Iran drops India from Chabahar rail project, cites funding delay: Report

The development comes at a time when Iran is seeking to finalise a 25-year economic and security partnership with China. The deal is worth $400 billion. 

• Iran has decided to construct Chabahar railway line to Zahedan on its own
• Iran has dropped India from the project citing funding delays
• There are possiblities that a multi-billion dollar deal with China influenced Iran’s decision

Iran has decided to move ahead with the construction of a railway line from Chabahar port to Zahedan without any assistance from India due to delay in funding. India has been dropped four years after the project was finalised as part of a broader trilateral agreement.

According to a report published in The Hindu, the entire project will be completed by March 22 and will $400 million will be sanctioned by the Iranian National Development Fund for the project. The project, however, will be completed without any assistance from India.

The railway line project was part of India’s commitment to the trilateral agreement with Afghanistan and Iran to build an alternate trade route to Afghanistan and Central Asia.

The deal was finalised during Prime Minister Narendra Modi’s visit to Tehran in 2016 after he signed an agreement with the Iranian President Hassan Rouhani and Afghanistan President Ashraf Ghani.

Indian Railways Construction Ltd (IRCON) had promised assistance to the railway line project besides financing worth $1.6 billion. However, the work was never started as the United States imposed sanctions on Iran.

And while there was a waiver on US sanctions for the specific railway line project, India found it hard to pick equipment suppliers who were worried about possible action from the US.

Iran-China deal connection

The development comes at a time when Iran is seeking to finalise a 25-year economic and security partnership with China. The deal is worth $400 billion.

The deal between Iran and China — if finalised — could result in a vast expansion of Chinese presence in various sectors of Iran including banking, telecommunications, ports, railways and numerous other projects.

In return, China will receive heavily discounted supply of Iranian oil regularly for the next 25 years. An 18-page document listing the proposed agreement also talks about deeper military cooperation.

Considering that Iran has been an important strategic ally for New Delhi, the deal could hurt India’s prospects in the region, especially at a time when its relations with China have soured further in the aftermath of the recent border standoff.