Iran has reportedly dropped India from a key rail project along the border with Afghanistan after New Delhi showed reluctance in joining the project due to US sanctions, according a report by an Indian newspaper.

The Iranian government decided to proceed with the long-stalled project without India’s participation, citing delays in funding and starting the project, English language daily The Hindu reported on Tuesday.

The project, which is scheduled to be completed by March 2022, has started with about $400m funding from the Iranian government, the paper reported.

“It was expected that in addition to the investment in Chabahar Port, India could also play a more crucial role … in the absence of an active Indian engagement and partnership, [the port is] currently under construction by Iranian funding and engineering capacities,” the Hindu reported that Iranian sources said.

The deal to construct 628-km (390 miles) railway line from the port city of Chabahar to Zahedan province was part of a series of bilateral agreements signed between India and Iran in May 2016.

The agreement was signed on the sidelines of a 2016 trilateral agreement between India, Iran and Afghanistan to develop a transport and trade corridor from India to Afghanistan through the Chabahar port in southeast Iran.

‘Pressure of US sanctions’

The track-laying ceremony for the Chabahar-Zahedan rail line was held last week. The track will eventually be stretched to Zaranj on the Afghan side, enabling hassle-free trade and movement.

Indian consultancy IRCON had pledged to provide all services and funding for the project, estimated at approximately $1.6bn, according to the Hindu report.

However, the project failed to take off – despite many visits by IRCON engineers and arrangements made by the Iranian side – owing to the pressure of US sanctions, sources both in India and Iran said.

In 2018, Washington agreed to a waiver for Chabahar port under the Iran Freedom and Counter-Proliferation Act of 2012. However, New Delhi still seemed hesitant to provide loans for buying heavy equipment, sources told Anadolu Agency.

Officials in Iran’s foreign ministry, without confirming or denying the news, admitted that the Indian side had “delayed” the project “apparently fearing US sanctions”.

Iran’s President Hassan Rouhani has previously described the port as a vital part of shaping Iran’s economic future.

‘Big loss’

Ali Ahmadi, a Tehran-based geo-strategic expert, said the US sanctions and India’s inability to shake off US influence over their relations had “doomed this project”.

“What waiver the US gave, supposedly as a personal favour to [Indian Prime Minister Narendra] Modi, was never going to be worth anything because of all the uncertainty sanctions created around Indian involvement,” Ahmadi told Anadolu Agency.

The development came on the heels of a reported 25-year, $400bn deal between Iran and China, which is currently in the “phase of negotiations”.

“At this point, it is not clear if the Chinese have directly signaled interest in this project,” Sumitha Kutty, a research fellow at Rajaratnam School of International Studies in Singapore, told Anadolu agency.

“But they have long been the available alternative for infrastructure projects in Iran,” she added.

Indian geo-strategist and author Brahama Chellaney termed it “India’s loss and China’s gain”.

“While India’s compliance with the US sanctions has undercut its ties with Iran, China has bought with impunity heavily discounted Iranian oil. China is expanding its foothold in Iran with nearly 100 projects,” he wrote on Twitter.

India’s main opposition Congress Pary termed the move as a “big loss” for the country while raising questions over the efficacy of the current Hindu nationalist government’s diplomacy.

India dropped from Chahbar Port deal. This is the diplomacy of the Modi Govt that won laurels even without getting the work done, China worked quietly but gave them a better deal. Big loss for India. But you can’t ask questions!https://t.co/mrb6rhPhWg

— Abhishek Singhvi (@DrAMSinghvi) July 14, 2020