India Shunted Out of Key Iran Railway Project as China’s Shadow Looms in the Background

India shunted out of key Iran railway project as China’s shadow looms in the background. Iran said that India was delaying funding and other associated aspects, learned citing ET.

india shunted out of key iran railway project

A high-profile, big-ticket, much-touted Indian project with one of its oldest allies may have run into trouble. And although there is no clarity yet, there are whispers about a familiar rival pulling the strings behind the scene.

According to a report by The Hindu, Iran has decided to go it alone on the rail line from Chabahar port to Zahedan — the project that was slated to be carried out with Indian assistance.

As the reason for the cancellation of the project, Iran said that India was delaying funding and other associated aspects. The unexpected development comes four years after the two sides had reached an agreement to construct the 628 km rail line along the Iran-Afghanistan border.

Iran has already inaugurated the track-laying process, The Hindu reported. The line, which as per the plan will eventually reach Zaranj in Afghanistan, is supposed to completed by March 2022.

Iran’s decision to cancel India’s participation in the project, coming in the backdrop of a fast-moving strategic deal with China, could soon whip up a storm in diplomatic circles.

It may be noted here that China and Iran are giving final shape to a colossal partnership package worth $400-billion, to be spread over the next two decades and a half.

Backstory of Iran India Railway Project


Iran has announced that it will pool $400 million from the Iranian National Development Fund to go ahead with the rail line without Indian help.

It was to be carried out by way of a tie-up between Indian Railways Construction Ltd (IRCON) and the Iranian Railways as part of a trilateral project among India, Iran and Afghanistan.

The deal had been reached during PM Modi’s 2016 Iran visit to sign the Chabahar pact. The stated objective was to set up a new trade route to Afghanistan and Central Asia — a transit and transportation corridor.

As per the pact, IRCON had promised to provide $1.6 billion for “all services, superstructure work and financing”, the Hindu report noted.

A rail line exposes fault lines
The preparatory phase had kicked off smoothly with Indian engineers visiting the site many times. Iranian Railways had also begun its work in earnest.

But shortly thereafter, clouds began gathering over Iran in the wake of US sanctions, and as India was apparently apprehensive of possible US reprisals, IRCON never really started any work.

To be sure, the US had afforded Iran a waiver for the Chabahar port and the rail line in question. But fears of possible targeting by the US soon put paid to the search for equipment suppliers and project partners.

Neither the Indian govt not IRCON had any comment to make on the issue, the report said. An official, however, told the newspaper that “India could still join the project at a later date”.

Enter the dragon
The matter has assumed strategic significance after the sudden emergence of China on the Chabahar scene. Under the aforementioned partnership deal, China will assist Iran in “Chabahar’s duty free zone, an oil refinery nearby, and possibly a larger role in Chabahar port as well,” as per the report by The Hindu.

It also quoted leaked papers to say that the upcoming deal will facilitate Chinese investments in “infrastructure, manufacturing and upgrading energy and transport facilities, to refurbishing ports, refineries and other installations.”

Importantly, the agreement with commit Iran to supplying oil and gas to China for the whole duration.

Although Iran has denied the possibility, there are reports that the Chabahar port could eventually be leased out to China. Such a move, if it happens, will greatly help China “extend its control along the Pakistan-Iran coast,” The Hindu said quoting a former Indian Ambassador to Iran.

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