India's trade with Central Asia has long been constrained by the absence of viable overland transit routes, denied by Pakistan and China who share boundaries with India
Chabahar port, located in the Sistan-Baluchistan Province on the south-eastern coast of Iran, is of major strategic importance to India as it would give it sea-land access into Afghanistan and through Iran’s eastern borders, to Central Asia. From Chabahar port, there is a 883 km road route to Afghanistan’s border town of Zaranj, the Zaranj-Delaram road constructed by India’s Border Roads Organisation in 2009, providing access to four major cities of Afghanistan – Herat, Kandahar, Kabul and Mazar-e-Sharif. Chabahar will also serve as the Indian Ocean outlet for Central Asia, and the proposed 7200 km International North South Corridor (INSTC) running northward through Iran and Afghanistan, will provide India vital access to the markets of five Central Asian Republics (CARs), Russia, and ultimately Europe.
India’s trade with Central Asia has long been constrained by the absence of viable overland transit routes, denied by Pakistan and China who share boundaries with India. Once Chabahar Port is developed and becomes operational, India may be able to begin to compete with China.
Following his visit to Iran in early August 2017, Mr. Nitin Gadkari, Minister for Road Transport and Highways, Shipping and Water Resources, River Development and Ganga Rejuvenation stated, "Talks are on for building railways and roads through Chabahar till Afghanistan and then we have access to Russia. Once Chabahar is operationalised, which we are hopeful to be in 12 to 18 months; it will prove to be a gateway to golden opportunities to boost trade and business… would be a ‘win win’ situation for India, Iran and Afghanistan as it would serve as a “growth engine and gateway to golden opportunities…We are working on a fast track.”
In September 2014, on Iran’s request, the Indian government decided to participate in the development of Chabahar Port. Thereafter, following a series of meetings between the two countries, a Memorandum of Understanding for development of the Chabahar Port by India was signed in Tehran by Mr. Gadkari and Dr. Abbas Akhoundi on 06 May 2015. Then, followed several rounds of meetings between the Ministry of Shipping and India Ports Global Pvt. Ltd. from the Indian side and Arya Bander Iran and Port and Maritime Organisation from Iran’s side, leading to the contract agreement signed on 23 May 2016.
Also in May 2016, Mr. Narendra Modi became the first Indian prime minister in 15 years to visit Iran, and during his visit, he pledged up to $ 500 million to develop and operate Iran's Chabahar port as part of a trilateral engagement between India, Iran and Afghanistan.
On 22 January 2015, in preparation of India’s commitment, the India Ports Global Pvt. Ltd, was set up in Iran as a joint venture between Jawaharlal Nehru Port Trust with 60 percent shares and Kandla Port Trust, recently renamed as Deendayal Port Trust, with 40 percent shares, along with participation from private Iranian and Indian firms to develop and operate the port at Chabahar. The paid up capital of this company is presently Rs. 10 crores.
The contract entails developing and mechanizing two terminals with four berths to be equipped with rail mounted quay cranes, rubber tyre gantry cranes, mobile harbour cranes, yard cranes, empty container handlers, reach stackers and terminal tractor-trailors for handling cargo.
In June 2017, India reportedly ratified the United Nations TIR (Transports Internationaux Routiers) Convention. Developed and managed by International Road Transport Union (IRU), the World Road Transport Organisation (TIR) is the global standard for goods customs transit, which will ensure a secured supply chain and boost trade and is part of India’s multi-modal transport strategy to integrate the economy with global and regional production networks through better connectivity. This is expected to increase overland trade and regional integration across South Asia and beyond, fast-tracking the region’s potential to become a strategic trade hub. IRU Secretary General Umberto de Pretto said: “I am delighted to welcome India into the TIR family of nations. This is an important step in harmonising standards and boosting transport, trade and development across South Asia......We look forward to working closely with the Indian government and business community as we turn our attention now to implementing the TIR system.”
With India joining TIR, the INSTC becomes closer to implementation and also becomes India’s suitable substitute to China's One Belt One Road (OBOR) strategy.
During the 2nd meeting of the Strategic Partnership Council between India and Afghanistan, held in New Delhi on 11 September 2017 and co-chaired by External Affairs Minister of India, Sushma Swaraj, and Foreign Minister of the Islamic Republic of Afghanistan Salahuddin Rabbani, the two sides welcomed the establishment of the Air Cargo Corridor between Kabul and Kandahar with New Delhi in June 2017. It was agreed to expand it to include other cities in Afghanistan and India as well as to increase the frequency of the cargo flights between the two countries. Reaffirming the importance of connectivity and free and unfettered transport and transit access for Afghanistan and Central Asia, both sides agreed to work towards expeditious operationalisation of the Chabahar Port in Iran under the trilateral Agreement for Establishment of International Transport and Transit Corridor signed in May 2016. In this context, both sides agreed to explore joint investments. Also, the Afghan side welcomed the imminent commencement of wheat shipments of 170,000 metric tons from India to Afghanistan via Chabahar Port.
