$400 billion China-Iran deal and concerns about India's Chabahar port project

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It took around five years for China to clinch a $400 billion deal with Iran. Chinese President Xi Jinping first brought it up during his visit to Iran in 2016, proposing to strengthen the ties between the two countries with a 25-year bilateral pact. That was around a year after the permanent five of the UN Security Council, along with Germany, signed the 2015 nuclear agreement with Iran. The deal mandated Iran to unwind its nuclear program opening it up for extensive international scrutinies, in return, the world powers assured it billions of dollars of sanctions relief. 

While the nuclear deal was thrown into jeopardy after Donald Trump pulled out the United States from the agreement in 2018, China, in the intervening period, laid the groundwork to extend its ambitious 'Belt and Road Initiative' to Iran and grow its economic and strategic influence across Eurasia.

But despite China's desperation, between 2016 and 2021, the negotiation for the deal moved at snail's speed. While Iran hoped that the deal with the P-5+1 would open the floodgates of foreign investments to develop its gas and oil fields, the critics inside Iran were wary of China's intentions, citing the situations in countries like Sri Lanka debt-trapped by the dragon.

Once Trump abrogated the nuclear accord and imposed new sanctions, Iran revived the negotiations with China expediting the process for a comprehensive pact. Finally, on 27 March 2021, both countries signed an overarching 25-year deal in which China has promised to invest $400 billion in Iran, in return, China will receive an uninterrupted and discounted supply of oil to bolster its economy.

The multi-hundred-billion dollar deal has set alarm bells ringing in the United States due to its ongoing tension with both China and Iran. While the move is being seen as an act of defiance against the US, it has also raised concerns in India if the deal will alter the India-Iran ties? Will it affect India's role in the development of the Chabahar port?

Chabahar India's gateway to Afghanistan and Central Asia

Situated on Iran's Makran coast in Sistan and Balochistan province, Chabahar port is considered as India's gateway to Afghanistan and Central Asia. A significant and secure transit trade route to landlocked countries like Uzbekistan and Turkmenistan avoiding rival  Pakistan. The port, for its location, being close to the Gulf of Oman and the Strait of Hormuz, is also seen as a strategic counter to Pakistan's Gwadar port.

While China has been developing Gwadar port under the China-Pakistan Economic Corridor (CPEC) project, India announced to build and operate Chabahar port investing $500 million. The deal was sealed during Prime Minister Narendra Modi's visit to Iran in 2016.

Alongside, an MoU was also signed between India and Iran to lay a 628 km railway line from Chabahar port to Zahedan (the capital of Sistan-Baluchestan province) at an estimated cost of $1.6 billion. Zahedan city is close to the Afghanistan border and the rail line is expected to ease the transport of goods from India.

Last year, after the draft of the China-Iran deal emerged in the media, several reports claimed that Iran had removed India from the Chabahar-Zahedan Railway Line project due to the fund deficits. But, soon enough, both India and Iran rubbished the reports, saying the relations between the two countries are independent of their relations with any other country. 

To bolster the bilateral cooperation, External Affairs Minister S Jaishankar met his Iranian counterpart Javad Zarif on his way to the SCO meet in September 2020, while Defence Minister Rajnath Singh met his counterpart Brigadier General Amir Hatami in Tehran returning from the SCO meet in Moscow.

Now India is expected to commence its full operations at Chabahar port by the end of May. India is building two terminals at the port including the Shahid Beheshti complex. And, according to the deal, India will operate the terminal for 10 years.

(Disclaimer: The opinions expressed in this article are those of the author. They do not reflect the views of India TV. The author can be reached on Twitter @iamomtiwari)