News Code : 44846

Petrotahlil - Iran has ended its agreement with India for two key projects, the second phase of Chabahar Port and development of the Farzad-B block, reflecting the souring relations between the once strong allies.

The West Asian country will fund and develop a rail link under the second phase of the Chabahar Port on its own, while the contract for developing the Farzad-B block is likely to be handed over to a local company following slow progress by ONGC Videsh (OVL). A person close to the development said Iran will sign a deal for development of the field with a local oil company soon.

In the historic ‘New Delhi Declaration’ signed on January 25, 2003, both countries had decided to jointly develop the Chabahar Port complex and Chabahar-Fahranj-Bam railway link.

Since then, the Chabahar project, along with the Farzad-B block deal, has been something that forced India to play a balancing act between the US and Iran. In 2020, however, both projects appear to be out of India’s hands. 

While the first phase of the Chabahar Port was developed by India, US sanctions stopped progress in the second phase. Though the initial agreement was signed in 2003, a contract was signed between India and Iran to develop the 628-km railway line along the Iran-Afghanistan border, in 2016.

Former shipping secretary Vishwapati Trivedi said: “The idea of Chabahar Port was brought back on the table in 2014. Several exchanges happened between the two countries before finalisation of the infrastructure development by India in Iran.”

The initial agreement signed in May 2015 translated into a formal 10-year contract.

Both the Kandla Port and JNPT were entrusted with the job of developing Chabahar Port. The then chairman and managing director of Shipping Corporation of India was given charge of Indian Ports Global — a special purpose vehicle for execution of the contract. A revenue-sharing pact with a minimum guarantee throughput (MGT) was agreed upon, based on which Iran wanted India to increase traffic at Chabahar Port. MGT is the lowest number of cargo and passengers that can pass through a port on a daily basis, from arrival at the port to loading onto a ship. Now, Iran has indicated it will provide $400 million from the Iranian National Development Fund for the railway line. As part of the deal, Indian railways arm IRCON was supposed to provide $1.6 billion for the rail project.

People in the know said the Indian firm could not move ahead with the project because of US sanctions on Iran. In addition, Iran’s growing proximity to China may have also played a part. Iran and China are set to sign a deal worth $400 billion, lining up an investment roadmap for the next 10 years.

Even when US sanctions were on a high, India had kept the project on the discussion table. However, strengthening Indo-US relations under Donald Trump forced India to go slow on Iran projects. A prime example was the halt in oil imports from Iran following the recent US sanctions. Earlier in 2006, India and Iran had conducted a joint naval exercise prior to then President George Bush’s visit to India.

Source : Business Standard

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