Timed with the recent forward movement on Chabahar, Dr. Amiya Chandra, Joint Director General, Foreign Trade, Ministry of Commerce, has come out with his book, The Trade Game, a revised extension to his earlier book, India-Central Asia Relations: The Economic Dimension. Dr. Chandra, has handled the East European region including Central Asia, and was part of the Indian government’s delegation which set up India’s trade route to Central Asia via Iran. This book elaborates on the importance of India’s all-round economic engagement with Central Asia.
The CARs are resource rich and have vast reserves in natural gas and oil. Energy cooperation thus forms an important component of India–Central Asia relations. India–Central Asia economic relations also need to be seen through a wider prism that would involve important sectors of each of the CARs’ economic development planning: uranium, electricity, hydroelectricity, infrastructure, construction, transport, banking, agribusiness, and above all, the other emerging service sectors, such as Information and Communications Technology (ICT), healthcare, hospitality, tourism etc. The book explores various transportation routes and networks which are likely to propel India into the Central Asian picture in the near future. Apart from energy and uranium resources, Central Asia offers a relatively untapped market for the Indian consumer goods, especially as consumers in the region have little to choose from between the highly priced imported Western products and cheap but lower-quality Chinese manufactured goods that have flooded the region. The potential for Indian investment and expertise has been identified in the areas of IT, banking, construction and food processing. Further, the potential for Indian assistance to the CARs in developing their small and medium-scale enterprises is immense, in addition to the tremendous opportunity in joint ventures in different sectors especially service sectors.
Interacting with this writer, Dr. Chandra made an interesting point. He said, “China’s economic strength comes from its foreign trade and it is exporting to almost all the nations of the world and slowly killing local industries. However, Chinese foreign trade currently is majorly dependent on maritime routes and it is because of its limitations in maritime trade that it has opted for overland routes for furthering its economic and militarily interests through the One Road One Belt (OBOR). The CARs are the soft target of China as they are currently dependent upon China and Russia for their foreign trade, and in absence of any credible trade route they are bound to be attracted more intricately and integrate with China, against the interest of India and the US. Unfortunately, the US under President Donald Trump’s administration is getting side-lined more and more due to its absurdity and fickleness in international trade and political dealings. It would be in India’s economic, foreign trade and political interest to have excellent relationship with Iran and Central Asia. The western world and the US is in turmoil and their antipathy to lifting any further trade barriers is against India’s economic and security interest. Central Asia, Iran, Russia and EU offer much better opportunities for Indian exports growth”.
Claudia Waedlich, in her article ‘CPEC and military design eliminations for development, on 25 September 2017, stated: “The implementation of the China Pakistan Economic Corridor (CPEC) raises many questions. Is it only an economic corridor as promised by China and Pakistan? Or has it another purpose? Will it bring the promised free trade, prosperity and development to Balochistan and the other nations in the artificially constructed State of Pakistan? The answer is a clear no. Regarding strategic designs – first Gwadar port, the end point of the CPEC, which stretches from Kashgar in Xinjiang to Gwadar, close to the Straits of Hormuz, will be in danger of being completely blocked with a high impact on international trade from around the world”. (http://www.vijayvaani.com/ArticleDisplay.aspx?aid=4443)
India’s development of Chabahar, just 70 km away from Pakistan’s Gwadar port, handed over by it to China for 40 years and part of the CPEC, is being viewed by Pakistan as a threat. According to Ahmad Bilal Khalil, a researcher at the Center for Strategic and Regional Studies, Kabul, writing in The Diplomat on 31 January 2017, Iran also wants to connect CPEC (and Gwadar) and Chabahar. Given that both Afghanistan and Iran have embraced OBOR, it seems unlikely that Chabahar will line up in direct competition with the Chinese project. The rivalry between Chabahar and Gwadar mostly hinges on two factors. First, analysts posit that the probability of a Chinese and Indian military (especially navy) presence in these ports will increase Sino-Indian rivalry in the Indian Ocean. Second, there is an expectation that Chabahar port will diminish the importance of Gwadar port (the end of CPEC) as a transit hub and route for Central Asian republics and Afghanistan. The signing of the Chabahar transit agreement in Tehran has left Pakistan in a quandary. This transit trade agreement, seen with both suspicious and hopeful eyes in Islamabad, has since become a dilemma for Pakistanis. The reactions of the Pakistani media (particularly the Urdu media) have been uneasy; some retired army generals (and former defence secretaries) even referred to the Chabahar agreement as a “security threat” to Pakistan.
This will have to be appropriately factored by India, Iran and Afghanistan.
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