Lost opportunity: On India losing Chabahar project 

INTERNATIONAL/ ECONOMY 

Topic: General Studies 2 and 3:

• India and its neighborhood- relations.
  
• Effect of policies and politics of developed and developing countries on India’s interests.

Lost opportunity: On India losing Chabahar project 

Context: 

Iran decided to proceed with the Chabahar port rail project by itself citing funding delays from India side in beginning and funding the project

Do You Know? 

• Chabahar port is located on the Gulf of Oman and is only 72 km away from the Gwadar port in Pakistan which has been developed by China. 
• The distance between Kandla and the Chabahar port is less than the distance between New Delhi and Mumbai. 
• The Chabahar port, signed in 2003, has been jointly developed by India, Iran, and Afghanistan. 
• The government sent exports to Afghanistan in 2018, and has moved over half-a-million tonnes of cargo, including grains and food supplies, for Afghanistan again, through the port 

Significance of Chabahar Port 

• It gives a boost to India’s bilateral ties with Iran which is a major oil supplier for India. 
• It will give India access to Afghanistan, Russia and Europe, thus circumventing Pakistan 
• The port and the rail project (Chabahar to Zahedan to Zarang near Afghanistan border) will enhance connectivity, energy supplies and trade 
• The port is also a key link in the International North South Transport Corridor (INSTC), a multi-modal network of ships, rail and road routes to move freight between India to Russia via Iran. 
• It will facilitate India’s role in Afghanistan’s development through infrastructure and education projects. 

Why the recent move by Iran is considered as setback for India? 

• India and Iran had agreed to construct 628km rail line from Chabahar port to Zahedan, which will be extended to Zaranj across the border in Afghanistan. 
• This rail line was considered by India as an alternate trade route to Afghanistan & Central Asia. 
• The state-owned Indian Railways Construction Ltd. (IRCON) had signed a MoU with the Iranian Rail Ministry in 2016 and promised to provide all services, superstructure work and financing (around USD 1.6 billion). 
• Iran’s latest action comes in the backdrop of Iran finalising a 25-year strategic partnership deal with China worth $400 billion, negotiated in secrecy. 

Reasons for Iran’s actions 

• Delay in Indian funding due to fear of US Sanctions: Despite several site visits by IRCON engineers and preparations by Iranian railways, India never began the work, worrying that it could attract sanctions by the USA. 
• Hiccups in bilateral relations: India has already zeroed out its oil imports from Iran due to USA sanctions. Bilateral ties with Iran took a hit in February 2020 after the riots in Delhi drew condemnation from Iranian 
• Difficulties in logistics procurement: The USA had provided a sanctions waiver for the Chabahar port and the rail line but it was difficult to find equipment suppliers and partners due to worries of being targeted by the USA 
• Better Deal with China: The $400 billion deal includes Chinese involvement in Chabahar’s duty-free zone, an oil refinery nearby and possibly a larger role in Chabahar port. 
• Growing Iran-China relationship: Iran proposed a tie-up between the Chinese-run Pakistani port at Gwadar and Chabahar in 2019 and offered interests to China in the Bandar-e-Jask port 350 km away from Chabahar, as well as in the Chabahar duty-free zone. 

Conclusion 

In a world where connectivity is seen as the new currency, India’s loss could well become China’s gain.  

Connecting the dots 

• String of Pearls Theory 
• Belt & Road Initiative of China