Iran removed India from the Farzad-B oilfield project and inked a 25-year deal with China.


New Delhi: The two recent steps taken by Iran, of removing India from the Farzad-B oilfield, a project in which India was involved since 2002, and signing a 25-year comprehensive long-term deal with China, are being seen as China’s takeover of Iran’s strategic decision-making capabilities, especially as far as India is concerned. The 25-year deal also focuses on taking care of Pakistan’s interests, denoting the deep relations that China and Pakistan share.

As per unofficial reports, India had already spent more than $400 million on the Farzad-B oilfield project.

While the “Comprehensive Strategic Partnership” agreement between Iranian Foreign Minister Mohammad Javad Zarif and his Chinese counterpart, Wang Yi, spanning 25 years, was signed on 27 March, the National Iranian Oil Company (NIOC) awarded the $1.87 billion contract to the Tehran-based Petropars to develop the Farzad-B gas field on 17 May, fewer than 50 days later. Though the content of this 25-year deal between Iran and China has not been made public, a “copy” of the same was leaked online, after politicians and strategic experts in Iran started questioning the political leadership for entering into an agreement with China that will “plunder the country”, “bring the country under debt trap” and “allow foreign troops to enter Iran”. The copy makes it clear that Beijing’s investment in Tehran in the coming years would not just be limited to oil and energy, but will cover telecommunications, ports, banking, infrastructure, transportation and similar crucial sectors. In return, China will get regular and discounted supplies of oil for the next 25 years.

The 18-page document, which was drafted in Farsi and found its way online, is likely to be a “sensitized” and “incomplete” copy, New Delhi-based officials, who track these developments, said. Officials said that it is not a copy of the agreement or the contract signed by the two countries, but more of a “strategic” document.

Nevertheless, the content of this document, even if it’s incomplete, gives an insight into why observers in New Delhi believe that China had a role to play, an indirect one if not direct, in Iran’s decision to “exclude” India from the Farzad-B project, while giving the reason that India has not done enough as part of its deal, ostensibly because of the US imposed sanction that Iran is facing.

The officials pointed out that Iranian officials quoting US sanctions was a “weak excuse”, as US in November 2018 granted an exemption to the India-backed Chabahar port from the sanctions that it had imposed on Iran, ascribing it to its “close partnership with India”.

Indian government officials said that the Farzad-B deal hit a roadblock after Iran started “re-negotiating” the financial details of the agreement, a development that began in the last 3-4 years. The strategic China-Iran document contains nine articles in which Article 4 talks about “Cooperation grounds” outlining the common objective for which the two countries will be cooperating. Article 4 of the document states that: To expand comprehensive cooperation, the two parties will work together in some of the key areas which are as follows: 1. Energy, including crude oil (production, transfer, refining and secure delivery), petrochemicals, renewable energies, civilian nuclear energy; 2. Highways, rail, roads and maritime connections with an increasing Iranian role in the Belt and Road Initiative. In the section titled “Fundamental Goals”, the document specifically mentions the extent of intervention China will be doing in the coming days when it comes to oilfields in Iran; 3. Both parties will make efforts to turn China into a steady importer of Iranian crude oil. China will be expecting Iran to be mindful of Chinese concerns regarding its return on investment in the Iranian oil sector. In exchange, the Chinese side will be mindful of optimizing the financial gains generated in oil deals with Iran. The state-owned China National Petroleum Corporation (CNPC), which is going to enter Iran in a major way in the coming days post the signing of this agreement, already has vast experience of working in Iran. It has been involved in two major oil projects in the country in the past—development of the South Azadegan oilfield and development of the “South Pars” oilfield where its stake is 80%. Earlier, its stake was 30% but after the French oil company withdrew from the project due to US pressure, China took over the French stake.

The “South Pars” oilfield has an estimated 14.2 trillion cubic meters (Tcm) of gas reserves, apart from 18 billion barrels of gas condensate and accounts for around 40% of Iran’s total estimated 33.8 tcm of gas reserves. The document mentions how Iran and China will come together to promote the “Belt and Road Initiative (BRI) through a development of a multifaceted transport system, covering railroads, roads and highways, maritime and aviation based on national and regional demands”.

The Chinese focus on developing a transport system becomes important when one considers how Iran walked away from a trilateral agreement involving India and Afghanistan in July last year—the agreement which it had signed in May 2016 to develop a rail line from Chabahar port to Zahedan, a town in South-East Iran, bordering Afghanistan and Pakistan.

The reason Iran gave for taking this step was “delay” on India’s part in starting the project. However, Delhi-based officials said that there was no “delay” in releasing the money; rather, it was the Iranian side that delayed starting the project. The deal was signed on 23 May 2016 between Prime Minister Narendra Modi and the Presidents of Iran and Afghanistan with the intention to create a trade corridor between India and Afghanistan via the Chabahar port and in the process bypassing Pakistan. Apart from playing a significant role in increasing the trade between the three countries, it was of a massive strategic interest. This rail line was then expected to extend to the transit town of Zaranj in South-West Afghanistan. It is pertinent to mention that the 25-year-deal between China and Iran was first envisaged when Chinese President Xi Jinping visited Tehran in January 2016, just four months before PM Narendra Modi visited the country.

The strategic document then goes on to mention the “Key fields of cooperation under the 25-year Comprehensive Partnership Deal”. Apart from talking about the cooperation in oilfields, it also calls for China’s intervention in Chabahar port and development of Makran coast which is located in the Balochistan region of Pakistan, apart from China helping Iran develop the Jask Port, which is located on the western part of Iran’s coast along the Gulf of Oman outside of the Strait of Hormuz, less than 400 km from Gwadar in Pakistan.

