Months after starting Chabahar rail project without India, Iran seeks equipment

In an interview to 'The Hindu', Iranian diplomat Masoud Rezvanian says Tehran now hopes that New Delhi will help facilitate equipment for the Chabahar-Zahedan railway line

November 07, 2020 10:30 pm | Updated November 09, 2020 12:15 am IST

Iran’s Deputy Chief of Mission Masoud Rezvanian. Photo: Special arrangement

Iran’s Deputy Chief of Mission Masoud Rezvanian. Photo: Special arrangement

India is not a part of the Chabahar-Zahedan railway at present, but as Iran begins the second phase of the 628-km project, Tehran hopes New Delhi will help it procure equipment to run the rail line from the Chabahar port to the Afghan border.

According to a senior Iranian diplomat, Iran’s Port and Maritime Organisation (PMO) recently conveyed to India a request for cranes, tracks, switches and signalling equipment, as well as locomotives that it has had difficulty in procuring them directly due to the U.S.-imposed sanctions. Iran has also asked to activate a $150 million credit line that had been offered by India during Iranian President Rouhani’s visit to Delhi in 2018 to pay for the purchases.

“We are still hopeful that the pledge for the line of credit India made in 2018 [will] pave the way for future cooperation,” Iran’s Deputy Chief of Mission Masoud Rezvanian told The Hindu in an interview, explaining that the 2016 MoU signed with the Indian Railway Construction company (IRCON) was no longer relevant as there had been no progress in talks, and Iranian construction companies have now taken over the project.

According to the Ministry of External Affairs (MEA), IRCON completed the site inspection and feasibility report, and had been waiting for the Iranian side to appoint a nodal authority.

Official sources said the real sticking point was that Iranian construction company Khatam Al Anbyar is under U.S. sanctions for its links to the Iranian Revolutionary Guards Committee (IRGC) and although the Chabahar project has secured a special waiver from the US, the government is hesitant to deal with the IRGC entity.

On November 4, Iran’s Urban Development Minister Mohammad Eslami inaugurated the track-laying ceremony for the second of the three phase construction. Sixty per cent of the track-laying and about half of the entire project, including infrastructure and superstructure are now complete, and officials say they are on track to complete the whole line by June 2021, which will connect the Chabahar port to the Afghan border, but through the existing rail system, to Turkmenistan and Central Asia as well. The first phase was inaugurated in July last, leading to a controversy over the fact that India had been dropped from the project.

“We think that we should look at the future instead of digging into the past, where there have been some sources of bitterness,” said Mr. Rezvanian, clarifying that Indian companies played “no role at present” in the railway project. In contrast, the Chabahar port Shahid Beheshti Terminal, operated jointly by India and Iran, had been running smoothly, and had processed more than 12 lakh tonnes of bulk cargo and 8200 containers, according to the MEA.

Gas field development

Delays due to sanctions have also taken a toll on the Indian interest in developing the Farzad-B gas field, where ONGC Videsh made a discovery in 2008, Mr. Rezvanian explained, when asked about reports that Iran would now develop it through domestic companies.

“Iran has frequently said that we cannot wait until sanctions are lifted to develop Farzad B...[] That’s why Iran recently said that we will hand over Farzad-B to an Iranian company, and we will complete exploration and development on our own,” he said.

The issues over India-Iran cooperation are believed to have been taken up during quick stops by External Affairs Minister S. Jaishankar and Defence Minister Rajnath Singh, in Tehran in September in transit to and from Moscow respectively, where they attended the SCO ministerial meet.

U.S. poll results

The U.S. election results projecting Mr. Biden as the next President are being watched in both India and Iran for the possibility that sanctions on Iran might ease, allowing India to increase its engagement with its traditional partner who used to be a major supplier of oil before the Trump administration forced India to “zero out” imports. New Delhi is also watching negotiations on a 25-year strategic cooperation agreement between China and Iran believed to be worth $400 billion, which could fund other parts of the Chabahar development, including a free trade zone along the Makran coast, and oil infrastructure projects.

According to Mr. Rezvanian, however, the “umbrella agreement” would not impinge on India’s interests in any way.

Full interview:

Where do you see India-Iran relations at present, especially given the continuing pressure of U.S. sanctions?

