Connecting Regions of Asia.

India’s Next China Challenge In Iran

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Even as India and China hold talks to defuse a deadly Himalayan border clash between their troops last month, New Delhi’s next challenge from Beijing is already emerging, over 1,000km (620 miles) away from Indian territory – in Iran.
Relations between the world’s two most populous nations turned volatile after 20 Indian soldiers died in a skirmish with Chinese soldiers on June 15 at the Himalayan border region of Ladakh. Earlier this month, Indian national security adviser Ajit Doval and Chinese Foreign Minister Wang Yi agreed to pull back troops from the disputed border.
While the tensions may have eased for now, a clash of strategic interests in nearby Iran could be a new source of friction.
Beijing plans to pour US$400 billion into infrastructure investment in Iran as part of a 25-year economic and security partnership that will give China a regular, lower-priced supply of oil, The New York Times reported on July 11, citing an 18-page leaked document on the plan. China has declined to confirm or deny the report.
Such a move would elbow right into a long-planned ambition of India to invest in Iran’s Chabahar port on the Indian Ocean. The project, which includes building a rail link from the port to Iran’s border with resource-rich Afghanistan, would open up lower-cost seaborne trading channels for India into Central Asia, while hopscotching landlocked routes blocked by rivals Pakistan and China.
The bad news for Delhi is that Iran has dropped India from the railway project for Chabahar, according to a July 14 report in The Hindu newspaper that cited Iranian government sources.
Tehran has denied excluding India, stating that no deal was signed, though adding that the National Development Fund of Iran will now finance the railway.
The Iran-China trade deal and the ejection of India from the rail plan are connected, said Claude Rakisits, honorary associate professor in diplomacy at the Australian National University in Canberra.
“This is a very big win for China at the expense of India, especially after India’s loss at Ladakh. I also suspect that Iran will dump India for the development of Chabahar in favour of China,” he said.
Chabahar on Iran’s southern coast is a crucial piece of India’s seaborne foreign policy and economic strategy.
The land mass of Pakistan, Delhi’s arch rival, is wedged between India and Iran, which blocks overland access for Indian trade to Central Asia.
“There has long been a physical blockage of not letting any Indian cargo go through Pakistan,” said Phunchok Stobdan, former Indian ambassador to the Central Asian nation of Kyrgyzstan.
Beijing supported Pakistan in this strategy because China and India, as the two largest developing Asian economies, were competing for influence in many of the same areas, he said.
“The Chinese have always propped up Pakistan to stop India’s access to Central Asia. If China wanted, it could allow India access to Central Asia through Xinjiang, but China is trying to contain India’s outreach,” he said.
In 2015, Pakistan and China strengthened their “iron friendship” by launching the US$46 billion China-Pakistan Economic Corridor, a cornucopia of infrastructure investments that includes over US$1 billion for the expansion of Gwadar, a port in south Pakistan, just 76 nautical miles from Chabahar in Iran.
Analysts say it was the planned investment in Pakistan’s Gwadar port that forced India to follow through on its decade-long interest in Chabahar.
“India hoped that Chabahar could weaken the influence of Gwadar,” said Liu Zongyi, secretary general of the South Asia and China Centre at the Shanghai Institutes for International Studies.
During his first state visit to Iran in 2016, Indian Prime Minister Narendra Modi committed US$500 million to develop the Chabahar port and a further US$20 billion in infrastructure projects, including a US$400 million railway from the port to the Iranian city of Zahedan that borders Afghanistan.
Without the Chabahar-Zahedan railway, some analysts say India’s vision of a direct route into Central Asia is no longer viable.
The Indian and Iranian governments have not mentioned China in their commentaries on the Chabahar project issues, but analysts see Beijing as a factor.
“If there is a money dump from Beijing into Iran in an attempt to make it a reliant state that would be a big problem for India,” said Kabir Taneja, a fellow at Delhi-based think tank the Observer Research Foundation. 
This could create a bloc of nearby Muslim countries beholden to Beijing, he said.
“China could end up having two countries in Pakistan and Iran that it has significant sway over and then Afghanistan will have no choice but to join,” he said.

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