Image Courtesy: Jerusalem Post
Article 28/2020
Two weeks ago, when Afghanistan transited 76 Twenty-Foot Equivalent Units (TEU) of cargo via Chabahar to India, it was considered to be a landmark event in the two-way movement of goods through the Iranian port. Shortly after, Iran also agreed to link the Chabahar port with the Free Trade Zone, a move that was welcomed by India. They had also planned to re-commence constructing the proposed USD 1.6 billion rail project along with the state-owned IRCON, connecting Chabahar and Zahedan, of which India was a part. These developments showed positive signals for long-standing Indian ambitions of a trade connectivity route via Chabahar facilitating trade to Afghanistan and the Commonwealth of Independent States (CIS), and further with Russia. However, Iran had other plans. Citing delays in the allocation of proposed funds for the rail project, Iran dropped India from the initiative as the country was to invest only 400 million from its development fund for the same, as opposed to the 400 billion dollars from China, with whom they have recently signed a deal for 25 years of strategic partnership.
Since the signing of the tripartite treaty between India, Iran, and Afghanistan in May 2016 on the usage of Chabahar port for transit, the proceedings on the development of the terminal delayed overtime. India made its first shipment delivery via the port in 2017. Over the last couple of years, there were many hindrances in the region, be it the Iranian sanctions, the tensions between the United States and Iran in the Strait of Hormuz or the Afghan Peace process, among others. Excluding these, one major drawback that India bore was the improper deployment of the allocated of funds, over the years. Despite allocating the sizeable amount of around INR 395 crores since 2016, India was able to spend only an approximate of INR 5.5 crores until September 2018 as per official data. It might have been one among the concerns for the host nation, but it may also be that the Iranian coastal region was hostile due to various geopolitical tensions since mid-2019. Moreover, there could have been some progress in fund usage, especially during the non-sanction period, considering that India was a premium customer for Iranian oil until May 2019, which was the focus of their bilateral relations until then. Dropping India from the rail project seems to be a pre-determined decision by Iran, as it has in the past offered the port to China; they have already invested in various sectors within the Persian state in the last few years. China’s proposed USD 400 billion investment in several projects is almost in the final stages.
Iran is not entirely to blame. Their domestic economy, since the sanctions, has witnessed a decline and now with the pandemic, has only worsened. Being an oil-based economy, their only trade since May 2019 was with China. And they have been supportive, by importing oil generously. What Iran requires are investments in its private sector and pumping of cash into the economy and would welcome anyone who could provide that. Currently, it was only China who could deliver a fiscal stimulus while challenging the US at the same time. Although India was keen with budget allocation announcements relating to the project’s development over the years, it has taken Iran for granted. India’s continuous knocking on the subject came up in various bilateral level meetings as well. However, it seems like India lost the bus mid-way as it knew that monetary obligation would play a defining role in the infrastructural project where fiscal allocation is vital considering its geostrategic importance.
Over the years, China has been knocking the doors of Iran for further cooperation in strategic issues, but Chabahar remained untouched for long because it was a prospective cog in India-Iran relations. However, India should have anticipated this move from Iran and should have taken the project more seriously as this would have catered to the regional strategic element that India was searching for through investment in connectivity project for decades. In the current age, connectivity projects are like a new floating currency that could increase their forex and change their fortune. Now, in the future, if India needs to send consignments to Afghanistan, they will have to use the Iran-Chinese railway link which would be cost-effective yet seem like an indirect linkage to the Belt and Road Initiative (BRI).
Considering the situation, the benefits India might have lost due to this deal are as follows: A crucial setback would be that of the access, convenience and cost that would have been feasible and affordable. Firstly, the rail-road facilities would have facilitated the continuous movement of goods and services, saving time and cost. Secondly, a shorter and cheap route, bypassing Pakistan and China, would aid the trade to Afghanistan and the Commonwealth of Independent States (CIS) respectively. Thirdly, as the Chabahar port is getting linked with the Free Trade Zone (FTZ), more Indian companies would have considered investing in it. Fourthly, the strategic location of Chabahar would have provided direct access to the international waters in the region as the Gwadar port in Pakistan, where the Chinese have already invested, is located just approximately 170 kilometres away, thus lowering its strategic value. The fifth is the revival of the International North-South Transport Corridor (INSTC) connecting Russia and promoting local businesses along the corridor. And finally, a possible proposal for an underground oil and gas route linking Russia, Central Asia and Chabahar. Regardless of the reasons behind India’s non-ability to be part of the rail link, the country has lost a golden opportunity while allowing for Chinese gains in the region.
It is time that India must realize that in international relations there are no permanent friends. There will be friends with benefits, but it also depends on the financial capabilities of the nation. India’s traditional influence has now found its northern adversary as an economic stimulator to revive Iran from the drowning economic state of affairs it suffered due to the US sanctions. With the Iranian presidential elections to be held in the following year, can India have hope in regaining the rail link? Chances are slim, given the strategic interests that China holds in Iran. In the current frame of things, even for the slightest of chances, India has to fasten its seatbelts if it has to conserve its strategic interests in the region through clandestine meetings and diplomatic channels. Perhaps this should be considered as an awakening call to revise India’s foreign policy objectives, promises and implementation of its interests invested in the region.
(Vishakh Krishnan Valiathan is a Research Assistant at Centre for Land Warfare Studies (CLAWS), New Delhi. He can be reached at vishakh94@gmail.com. The views expressed are personal.)
