Explained: Iran Drops India From Chabahar Rail Project; Know How It Will Impact Trade Relations

Iran has taken the measure after four years since the project was finalised as part of a broader trilateral agreement citing delay in funding as the reason to withdraw the support.

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New Delhi: In a move that could hamper the relationships with India, Iran has decided to continue with the construction of a railway line from Chabahar port to Zahedan without any support from India citing delay in funding as the reason. Iran has taken the measure after four years since the project was finalised as part of a broader trilateral agreement, the report published in The Hindu revealed. As per the report, the entire project is expected to be completed by March 22 for which $400 million will be sanctioned by the Iranian National Development Fund. The point to be noted is that the project will now be finished without any assistance from India. What is the project? The railway line project was a part of India’s commitment to the trilateral agreement with Afghanistan and Iran to construct an alternate trade route to Afghanistan and Central Asia. It was during the visit of Prime Minister Narendra Modi to Tehran in 2016 where the agreement was inked with the Iranian President Hassan Rouhani and Afghanistan President Ashraf Ghani. Under the agreement, Indian Railways Construction Ltd (IRCON) had promised assistance to the railway line project besides financing worth $1.6 billion. The project didn’t take off as the United States imposed sanctions on Iran. Even as this particular project had a waiver, India found it hard to pick equipment suppliers who were worried about possible action from the US, as per the report. How does it impact trade relations? India has been out of the project at a time when Iran is seeking to finalise a 25-year economic and security partnership with China. The deal between Iran and China is worth $400 billion. The deal can prove to be a pre-cursor to China’s expansion in various sectors of Iran including banking, telecommunications, ports, railways and numerous other projects. In lieu of the deal, China will have access to heavily discounted supply of Iranian oil regularly for the next 25 years. An 18-page document listing the proposed agreement also talks about deeper military cooperation. However, Iran has remained a strategic partner for New Delhi, this deal comes as a blow for India’s trade engagement with the country. Amid India’s recent standoff with China, this would further worsen the relationship between the two neighboring countries.