Published in The Hindu on 18th July, 2020

Recent reports that Iran’s Transportation Minister Mohammed Eslami had launched the track laying programme for the 600 km long rail link between Chabahar and Zahidan last week sparked concerns that India was being excluded from the project. Iran has since clarified that it is not the case and India could join the project at a later stage. This keeps the door open for IRCON
which has been associated with the project even as India continues with the development of Chabahar port.

Connectivity for Afghanistan
Providing connectivity for Afghanistan through Iran in order to lessen its dependence on Karachi port has enjoyed support in Delhi, Kabul and Tehran since 2003. Chabahar port on Iran’s Makran coast, just 1000 kms from Kandla, is well situated but road and rail links from Chabahar to Zahidan and then 200 kms further on to Zaranj in Afghanistan, need to be built. With Iran under sanctions during the Ahmedinejad years (2005-13), there was little progress. IRCON had prepared engineering studies estimating that the 800 km long railway project would need an outlay of $1.5 billion. Meanwhile, India concentrated on the 220 km road to connect Zaranj to Delaram on the Herat highway. This was completed in 2008 at a cost of $150 million.

Things moved forward after 2015 when sanctions on Iran eased with the signing of the JCPOA. An MOU was signed with Iran during Prime Minister Modis’s visit to Tehran in 2016 to equip and operate two terminals at the Shahid Beheshti port as part of Phase I of the project. Another milestone was the signing of the Trilateral Transit and Transport Corridor treaty between Afghanistan, Iran and India. In addition to $85 million of capital investment, India also committed to provide a line of credit of $150 million for port container tracks. Phase I was declared operational in 2018 and India’s wheat shipments to Afghanistan have been using this route. An SEZ at Chabahar was planned but re-imposition of US sanctions has slowed investments into the SEZ.

India was given a waiver from US sanctions to continue cooperation on Chabahar as it contributed to Afghanistan’s development. Despite the waiver, the project has suffered delays because of the time taken by US treasury to actually clear the import of heavy equipment like rail mounted gantry cranes, mobile harbour cranes etc. With regard to the rail-track project, a financing MOU was signed under which India undertook to provide $500 million worth of rolling stock and signalling equipment including $150 million of steel rail tracks. In fact, the railway tracks currently being laid are those supplied by IRCON. Iranian responsibility was for local works of land levelling and procurement. The MOU between IRCON and Construction and Development of Transport Infrastructure Co expired last year. Further, the Iranian company undertaking some of the works, Khatab al Anbiya was listed by the US as Special Designated Entity leading IRCON to suggest to the Iranians to appoint another contractor.

Meanwhile, Iran has ambitious plans to extend the railway line from Zahidan to Mashad (about 1000 kms) and then another 150 kms onwards to Sarakhs on the border with Turkmenistan. Another plan is to link it with the INSTC towards Bandar Anzali on the Caspian Sea. In 2011, a consortium of seven Indian companies led by SAIL had also successfully bid for mining rights at Hajigak mines in Afghanistan that contain large reserves of iron ore. However, developments at Hajigak remain stalled because of the precarious security situation in Afghanistan continues.

Why Iran Needs China
In 2016 January, just as sanctions were eased, Chinese President Xi Jinping visited Tehran and proposed a long term comprehensive, strategic partnership programme that would involve Chinese investment in Iranian infrastructure and assured supplies of Iranian oil and gas at concessional rates. Reluctant to be tied in too close a Chinese embrace, Iran kept the negotiations going for years. China patiently permitted a limited barter trade; SINOPEC prolonged its negotiations on developing the Yadavaran oilfield while CNPC pulled out of the South Pars gas project last year, after initially promising to take over the French company Total’s stake.

Meanwhile tensions in the region have been growing since last year with missile strikes in Saudi Arabia claimed by the Houthis and a US drone strike in January killing IRGC chief Gen Qassim Soleimani. During the last four weeks, there have been more than half a dozen mysterious explosions including at the ballistic missile liquid fuel production facility at Khojir, advanced centrifuge assembly shed in Natanz and the shipyard at Bushehr. Reports attribute these to US and Israeli agencies in an attempt to provoke Iran before the US elections.

In May, US announced that it wanted UN Security Council to continue the ban on Iranian acquisition of conventional weapons. UNSC Resolution 2231 was adopted in July 2015 by consensus to endorse the JCPOA and contains a 5-year restriction on Iran’s importing conventional weapons that ends on 18 October. Even though US unilaterally quit the JCPOA, it is threatening to invoke the automatic snapback of sanctions provisions of JCPOA. UK and France have criticised US duplicity but are unlikely to exercise a veto. At the same time, Iran hopes that November may bring about a change in the White House that opens options for dialogue.

Iran’s Balancing Act
Just as it has been a tricky exercise for India to navigate between US and Iran to keep the Chabahar project going, the Rouhani administration has found it difficult balancing act to manage the hardliners at home while coping with Trump administration’s policy of ‘maximum pressure’.

Russia and China are the only countries to veto US moves in the UN Security Council. Even so, the Iran- China comprehensive, strategic partnership roadmap has run into opposition in the Majlis. After the recent elections, the Reformists are down from 120 seats to 20 while the Principlists (Conservatives) are up from 86 to 221 seats in a house of 290 members. A former IRGC Air Force commander Mohammed Ghalibaf, former Mayor of Tehran who ran unsuccessfully for President against Rouhani in 2013 and 2017 has been elected the new Speaker. Hard liners have accused Foreign Minister Zarif of undue secrecy surrounding the agreement amid rumours that China may be taking over Kish island and that Chinese troops would be stationed in Iran to secure Chinese companies and investments.

Iran may well be considering a long-term partnership with China but Iranian negotiators are wary of growing Chinese mercantilist tendencies. It is true that China has greater capacity to resist US sanctions compared to India but Iran realises the advantage of working with its only partner that enjoys a sanctions waiver from US for Chabahar since it provides connectivity for land-locked Afghanistan. Iran and India also share an antipathy to a Taliban takeover in Afghanistan. This is why Iran would like to keep the door open. Nevertheless, India needs to improve its implementation record of infrastructure projects that it has taken up in its neighbourhood. There are numerous tales of Indian cooperation projects in Nepal, Bangladesh, Sri Lanka, Myanmar etc suffering delays and cost over-runs that only make it easier for China to expand its footprint in our neighbourhood. The key is to continue to remain politically engaged with Iran so that there is a better appreciation of each other’s sensitivities and compulsions.