As China offers funds to Iran, India set to fast-track Chabahar pact

China is quietly intruding into India's geopolitical space in Iran. It recently offered Tehran credit facility of Euro 60 million — almost equal to the proposed Indian investment in the revamp of Chabahar port — which may muscle out India from the project.

Beijing's covert credit offer is seen by the Indian foreign office as a first step by China before it bids to finance the port project. "China could finance the project to keep India out of Chabahar and protect its investment in Gwadar port (in Pakistan)," it informed the shipping ministry.

The Ministry of External Affairs has therefore suggested to the Prime Minister that an inter-ministerial task force be constituted, comprising the finance, external affairs, shipping and commerce ministries to fast-track an agreement with Iran to "prevent any backsliding".

New Delhi's worry is that there is no official confirmation from Tehran on the pact and unless the shipping ministry moves fast, there is a likelihood of losing out to Beijing. It has told the shipping ministry to hasten its promise to form a Special Purpose Vehicle (SPV) between Kandla Port Trust and Jawaharlal Nehru Port Trust for executing the project and to finalise the final costs for approval of the Cabinet Committee on Security.

The MEA wants these steps to be completed ahead of a proposed visit by an Iranian delegation next month.

Despite strong pressure from the US, India announced in May that it could pump in $100 million for the upgrade of the Iranian port. The breakaway from the US line was done to secure a route for movement of Indian goods to Central Asia and to counter joint forays by China and Pakistan into the Indian Ocean following Islamabad's decision last February to hand over Gwadar port to China.

The transfer of deep-water Gwadar, 76 kms from Chabahar, was seen by India as another step in China's String of Pearls strategy to build a network of military and commercial facilities extending from the Chinese mainland to Port Sudan, and including a port in Sri Lanka's Hambantota, with similar projects underway in Myanmar and Bangladesh.

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