On July 14, it was reported that Iran had bumped India from its involvement in the Chabahar-Zahedan railway project, a critical component of the joint effort to develop strategically significant Chabahar port in southeastern Iran. India’s involvement in Chabahar port (despite the threat of U.S. sanctions), including the railway, has been seen as a means of countering China’s growing maritime ambitions in the Indian Ocean, marked by significant Chinese investments at Gwadar Port, Pakistan as well as in Sri Lanka, the Maldives and elsewhere.
While Iran is challenging the notion that India ever had a binding role in the railway project to begin with (and the Indian government is likewise challenging the media’s interpretation that it has been unexpectedly removed from the project), there is still a broadly held view that Iran’s decision to move on with the project without India is linked to the new 25-year, $400 billion cooperation agreement recently announced between Iran and China. Although India continues to have a significant stake in other aspects of the Chabahar port project, there is a perception that this recent decision was either motivated by an Iranian desire to appease Chinese wishes in the aftermath of recent border clashes with India or by a newfound confidence in its ability to finance and execute projects of this magnitude with the help of Chinese companies and banks.
Either way, the overarching concern for India is that its removal from the rail project may be as an early indicator of greater Chinese influence over Chabahar port, undermining its utility to New Delhi as a source of competing strength in the region. Prior to these recent developments, Iran had, indeed, already invited China’s participation in the port’s development in a non-binding capacity, with the intention of increasing Chabahar’s connectivity with the Chinese-operated, Gwadar Port.
It is also worth considering how increased Chinese participation in Chabahar port will impact Russia’s perception of the city as a hub for the multi-modal, Russian-backed International North South Transport Corridor (INSTC) that is being put in place incrementally across 7,200-km, intended to connect St. Petersburg and Mumbai via Iran and Azerbaijan.