Looking at the whole aspects of relations, when it comes to politics, there has been a great common understanding and shared interests. There have been exchanges of delegations between the two countries at the highest level, and we have had very good relations either at the time of the Congress Party ruling India or the BJP. But when it comes to economic and trade relations, it has been subject to some limits and restrictions, which, to our understanding, has been unnecessarily imposed by third parties. Other powers have put pressure directly or indirectly on the relations, although that has not been the will of both sides.

What we expect is that the political will of the two countries should be in a way to avoid or bypass such difficulties, for both private and the public companies. We should try to pave the way for them through designing and pushing for some MoUs, agreements and contracts between the two countries. I remember when the first round of sanctions was imposed unilaterally and very unjustly against Iran in 2010, India and Iran managed to design for example, a Rupee Mechanism, which could help and facilitate to continue trade between the two countries.

Even at this time, we are witnessing the signs of a political will to continue that positive approach. Relations with third parties should never determine the scope and quality of relations between Iran and India. We have never been against the kind of friendship which India choose to follow with others, and we believe India also understands that our relations and friendship with other countries is never against it.

On that note, what is the latest on the Iran-China Cooperation programme, believed to be a $400-billion 25-year deal? There have been misgivings in India about some of the infrastructure projects in the deal affecting India’s investment in Chabahar port...

We are still in the process of finalising this agreement, and like any other important document of strategic nature, that takes some time to conclude. This is an umbrella agreement, so media reports on figures and specific details are really untrue.  When it comes to Chabahar, one must understand exactly what is being discussed with whom. We have a good collaboration with India in one of the terminals of Chabahar port, operated by a joint venture between Iran and India. This Joint Venture has shown its efficiency in increasing the traffic and transit of goods between the two countries and via Chabahar to neighbouring countries, specifically Afghanistan at present. But, in addition to the port, there is also a free zone, which we would like to use it as a leverage for developing the whole Makran coast with the Oman Sea. Accordingly, we have offered investment opportunities here to India.

Of course, we have also offered the same to other countries like Japan, CIS countries, China and even to the Europeans. The door is open for all, but we are considering a priority for Indian companies. Even once in 2014 or 2015 a proposal was put forward by Fertiliser Ministry of India for establishing a “Reverse SEZ” in Chabahar but it was never officially discussed and followed with us. So, you admit that in such an endeavour, no country waits so long for a specific country and finally first come, first serve would be the ruling principle. 

There has also been some confusion over the Chabahar-Zahedan railway line recently. While the MEA has said India remains engaged in the project, Iran appears to have gone ahead with constructing the line without Indian companies. Could you clarify what is India’s role?

Chabahar port is very important to us, but a port without inland connectivity support would be useless. At this stage there is a good road which connects Chabahar to Zahedan and to other parts of the country. But if the level of traffic and transit of goods increase, then the capacity of the road would not be sufficient. Discussions on this rail line began between India and Iran in 2010, and we offered Indian companies participation in the construction, technical aspects and operation of the project. But for a number of reasons, and in the shadow of the unjust Sanctions against Iran, nothing materialised at the end.

Maybe, instead of going much into the history and digging into the past, it’s better we focus on the future and the possibilities for mutual benefits. We all know what is happening in the neighbourhood (Afghanistan and others). Apparently, India is looking more vigorously to the importance of Chabahar and its strategic function. In such circumstances, Iran would like to expedite connectivity projects in the South eastern part of the country as a very crucial development project.

Given this and the said circumstances, we decided to utilise our own financial resources and engineering capacity to complete the [railway line] instead of waiting more. So far 60% of the infrastructure of the railway line has been constructed, which means about 48% of the total project. (Pointing to a map), Two of the three parts of the Chabahar-Zahedan line have now been started, including the inauguration of one section a few days ago. The whole project of 628 kilometers is expected to be finalized by June 2021. This will then connect Chabahar Port through the existing Iranian railway network to Turkmenistan in the North, and also to Afghanistan in two border points including one in Zabol, which facilitates access to Zaranj – Delaram Highway and another city in South Khorasan Province, from Khaf, Iran to Herat. While Iran itself has completed 3 out of 4 parts of railway project and only the fourth part is upon Afghan Government to construct together with a country from the Central Asia.

