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China-Iran proximity costs India major gas field; risks losing high strategic value Chabahar rail

Amid reports that Iran has already dropped India from the Chabahar-Zahedan rail line, Iranian news agency quoted Farhad Montaser, a deputy to Iran's Ports and Maritime Organisation clarified that Iran had not inked any deal with India related to the rail link

Nirbhay Kumar | July 16, 2020 | Updated 21:38 IST
China-Iran proximity costs India major gas field; risks losing high strategic value Chabahar rail
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Key Highlights

  • India's move to develop Farzad B gas field and a strategic rail link under Chabahar-II in Iran have landed in troubled waters
  • Ministry of External Affairs (MEA) statement says Iran in January this year informed that it will initially develop the field on its own, and involve India appropriately at a later stage
  • Iran has signalled that it may prefer local companies over Indian firms but no official communication has come so far
  • While ONGC's overseas arm OVL was frontrunner for developing Farzad B gas field, Indian Railways controlled IRCON had signed MoU to finance and execute Chabahar-Zahedan Railway project
  • India and Iran have maintained cordial relations despite pressure from the US, but Tehran has now shown its tilt towards Beijing

India's plan to develop two key projects -- Farzad B gas field and a strategic rail link under Chabahar-II -- in Iran has come under a cloud as proximity of the energy-rich nation with China grows.

Highly-placed sources say signals from Iran suggest that the two projects may not be offered to Indian companies. However, no official communication has been received so far.

"Farzad B is a gas field in Iran where OVL (overseas arm of oil and gas behemoth ONGC) is part of the consortium along with two other Indian companies. Exploration was done by OVL and some discoveries were made. In the next stage when extraction had to take place, the discussion was taking place but in the meantime sanctions were imposed by the US on Iran," an official said.

"After that no pact could be reached. Now, Iran wants to develop that block through some local company, which they can do as there is no agreement with our company," he added.

Another official familiar with the rail line project said there is no final word on it, and hence it can be assumed that India is still in the fray.

An official Ministry of External Affairs (MEA) statement says that in January this year Iran had informed that it would develop the field on its own and would like to involve India appropriately at a later stage.

The MEA said that follow-up bilateral cooperation was impacted by policy changes on the Iranian side.

"This matter remains under discussion," the statement said.

On the proposed railway line the MEA said that IRCON had completed the site inspection and reviewed the feasibility report.

"Detailed discussions were thereafter held on other relevant aspects of the project, which had to take into account the financial challenges that Iran was facing. In December 2019, these issues were reviewed in detail at the 19th India-Iran Joint Commission Meeting in Tehran. The Iranian side was to nominate and authorised entity to finalise outstanding technical and financial issues. This is still awaited," the MEA readout noted.

Amid reports that Iran has already dropped India from the Chabahar-Zahedan rail line, Iranian news agency quoted Farhad Montaser, a deputy to Iran's Ports and Maritime Organisation clarified that Iran had not inked any deal with India related to the rail link.

While Montaser has maintained that a deal had not been signed for the rail project, Indian Railways arm IRCON had earlier said that they expected to work on the rail project as it had had also been exempted from US sanctions along with Chabahar port project carried out by India Ports Global Pvt Ltd (a consortium of Jawaharlal Nehru Port Trust and Kandla Port Trust).

On being asked about the progress on the Iran rail project during an investor call on 14th November 2018, IRCON International Chairman and Managing Director SK Chaudhary had said he hoped that work on the proposed line would start.

"Yes definitely, government is studying those things in detail and some meetings are going on and it is not only the port, the railway lines also have been exempted from this. We hope that the work will start," he had said referring to US sanctions.

In its Annual report for 2016-17, IRCON said it had signed a MoU with Construction and Development of Transportation Infrastructure Company (CDTIC), a company owned by Government of Iran, for the financing and execution of Chabahar-Zahedan Railway project.

Following the outbreak of the coronavirus pandemic, US and other affected countries have questioned the handling of the deadly virus by China and have cornered it for allegedly hiding crucial information about the contagion. This seems to have divided the world with countries converging around either US or China. In recent months, India has gravitated towards the US and the recent tensions at Line of Actual Control (LAC) with China have further amplified the pull.

While India and Iran have maintained cordial relations despite pressure from the US, the latter has now shown its tilt towards China.

The two countries are reported to have drafted a comprehensive military and trade partnership. The pact is expected to bring Chinese investments worth $400 billion in key sectors including energy and defence over the next 25 years.

Riding strong ties over the years, India has been a strategic trade partner of Iran and participated in the development of the first phase of Shahid Behesti Port in Chabahar. Indian company India Ports Global Ltd took over port operations in December 2018 and has successfully handled cargo since then.

As part of the agreement, India was to extend grant assistance of nearly $85 million and a credit facility of $150 million for Chabahar Port development.

In line with the Tehran Declaration of 2001 and the New Delhi Declaration in 2003, the two countries had agreed to boost regional connectivity, including the development of Chabahar Port.

Accordingly, India participated in the development of Chabahar port and agreed to construct two terminals (five berths) as per the terms under the Inter-governmental MoU with Iran on 5th May 2015. The MoU envisages construction of a multi-purpose cargo terminal (600 mtrs length) and a container terminal (640 mtrs length).

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