The document also states: “Attracting Chinese investment into projects at the Chabahar [Makran] Petrochemical Town through offering facilitative financial procedures and preferential policies”. The majority part of this strategic document talks about oil and energy and gives a glimpse into how Iran is going to become one of the biggest suppliers of oil to China as the next super-power moves towards increasing the size of its economy and military might. Under a section titled “Oil and energy”, the document mentions that more and more Chinese companies will be investing in Iran in the field of oil and energy in the coming days; 2. Provision of long-term energy security; 3. joint efforts toward setting up a mechanism for sustainable imports of crude oil from Iran; 4. Encouraging companies on both sides to develop Iranian oilfields through partnership or joint investment; 5. Covering China’s energy demand; 6. negotiation on partnership in constructing and equipping storage facilities for oil, gas and petrochemicals in the two countries; 7. Encouraging Chinese firms into investment and financial procurement in electricity, energy, water and sanitation projects [in Iran]; 8. Transfer of Chinese technical knowhow and experience in strategic planning into Iran’s water and electricity sectors.

Under a heading titled: “Active Involvement by Iran in China’s Belt and Road Initiative”, the document goes on to mention about Iran becoming a major partner in BRI and how it is expected that this will lead to transfer of oil and electricity to Pakistan; 2. Regional-international corridors; 3. Boosting cooperation and consultation over active involvement in the south-north corridor (Chabahar Port-Central Asia) and southwest (Chabahar and Bandar Abbas-Turkey and Azerbaijan Republic) on the basis of the fundamental principle of pursuing common interests; 4. Negotiations over the construction of the Pakistan-Iran-Iraq-Syria pilgrimage railroad and the related subprojects; 5. Accelerating the completion process of Iran’s east-west railroad based on the three economic principles of respect for private ownership, market orientation and competition; 6. Encouraging the implementation of projects focused on the construction of roads, highways and railroads in Iran; 7. Regional Cooperation; 8. Transfer of energy including oil and natural gas from Iran’s west to east; 9. Transfer of natural gas to Pakistan and China through the China-Pakistan Economic Corridor (CPEC); 10. Planning and execution of joint projects focused on energy resource development and transfer in Iraq; 11. Chinese cooperation in boosting production and transfer of energy between Iran and its neighbours; 12. Joint investment on construction of power plants and electricity transfer lines in Pakistan, Afghanistan, Iraq and Syria and providing Iran with the opportunity to export its electricity to Pakistan and Afghanistan within the framework of the Belt and Road Initiative, as well as exchange of energy through the Iranian east-west corridor.

In the heading tiled “Short-term executive steps” the document reiterates how oil is the centrepiece of the entire deal. The two parties have agreed to cover the following should conditions prove suitable: 1. Steady exports of crude oil to China; 2. Contracts to be signed between Iran and giant Chinese firms on cooperation in upstream and low-stream oil projects; 3. Partnership in construction and equipping crude and oil products storage units in Iran, China or other countries; 4. Partnership in construction and capacity development of Iranian energy transfer lines, including oil and gas pipelines as well as construction and capacity development of oil products and electricity networks.

To safeguard its interest, China has inserted a separate article in the document, Article 8, which states that no outside pressure will be allowed in the implementation of the deal. “Rejection of Outside Pressure: In line with the principle of multilateralism, the two parties shall safeguard the implementation of the Articles of the present document in the face of illegal pressure from third parties”.

India’s Ministry of External Affairs, on 20 May 2021, while reacting to Iran’s decision to exclude India from the Farzad-B oilfield, which India had discovered in 2002, sought to bypass any probing questions by suggesting that there was a possibility of India becoming involved in the Farzad-B project at a later stage. “Iran wanted to involve us at a later stage. Our consortium is in touch with the Iranian authorities,” MEA’s official spokesperson Arindam Bagchi said.

However, no details were shared about how this “involvement” will happen, considering Iran’s Petropars will spend almost $2 billion to develop the field. Any “involvement” of any country after oilfields are developed is only as a buyer of the oil that is produced from those fields.

The fact that India tried very hard to salvage these two long standing agreements (Farzad-B and the Chabahar port-Zahedan rail line) and ward off China’s pressure on Iran, unsuccessfully though, is clear from the fact that in September last year, two members of the all-powerful Cabinet Committee on Security (CCS), Defence Minister Rajnath Singh and External Affairs Minister S. Jaishankar, separately met their Iranian counterparts in Tehran within hours of each other. Chaired by Prime Minister Narendra Modi, the CCS is the final decision-making body on matters related to the country’s security, including defence policy and internal security. Besides the Prime Minister, the Ministers of Defence, Home, External Affairs and Finance are members of the committee.

Email sent to the spokesperson of the Petroleum Ministry, India, seeking a response to the following queries did not elicit any response: 1. Indian companies, including ONGC, were involved with developing the oilfield since 2008 and have spent not less than $400 million since then. Why did Iran decide to stop the cooperation with Indian companies all of a sudden? 2. Does any mechanism exist to recover the money that India has spent on developing the oilfield? 3. If yes, is the Ministry exploring this mechanism?

The Sunday Guardian reached out to the Iranian embassy in India with similar queries, but the embassy chose not to respond. The state-owned National Iranian Oil Company, too, did not respond to The Sunday Guardian’s queries.