India other countries could use both lines to access Afghanistan for its goods, and of course the door is still open for India to join and help us with this project. Recently Iran’s Port and Maritime Organisation have officially sent a request to the relevant authorities in India through our Embassy, with a list of equipment that we hope India could help us to procure from Indian market. When President Rouhani visited India in February 2018, India signed an agreement with Iran for extending a $150 million credit line, which taking into account our cordial relations, is expected to be used to facilitate procurement of those supplies with the support of Indian Government in a timely manner.

But just to clarify, at present, India and Indian companies have no role in the railway line between Chabahar and Zahedan?

No, no role at present. However, we are still hopeful that the pledge for the line of credit India made in 2018 might now pave the way for Indian contribution to the development of this railway line. We hope that India will positively respond to this request in an expedited manner and we welcome Indian government and Indian companies to join somehow in this project between Chabahar-Zahedan and the other one which connects Zahedan to Mashhad-Sarakhs on the border with Turkmenistan and other Central Asian countries, and would be happy to facilitate any serious dialogue or site survey for this purpose. It depends on India’s decision to join or not. But we can't wait forever.

Recent reports said India was no longer a part of the development of Farzad-B gas fields. What is the latest on this, as well as on setting up a branch of Iranian bank Pasargad in India to facilitate transactions? 

On Farzad B, it is well known that OVL -ONGC Videsh had begun explorations with apparently some findings there in 2008, but due to unjust U.S. sanctions, there were long delays in going ahead. You may know that this gas basin is shared between Iran and neighboring countries. Iran has frequently said that we cannot wait forever and based on our interest will develop Farzad B, as the other side is expeditiously developing its side and using the resources.  Certainly, no country waits for the other side open-endedly. That's why after a long time of patience, sending delegations & letters, we recently said that we will hand over Farzad B to an Iranian company, and we will complete exploration and development on our own. This also shows that Iranian side has opened the door for Indian friends for the years. Moreover, our Minister of Oil has sent a letter to his Indian counterpart in this issue.

On the Pasargad Bank branch, we are pleased to have made some progress, and completed logistics of a location in Mumbai, staffing around one year ago. However, we are still waiting for final clearance from the Reserve Bank of India so it can begin operations. This bank will have a key role to facilitate the trade and investment between the two countries especially in Chabahar.

On Chabahar opportunities for investment, railway projects as well as Farzad B project, we would stress that India has been given a priority. Iran has always welcomed Indian companies for investment and partnership and the door is still open to India for any genuine collaboration and partnership in those projects.

We should also remind that the Chabahar Port has been developed merely by Iran so far and not any other country, and the claim of a $400 million investment by India in Chabahar Port is also untrue. The only investment amount pledged so far by India is around $85 million of which a small portion has been absorbed and the rest in the form of some parts of equipment expected to be shipped to Iran by the end of this year.

Both the External Affairs Minister and Defence Minister visited Tehran in the recent past for talks. Were any specific agreements under discussion, and can we expect any high level visits from Iran in the near future?

Both the ministers were travelling to Moscow to participate in the SCO summit, and their stops in Tehran, were seen as an opportunity for talks between the two sides. Mostly, the discussions were over bilateral & regional situation, particularly Afghanistan.

In the past some Iranian officials have suggested they would be prepared to facilitate India’s engagement with the Taliban...has the Indian government requested this? 

We have very close contact and are consulting with Indian friends on Afghanistan issue.

No winner has been declared yet in the U.S. Presidential elections, but do you think a change in leadership there will relax some of the sanctions against Iran. In particular, do you think India may be able to restart oil imports from Iran?

Well, this is essentially a commercial decision as well as a political one. We believe that Iran’s proximity to India makes the best sense for the Indian market. Because of our close relations, we used to sell our crude oil to India on credit, so India could process and even resell it, and pay us in time. Short time of 7 to 8 days for crude oil delivery to Indian ports is also something unique which gives adequate assurance on availability and accessibility of oil resources. In addition, as we used the Rupee mechanism, the money we received from India was used to purchase goods from India. market, and so it benefited much of Indian foreign trade and economy. On U.S. presidential elections, it is premature to say what will happen next. We believe our bilateral relations especially in trade and investment, should not be linked to the third parties and I do think that for Indian companies, in spite of the increase in purchase of oil and gas from the U.S. market, restarting oil import from Iran, is still something they dream about.

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