Implications of the Iran-China Deal on India

Implications of the Iran-China Deal on India
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China has recently finalized a massive 25-year, $400 billion strategic partnership deal with Iran. The deal, if implemented, would be much bigger than the present volume of the China-Pakistan Economic corridor (CPEC) and could adversely impact not only India’s grand strategy in Iran, but could also further undermine India's multi-dimensional, balancing act foreign policy in South Asia, Central Asia, and indeed in the Gulf region.

In a meeting held on June 21, the Iranian cabinet approved the final draft of the 25-year comprehensive cooperation with China. On June 29, the Foreign Ministry said the cooperation plan has not been finalized yet between the two countries. However, it was added that, the content of the agreement will be published later. Gholamreza Ansari, the Iranian Deputy Foreign Minister for economic diplomacy, who also served as Iran’s ambassador to India, announced that the details of the 25-year Iran-China cooperation plan will be published after the specifics will be finalized. He additionally expressed hope that the document would be fine-tuned and prepared soon for implementation. The Iran-China 25-year comprehensive cooperation plan is portrayed by the Iranian officials as a failure of the plots to isolate the Islamic Republic by the US and the other western powers.

The Rail Line Cancellation Saga

On May 2016, during the Prime Minister Narendra Modi’s visit to Tehran to sign the Chabahar agreement with the Iranian President Hasan Rouhani and the Afghanistan President Ashraf Ghani, the IRCON International Limited, a public sector construction firm from India signed an MOU with the Iranian Rail Ministry to construct a railway line from the Chabahar port to Zahedan, along the border with Afghanistan. The Indian media reported that the Iranian government has decided to proceed on its own with the construction, citing delays as the main problem from the Indian side in terms of funding and initiating the project. India later denied the claims that the agreement was signed between Iran and India; that the IRCON officials visited Iran only to conduct survey and discuss technical issues. Iran has already started the track-laying process for the 628 km Chabahar-Zahedan line, which will be extended to Zaranj across the border in Afghanistan. The entire project is expected to be completed by March 2022, with the estimated cost of $400 million. In the absence of the Indian financial assistance, the Iran Railway will utilise the Iranian National Development Fund for the project. The railway project, which was being discussed between the Iranian Railways and the IRCON International Limited, was meant to be part of India’s commitment to the Chabahar trilateral agreement- between India, Iran, and Afghanistan — and was also meant to serve as an alternative trade route to Afghanistan and Central Asia bypassing Pakistan.

India saw the Chabahar port as a counterbalance to the Gwadar port in Pakistan, which was built and run by China as a part of the China-Pakistan Economic Corridor (CPEC), a main artery of China's Belt and Road Initiative which India has already refused to join citing sovereignty issue.

Tehran has long been trying to enhance its strategic cooperation with New Delhi. Like any other regional power, Tehran does not want to put forth all of its assets into the Chinese basket. Here, India failed to grab the opportunity mainly because of its growing partnership with the US. India’s growing ties with the US has also played a key role in the last few years within India's decision-making process vis-à-vis Iran. On the other hand, Iran's decision has got more to do with Iran's loss of confidence in India as a reliable regional partner who can defy the US pressure.

The US Factor

India's investment in the Chabahar ports development was granted exemption from the sanctions executed by the US, but not for the other sub projects it has administered. Iranians have been expressing their displeasure with India's perpetual delays and with its failure in to starting the project. Three reasons can be asserted for India's particular action of putting off the railway project. The first reason being India's core interest is only in the development and operation of Chabahar port itself. The second reason being that the other branch out like rail link comes under the US sanctions, there might be anxiety within India, mainly due to the fear that the European and Japanese companies might refuse to supply equipment to them in fear of the US sanctions. And the third reason being the US-Taliban deal which paved the way for the Taliban's return to rule Kabul may also have impacted India's thinking to not invest huge amount of money in such projects which will have an uncertain future. Therefore, the sanction-hit Iran has left with no options but to go to China, as the Chinese can bring more to the table and are less vulnerable to the US pressure.

Even after the fact that China has finalized a massive 25-year, $400 billion strategic partnership deal with Iran, which could disrupt India’s plans, the sanction-hit Iran also wants countries like India, Russia, and Turkey to play a vital role in its economic development program. Iran has been trying to maintain good relations with both China and India at the same time. In addition, Iran has never let its close relations with China get in the way of its deep-rooted friendship with India and until India has proved itself as an unreliable partner failing to prove itself as an independent geopolitical player in the current world order. Another reason for Tehran’s annoyance is that New Delhi has already zeroed out its oil imports from Iran, leaving little to nothing to negotiate with Tehran.

Indian policymakers must be worried that the massive China-Iran deal could give China formidable clout and multi-dimensional long-term influence over Iran. It may also allow China unfettered access to the Indian Ocean region. The sizable Chinese investments in Iranian ports development may eventually be turned into permanent military access arrangement with Iran connecting it with Chinese built and operated Arabian Sea port of Gwadar in Pakistan’s Baluchistan and China’s military base in Djibouti. Not only does this deal fit perfectly with the much larger Belt and Road Initiative, it is also a logical extension of the “String of Pearls” a network of ports China is building and/or taking over across the Indian Ocean all the way to the Horn of Africa and beyond. In addition, India believes that China's ultimate plan is the encirclement of India with the acquisition of these ports. The agreement with Iran will eventually facilitate China's large-scale, multi-dimensional consortia with the other countries of the Middle East.

Disclaimer: The viewpoints expressed by the authors do not necessarily reflect the opinions, viewpoints and editorial policies of IRAM.