China bags Iran’s friendship with a loan⁠ — costs India the crucial Chabahar port project

China bags Iran’s friendship with a loan⁠ — costs India the crucial Chabahar port project
  • Iran drops India from the Chabahar rail project citing funding delays.
  • The development comes on the backdrop of Iran inking a $400 billion strategic partnership with China.
  • The China-Iran deal may give China more access to the Indian Ocean region.
Iran has dropped India from the Chabahar rail project. The rail line from Chabahar port to Zahedan was going to be India’s magnum opus as the bridge between India, Iran, Afghanistan and Central Asia.

Tehran’s decision has come within days of China finalising a huge $400 billion strategic partnership deal with Iran that will span over 25 years, which could shift the balance of power in the Indian Ocean in China’s favour.

Tehran’s excuse
The Iranian government cited funding delays from the Indian side for the $8 billion project that will run a rail line from the Chabahar port to Zahedan, which lies along the border of Afghanistan. This is a huge blow for India, which saw the port as a counterbalance to the Gwadar in Pakistan, which was built and run by China as a part of its China-Pakistan Economic Corridor (CPEC).

China bags Iran’s friendship with a loan⁠ — costs India the crucial Chabahar port project
Sister ports of Chabahar and GwadarGoogle Earth/BI India

“For India, an extensive economic and security pact between Iran and China raises some critical concerns,” writes the Observer Research Foundation’s (ORF) Kabir Taneja. The distance between Pakistan’s Gwadar port and Iran’s Chabahar ports are often referred to as ‘sister ports’ with only a distance of 172 kilometres between them.

Officials told The Hindu that the project will now be completed by March 2022 without India’s assistance, using $400 million from the Iranian National Development Fund.

India may have dragged its feet on the project due to the fear of US sanctions
The Chabahar trilateral agreement — between Iran, Afghanistan and India — was meant to serve as an alternative trade route to Afghanistan and Central Asia.

Last week, Iranian Transport and Urban Development Minister Mohammad Eslami inaugurated the track-laying process for the Chabahar-Zahedan line, the first phase which will be extending to Zaranj across the border in Afghanistan.

Meanwhile, Iran has been facing the US’ ‘maximum pressure’ policy in the form of crippling sanctions and military options being laid on the table. So despite several site visits by Indian Railways Construction (IRCON) engineers, India never began work on the site for the fear of attracting US sanctions on New Delhi.

During the Manmohan Singh and Barack Obama era, India had already ‘zeroed out’ its oil imports from Iran leaving little else to negotiate with.

The Iran-China deal and the Indian Ocean
For Iran, the finalisation of the strategic partnership with China is a much-needed lifeline. The $400 billion will go a long way as investments in Iran’s oil and gas, infrastructure and transportation sectors.

After a near-war situation in Ladakh, where India and China share a border, the China-Iran deal will give China more access to the Indian Ocean region. It will be connected via Gwadar, Djibouti “and possible permanent military accesses arrangement with Iran,” said Taneja.