Iran drops India from the Chabahar rail project.

#GS2 #International relations

What is the issue?

  • Four years after India and Iran signed an agreement to construct a rail line from Chabahar port to Zahedan, along the border with Afghanistan, the Iranian government has decided to proceed with the construction on its own, citing delays from the Indian side in funding and starting the project. 
  • The development comes as China finalises a massive 25­year, $400 billion strategic partnership deal with Iran, which could cloud India’s plans.

The Project

  • The railway project, which was being discussed between the Iranian Railways and the state­owned Indian Railways Construction Ltd (IRCON), was meant to be part of India’s commitment to the trilateral agreement between India, Iran and Afghanistan to build an alternate trade route to Afghanistan and Central Asia.
  • Indian Railways Construction Ltd (IRCON) had promised to provide all services, superstructure work, and financing for the project (around $1.6 billion).

Reason

  • India never began the work, ostensibly due to worries that these could attract U.S. sanctions.
  • Although the U.S. had provided a sanctions waiver for the Chabahar port and the rail line to Zahedan, but it has been difficult to find equipment suppliers and partners due to worries they could be targeted by the U.S., said officials.

Iran-China growing close

  • Iran proposed a tie­up between the Chinese-run Pakistani port at Gwadar and Chabahar last year.
  • Iran has also offered interests to China in the Bandar­e­Jask port 350km away from Chabahar. 
  • 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 being said that the cooperation will extend from investments in infrastructure, manufacturing, and upgrading energy and transport facilities, to refurbishing ports, refineries, and other installations.
  • It will also commit Iranian oil and gas supplies to China during that period.

Impact on India's Interests

  • The Iran-China deal 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 Straits of Hormuz. China would thus extend its control along the Pakistan-Iran coast.
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