Written by 8:01 AM News

Iran drops India from Chabahar rail project ,cites fund delay.

The development comes as China finalises a massive 25-year, $400 billion strategic partnership deal with Iran, which could cloud India’s plans.

 Last week, Iranian Transport and Urban Development Minister Mohammad Eslami inaugurated the track-laying process for the 628 km Chabahar-Zahedan line, which will be extended to Zaranj across the border in Afghanistan. The entire project would be completed by March 2022, and that Iranian Railways will proceed without India’s assistance, using approximately $400 million from the Iranian National Development Fund. The Ministry of External Affairs and IRCON declined to comment on the issue.

However, despite several site visits by IRCON engineers, and preparations by Iranian railways, India never began the work, ostensibly due to worries that these could attract U.S. sanctions.India has already “zeroed out” its oil imports from Iran due to U.S. sanctions.

In late 2018, the US had granted a waiver for Chabahar and the construction of a railway line from the port to the Afghan border from sanctions under the Iran Freedom and Counter-Proliferation Act of 2012. However, banks had been reluctant to provide loans for buying heavy equipment worth some $85 million for the port because of the lack of a written assurance from the US, the people said.

Meanwhile, complicating matters further, Iran and China are close to finalising 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.

According to leaked versions of the 18-page “Comprehensive Plan for Cooperation between Iran and China”, being finalised by officials in Tehran and Beijing.

India’s allocation of Rs 100 crore for the strategic port on the Gulf of Oman in south-eastern Iran in the budget for fiscal 2020-21 and greater clarity on the US waiver for Chabahar from sanctions imposed on Iran have heightened expectations in Tehran that work on the project will now pick up pace.

There are potential plans to link Chabahar to Gawadar which would end up cutting India off from the Straits of Hormuz.

Iranian officials also suggested Chabahar port, where India took, will be leased to China. However, Iran proposed a tie-up between the Chinese-run Pakistani port at Gwadar and Chabahar last year, and has offered interests to China in the Bandar-e-Jask port 350km away from Chabahar, as well as in the Chabahar duty free zone.

The cooperation will extend from investments in infrastructure, manufacturing and upgrading energy and transport facilities, to refurbishing ports, refineries and other installations, and will commit Iranian oil and gas supplies to China during that period.

Each of the possibilities should be watched closely by New Delhi, said former Ambassador to Iran, K.C. Singh. “[The Iran-China deal] impinges on India’s “strategic ties” with Iran and the use of Chabahar port.

However, when asked if the MoU with IRCON had been cancelled, now that the project has been started without it, an official said, India could still join at a “later date.”

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