• Recently, the Iranian government has taken decision to proceed with the construction on its own, citing delays from the Indian side in funding and starting the project.

• This decision comes after four years of signing an agreement between India and Iran to construct a rail line from Chabahar port to Zahedan City.

• The decision by Iran came after it finalized a massive 25-year, $400 billion strategic partnership deal with China. This move of Iran can cloud India’s plan.

Background:

• In May 2016, India, Iran and Afghanistan signed the trilateral agreement which envisaged the establishment of Transit and Transport Corridor connecting the three countries and Chabahar port in Iran to be used as cardinal hub transportation.

• The agreement had the provision for the construction of a rail line from Chabahar port to Zahedan, along the border with Afghanistan which would serve as an alternate trade route to Afghanistan and Central Asia bypassing Pakistan.

• The state-owned Indian Railways Construction Ltd. (IRCON) had signed a Memorandum of Understanding (MoU) with the Iranian Rail Ministry for the development of the proposed railway line.

Reasons behind dropping of India:

• Despite several site visits by engineers, and preparations by Iranian railways, India never began the work, ostensibly due to worries that these could attract U.S. sanctions.

• Though the U.S. government had provided a sanctions waiver for the Chabahar port and the rail line to Zahedan, it has been difficult to find equipment suppliers and partners due to worries of getting targeted by the U.S.

• India has already “zeroed out” its oil imports from Iran due to U.S. sanctions.

• Iran and China are close to finalising 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. This may be a probable reason for India’ dropping.

• There is a rumor that the Chabahar port will be leased to China surpassing India.

Concerns for India:

• The closeness of Iran and China further worry India due to the vast expansion of Chinese presence in various sectors of Iran including banking, telecommunications, ports, railways and numerous other projects.

• The Iran-China deal is against India’s “strategic ties” with Iran and the use of Chabahar port.

• The Bandar-e-Jask port lies to the west of Chabahar & right before the Straits of Hormuz and China would thus extend its control along the Pakistan-Iran coast.