Development of Chabahar, a deep-water port in southeastern Iran, on the Gulf of Oman could transform regional trade and connectivity for India, Iran, Afghanistan, Central Asian and Eurasian countries. For over two decades, India has been heavily investing in the development of the Chabahar Port project in Iran as a potential conduit for Eurasian interconnectivity.
India and Iran have been talking about this connectivity project since 2002 when the Iranian president visited India. A memorandum of understanding (MoU) for the development of Chabahar Port by India was signed in May 2015. However, the fear of sanctions kept it from realisation until 2016 when Prime Minister Narendra Modi visited Tehran and signed a trilateral agreement with Iran and Afghanistan. Chabahar, Iran’s only oceanic port which in Persian means ‘four springs’ has the potential to strengthen both Tehran and New Delhi’s geopolitical influence.
Finally this year on May 13, India and Iran formalised the 10-year contract, signed by Indian Ports Global Ltd and the Port & Maritime Organisation of Iran. The agreement was witnessed by India’s Ports, Shipping and Waterways Minister, Sarbananda Sonowal and Iran’s Minister of Roads and Urban Development, Mehrdad Bazrpash. Until now there has been an annual contract awarded to India Port Global Ltd (IPGL).
Underlining the significance of the Chabahar contract Minister Sonowal said, “Today is a historic day for the maritime sector of the region as India and Iran signed this long-term agreement on Chabahar Port heralding a new age of trade, marine cooperation as well as transhipment while boosting trilateral trade among India, Iran and Afghanistan.”
550 nautical miles from Kandla Port in Gujarat, the Chabahar Port is an important point on the Arabian Sea. This is the first time India will take over the management of an overseas port which will also have a multiplier effect on trade among India, Iran and Afghanistan. From Chabahar, a road to Zaranj, gives access to four major cities – Herat, Kandahar, Kabul and Mazar-e-Sharif in Afghanistan.
A number of factors contribute to the strategic dimension of the port. Chabahar Port’s inclusion in the International North South Transport Corridor (INSTC) which aims to connect India with Russia via Iran, creating an alternative trade route bypassing Pakistan’s Karachi and Gwadar ports, has further enhanced its outreach and efficacy. Chabahar also obviates the dangers of escalation in the Red Sea and Strait of Hormuz choke points. It is also expected to bolster India’s trade links with Central and West Asian countries, providing a vital corridor for economic activities.
Given that Islamabad has offered its Gwadar port to the Chinese under the rubric of China Pakistan Economic Corridor (CPEC), the uncertainty even for humanitarian assistance to Afghanistan via Pakistan will be addressed through Chabahar. Even the Taliban regime has agreed to invest $35 million in the Chabahar Port to diversify Karachi Port’s dependency. In addition, Chabahar can also be useful for maritime freight to the African continent, which is India’s natural partner.
The Indian operator IPGL will inject approximately $120 million into the port’s development, alongside an additional $250 million in financing, making the contract’s total value reach $370 million. In its budgetary provisions for 2024-25, the Ministry of External Affairs has allocated ₹100 crore as well. As part of the agreement, India will procure (MHCs) mobile harbour cranes, (RMQCs) rail-mounted quay cranes, (RTGCs) rubber-tyred gantry cranes, reach stackers, forklifts, pneumatic unloaders, among others, at Chabahar Port.
Pursuant to the Obama Administration, agreeing to the JCPOA Nuclear deal with Iran, exemptions were provided to Chabahar Port to ensure alternate supply routes under the Iran Freedom and Counter-Proliferation Act of 2012 allowing the development of Chabahar Port in 2018. India had developed the Shahid Beheshti Terminal and continued to use it for the supply of humanitarian assistance to Afghanistan and even to Iran. However, with the Trump administration walking out of the JCPOA, exemptions on sanctions for India were removed, making Indian imports of Iranian crude virtually nil and Indian companies wary of secondary sanctions. Nevertheless, Iran-India bilateral relationship remained strong with New Delhi supporting Iran’s entry into the Shanghai Cooperation Organization (SCO) and the BRICS.
Facilitated by the India Ports Global Chabahar Free Zone (IPGCFZ), a subsidiary of IPGL, the first consignment of exports from Afghanistan to India in 2019. Chabahar port was last year used by India to send 20,000 tonnes of wheat aid to Afghanistan, and prior to that in 2021 to supply pesticides to Iran.
Reacting to the Chabahar contract US Deputy Spokesperson implied sanctions threats for the Indian companies to which Foreign Minister Dr S Jaishankar has responded that the US should not take a narrow view towards the port in Chabahar, the US has been appreciative of the fact that Chabahar has a larger relevance. While Washington has in the past considered India’s core interests and critical connectivity perspective on the Chabahar Port deal, there is always the fear of exposure to American CAATSA sanctions (Countering America’s Adversaries Through Sanctions Act) for the companies involved, dampening enthusiasm for proactive engagement with Iran. But because Chabahar port can act as a significant hedge to counteract China’s Belt and Road Initiative (BRI), it is possible that the United States may ignore whatever economic gains Iran derives from Chabahar.
