The Ministry of External Affairs (MEA) recently confirmed that India had pulled out from the Farzad-B gas field project, an infrastructure project located in Iran. The Indian authorities also highlighted that they had not received any communication from Iran pertaining to the future of the Chabahar-Zahedan railway project since December 2019. These decisions can be attributed to policy alterations by the Iranian government, its fluctuating financial situation, and sanctions imposed by the USA.
The Farzad-B Gas Field Project
The Farzad-B gas field, situated in the Persian Gulf in Iran, had a contract for exploration signed in 2002 by an Indian consortium consisting of ONGC Videsh, Indian Oil Corporation, and Oil India. The contract was deemed expired after 2009 when the field’s commerciality was declared based on gas discovery. With gas reserves exceeding 19 trillion cubic feet, ONGC invested nearly USD 100 million in the project.
The consortium has since been attempting to secure the contract for the development of the field, encountering major disputes with Iran over the establishment of two pipelines and the money to be quoted for the development plan. Approximately 75% of the deal was finalized by May 2018 until the USA withdrew from the nuclear deal and placed sanctions on Iran. In January 2020, Iran informed India it would develop the field independently and might involve India later.
The Chabahar-Zahedan Railway Project
In the ‘New Delhi Declaration’ signed in 2003, both countries agreed to develop the Chabahar Port complex together, which was exempted from sanctions. India’s primary investment in the Chabahar Port – taking over operations of one terminal – had progressed significantly, handling 82 ships with 12 lakh tonnes of bulk cargo in 8200 containers since December 2018.
A contract for the 628-km railway line (Chabahar-Zahedan) along the Iran-Afghanistan border was signed in 2016. The Indian company, IRCON, was assigned to assess the project’s feasibility and collaborated with CDTIC, an Iranian company, to complete the site inspection and review the feasibility report. However, in July 2020, Iran initiated work on the project with India not currently involved due to uncertainties about attracting USA sanctions.
Concerns for India
India harbors concerns regarding Iran’s increasing closeness to China and its skepticism towards India’s diplomatic relations with the USA. The Farzad-B gas field is particularly important for India, as they require gas supply and Iran is geographically most suitable, located closest among the Persian Gulf countries.
Additionally, it could have enhanced India-Iran ties considering that crude oil imports from Iran are negatively affected due to USA sanctions. The Chabahar port is not only crucial to maritime relations between both countries, but also offers India a pathway to reach Russia and Central Asia. It also allows India to bypass Pakistan, which had blocked Indian aid to Afghanistan and all land trade.
Way Forward
India must carefully balance its relations between the USA and Iran while observing the space created by its exit. In today’s global context, where connectivity is viewed as a new form of currency, India’s loss from these projects could potentially become another country’s gain, particularly China’s.