New Delhi, Aug. 30: A railway line snaking away from an Iranian coastal town into mountainous Afghan terrain is New Delhi's answer to pay back its oil debts to Tehran.
Indian officials, in Tehran as part of Prime Minister Manmohan Singh’s team to the 16th Non-Aligned Summit, is looking to finalise the deal to build the railway line from Chabahar in Iran to Afghanistan’s Hajigak, which houses $1 trillion worth of mineral resources, whose rights were bagged by an Indian consortium led by Steel Authority of India Limited. Iran’s part of the railway line will be handed over to Iran Railways.
Also on the agenda is Iran’s demand to allow its banks to open branches in India.
The Indian home ministry had last month opposed the entry of three Iranian banks — Parsian Bank, Bank Pasargad and Eghtesad-e-Novin Bank — as they failed to conform to the provisions of the anti-money laundering pacts signed by India.
India owes Iran around Rs 2,000 crore for oil. It routes payments through banks such as the Uco Bank, which do not have any overseas branches and are, thus, outside the purview of the European Union and US sanctions against Iran. Around 45 per cent of India’s payment to Iran are in rupees and the rest is in hard currency.
India buys about 21 million tonnes of crude from Iran every year, or about 14 per cent of its oil imports, and is likely to ignore American opposition to the purchases.
In December last year, the RBI had said trade transactions with Iran would have to be settled outside the Asian Clearing Union. This forced both India and Iran to opt for innovative ways to pay for the huge oil purchases, which on an annual basis cost about $12 billion.
India needs to build the 900km Chabahar-Zaranj-Delaram-Hajigak line to evacuate iron ore from the Hajigak mines.
The Indian government wants to build the railway project in addition to a highway, which would link an existing highway built by India’s Border Road Organisation between Zaranj and Delaram in Afghanistan.
India is also building the Salma dam and power project in Afghanistan, besides planning a 6-million-tonne steel plant and an 800 megawatt power unit in Hajigak. These projects need heavy machinery but Pakistan may not allow these to be supplied using its territory. Hence, the spur to build rail and road links through Iran.
Pakistan has been extremely cagey about giving India access to the Afghan market through its land routes.
No Indian vehicle is allowed to pass through that nation and despite agreeing to let India send 2.5 lakh tonnes of wheat as gift to land-locked Afghanistan, it has allowed exports in a dribble.
India also needs the railway line to set up a link with the energy rich Central Asian markets of Kazakhstan, Uzbekistan, Tajikistan, Turkmenistan and Kyrgyzstan. China has already stolen a march over India by purchasing oil assets in the region and building a network of economic relationships.
India, Iran and Afghanistan will be setting up a joint working group, which will over the next three months flesh out the details of a trade and transit pact among the three countries, which is seen as a precursor to the railway project.