Iran Drops India from Farzad-B Gas Field after Chabahar II Project

Iran has ended its agreement with India over the development of the second phase of the Chabahar port and the Farzad-B block, in a development which is being seen as the souring of ties between the two countries.

A report in Business Standard says that Iran will go ahead with work on the rail link, part of the second phase of the Chabahar port’s development, by itself. The business daily added that the contract for developing the Farzad-B block, home to 21.6 trillion cubic feet of gas reserves, will be given to a local company.

The ‘New Delhi Declaration’, agreed upon by both countries in 2003, had said that the West Asian country and India would work on the Chabahar Port complex and Chabahar-Fahranj-Bam railway link together.

“The recent trilateral agreement between the Governments of India, Iran and Afghanistan to develop the Chahbahar route through Melak, Zaranj and Delaram would facilitate regional trade and transit, including to Afghanistan and Central Asia, contributing thus to enhanced regional economic prosperity,” the 2003 declaration had said.

However, Iran’s perceived proximity to China and India not wanting to irk the US in light of sanctions against the former, has led to the current state of affairs. Iran and China are said to be close to agreeing a $400 billion deal over the next ten years.

Work on the first phase of the Chabahar port was completed by India, US sanctions did not allow for the second phase – development of a 628 kilometre railway line along the Iran-Afghanistan border – to move forward. The initial agreement was signed in 2003 but a formal contract was agreed upon by India and Iran in 2016.

According to the report, Iran is looking to invest $400 million from the Iranian National Development Fund for the railway project. According to the earlier deal, Ircon International Limited (formerly Indian Railway Construction Limited) was to set aside $1.6 billion for the project.

As with the Chabahar port project, US sanctions have come in the way of the Farzad-B gas field agreement as well. A source told the newspaper that Iran was considering roping in a local player for the project. India has been looking to secure a deal for the gas field for over ten years now, and had close to 75% of the deal agreed when US sanctions in 2018 played spoilsport.

A contract was for carrying out exploration in the block was signed in December 2002 between ONGC Videsh, Indian Oil Corporation, and Oil India. It expired in 2009 after a commercial declaration of the block following the discovery of gas.

On Tuesday, The Hindu had first reported that Iran had dropped India from the second phase Chabahar project, citing delays in funding and beginning work on the project.