Aside from the risk of exposure to sanctions, India might face logistical and bureaucratic challenges in optimising the use of the port. To turn it into a critical transit hub, the companies involved would have to establish substantial infrastructure for storage and transport. If the INSTC is to be promoted as a viable alternate route, it is important to create reliable and high-quality infrastructure at the Chabahar Port. Along with competitive services along INSTC routes, the construction of a railway to the port in Iran is key in this regard.
According to former Indian envoy to Iran, KC Singh dealings with Iran are fraught with complexities due to its geopolitical strategies and relationships with major powers like China and Russia. Singh feels that Iran often engages in intricate geopolitical games, leveraging its ties with various countries to its advantage.
There are also the challenges of financial constraints from the Iranian side. India’s proactive involvement in Iran implies the inevitability of strategic competition with China, which might attempt to undermine India’s foothold in Chabahar to protect its interests in Gwadar.
Delivering Prime Minister Modi’s remarks at the the extended format meeting of the Shanghai Cooperation Organisation (SCO) Summit in Astana on July 4, External Affairs Minister S Jaishankar, said that the progress made by India in developing Iran’s Chabahar Port not only holds “great value” to landlocked Central Asian states but also “de-risks” commerce between India and Eurasia.
It has been suggested that the Shahid Beheshti and Chabahar port development is an important component of India’s “Diamond Necklace Strategy” an encirclement strategy through the development of naval bases, to counter China’s “String of Pearls” strategy. As its only oceanic port, located in the Gulf of Oman and the golden gate to landlocked Afghanistan and Central Asia, Iran Chabahar brings in foreign investment and increases its capacity within the INSTC project.
The Russo-Ukrainian war and the block of east-west transit corridors traversing Russian territory into Europe have increased the role of the Chabahar transit project in the INSTC. Over the last two years, the volume of trade between India and Russia has increased using INSTC. After India signed the 10-year deal with Iran to operate the Chabahar Port, all Central Asian countries have been eager to become part of this geoeconomic initiative, as global disruptions and conflict affect supply chains. Uzbekistan had expressed interest in forming a trilateral of sorts with India and Iran as the other partners for using Chabahar Port. Azerbaijan is working on operationalising the route via its territory which takes the shortest possible time between Mumbai and St Petersburg.
The Azerbaijan route is the original route of the three INSTC routes for Indo-Russian trade via Iran, but Azerbaijan has been slow in boosting infrastructure. Even the Caucasus countries are enthused about the INSTC. Armenia wants to join the INSTC, making it the fourth route for trade between India, Russia, Eurasia and Europe.
The INSTC contains three main routes relative to the Caspian Sea, including the Trans-Caspian Route through the ports of Astrakhan, Olya and Makhachkala in Russia, and the ports of Bandar Anzali, Amirabad and Nowshahr in Iran. India-Russia trade has been primarily taking this route. The second is the Eastern Route along the existing railway line through Kazakhstan, Turkmenistan and Iran. Some consignments to India came via this route from Eastern Russia. The Western Route extends from Astrakhan through Samur across Azerbaijan to the Astara station, and through Iran via the under-construction Astara-Rasht-Qazvin line.
Chabahar Port is key to India’s development sector outreach to Afghanistan. The Taliban-led government has also welcomed the pact that gives India ten years of management rights over Chabahar, offering an investment of $35 million as it explores a special zone in the Port for international trade. Zabihullah Mujahid, the spokesperson for the Islamic Emirate, has said, “We are in favour of better economic relations with all countries, and the Chabahar port should be expanded. The more activity there is in Iran’s Chabahar port, the more economic stability in the region is strengthened, benefiting Afghanistan, and we support it.” Mujahid went on to say that Chabahar port is a transformative venture and will reduce Afghanistan’s dependence on the Karachi port indicating Kabul’s growing discomfort with Pakistan.
Connectivity initiatives like the INSTC and Chabahar Port are positioned to potentially be an alternative to China’s Belt and Road Initiative. The INSTC and Chabahar Transit Project may not be able to completely replace the entire cargo flow through the Suez Canal, but the creation of an alternative will also be very important for smooth trade and transport operations. As its infrastructure is developed and logistics unravelled Chabahar port will serve as the primary node in a multimodal transit network linking India, Iran, Afghanistan, and, recently, Uzbekistan, through maritime, rail, and road routes. Their significance arises from the rapidly transforming geostrategic environment.
The conceptualisation of Chabahar port was driven by the unremitting scourge of cross-border terrorism inflicted by Pakistan against India. The ensuing uncertainty called for the need to connect with Afghanistan and Central Asia, bypassing Pakistan. By leveraging Chabahar Port, India has begun to steer its strategic interests to shore up trade and strengthen ties with not only Iran and Afghanistan but beyond with Central Asia, Eurasia and further with the Caucasus nations.
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