particular China and India as two friendly countries.
- Iran has promised that India will remain among Iran’s friends and “would be welcomed as a friend.”
Concerns for India
- Security and military partnership
- The deal calls for joint training and exercises, joint research and weapons development and intelligence sharing, this might be an area of concern for India.
- Initial reports in Iran have suggested that Beijing will deploy 5,000 security personnel to protect its projects in Iran.
- Some reports suggest Kish Island in the Persian Gulf, located at the mouth of the Strait of Hormuz, maybe “sold” to China.
- Strategic stakes over Chabahar port
- India has already committed Rs 100 crore in the last Budget for the project.
- However, the port is close to the Gwadar port in Pakistan, which is being developed by China as part of its China-Pakistan Economic Corridor.
- US sanctions
- While India got a waiver from US sanctions for the development of the Chabahar port it is still not clear whether railway and other projects are exempt from sanctions.
- India has committed to supplying tracks and rakes for the rail project. However, since steel is not exempted, India feels it will wait for the US to make a concession before it decides to provide tracks and rakes.
- India’s receding influence
- The Iran-China deal also impinges on India’s “strategic ties” with Iran and the use of Chabahar port.
- Bandar-e-Jask port lies to the west of Chabahar & right before the Straits of Hormuz. China would also thus extend its control along the Pakistan-Iran coast.
- Questions on strategic autonomy of India:
- The impression that India wavered due to U.S. pressure, especially after India canceled oil imports from Iran, also questions India’s commitment to strategic autonomy.
Need to act quickly
- Chabahar will not be the first time delays in the completion of ambitious infrastructure projects undertaken by India in the region have inflicted setbacks on Delhi’s strategic goals.
- From Nepal to Myanmar, Sri Lanka and Iran, India has made commitments on building power projects, highways, railways, and other infrastructure. Each proceeds slowly or not at all.
- The Pancheshwar Dam project in Nepal, for instance, has been hanging fire since 1991.
- A still to be completed trilateral highway between India, Myanmar and Thailand has been overshadowed by a Chinese-built highway that has boosted China-Myanmar border trade.
- The Chabahar project is important for New Delhi’s regional goals, and for its relations with Iran. That is reason enough to act quickly.
- Mutual benefits:
- It is true that China has a greater capacity to resist U.S. sanctions compared to India but Iran realizes the advantage of working with its only partner that enjoys a sanctions waiver from the U.S. for Chabahar since it provides connectivity for land-locked Afghanistan.
- Iran and India also share an antipathy to a Taliban takeover in Afghanistan. This is why Iran would like to keep the door open.
- The key for India is to continue to remain politically engaged with Iran so that there is a better appreciation of each other’s sensitivities and compulsions.
Image Source: Mint