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Chabahar port development and India

The recently finalised 10-year agreement between India and the Islamic Republic of Iran to develop and operate the Shahid Beheshti Port in Chabahar, signals that the two countries are heading towards a collaborative strategic partnership. The Chabahar Port is located in the south-eastern Sistan-Baluchestan province on the Gulf of Oman. It consists of two distinct ports: Shahid Kalantari and Shahid Beheshti. India has taken on the responsibility of managing one terminal in Shahid Beheshti. The development of, and responsibility to manage Iran’s strategic Chabahar Port establish India as a responsible partner and a mainstream player in the West Asian region. It further indicates India’s ever growing strategic depth in the region. For the uninformed, the Chabahar Port serves as a transit point for India to establish trade relations with Afghanistan, Central Asian nations, and Europe, while also providing leverage over ports in Pakistan, especially Gwadar keeping in mind that Pakistan is an arch-rival of India.

India and Iran share a long historical and cultural relationship, which has fostered healthy trade and economic relations. India has always relied on Iran for land and sea connectivity with Central Asia, the Caucasus, and Russia, extending to Europe. The port development project was first planned in 2003 but was delayed for many years due to American sanctions on Iran and United Nations’ restrictions related to Tehran’s nuclear program. In 2015, India signed a memorandum of understanding after the United States relaxed sanctions due to the Iran nuclear agreement, enabling India to expand trade relations with Iran. In 2016, work on the project was inaugurated during Prime Minister Narendra Modi’s visit to Iran. The United States’ unexpected termination of the nuclear agreement in 2018 and the reinstatement of sanctions on Iran created uncertainty over India’s ongoing collaboration with Tehran. However, India managed to secure exemptions from U.S. sanctions, allowing it to continue operating the port through temporary means. As part of the agreement signed on Monday, India has committed to invest $120 million in the equipment required for the terminal. Additionally, the contract’s total value is increased to $370 million with the inclusion of a $250 million loan credit facility for related port projects. Bilateral trade between India and Iran in the fiscal year 2022-23 reached $2.33 billion, showing a growth of 21.76% compared to the previous year. India’s exports to Iran amounted to $1.66 billion, with a growth rate of 14.34% while India’s imports from Iran reached $672.12 million, with a growth rate of 45.05% year-on-year.

YearIndia’s Exports to IranIndia’s Imports from IranTotal TradeGrowth Rate (%)
2019-203.381.394.77
2020-211.770.332.10-55.9
2021-221.450.461.91-9
2022-231.660.672.3321.6

(India-Iran trade; Source: Department of Commerce of India)

Chabahar port has significant geostrategic and geo-economic importance. It connects India to the International North-South Transport Corridor (NSTC), establishing a commercial route to Europe via Iran, Azerbaijan, and Russia. A fully operational NSTC reduces both the time and expenses involved in transcontinental commerce and is seen as an alternative to the Suez Canal route. Chabahar port is located around 200 km from Gwadar port, which is controlled by China as part of its Belt and Road Initiative (BRI). This proximity makes Chabahar strategically important for India, particularly in Afghanistan and Central Asian countries. The development of the port may bolster Indo-Iranian relations, potentially countering the expanding cooperation between China and Pakistan. Meanwhile, China is enhancing its presence in Iran, aiming to secure vital natural resources and strategic shipping lanes. For Iran, this opens doors for new diplomatic and economic alliances, particularly given its isolated status in Western circles. By strengthening ties with India through the development of the port, Iran can counter China’s influence in the region. This partnership could provide Iran with alternative economic opportunities, mitigating its vulnerability and economic stagnation due to Western sanctions. Enhanced relations between Iran and India might also help bridge the regional divide, fostering greater understanding and cooperation, boosting intra-regional trade and investment, and promoting people-to-people contact.

The land routes connected to the port are positioned to greatly enhance the accessibility of markets in Afghanistan and Central Asia. The increased interconnections have the potential to significantly affect Afghanistan’s rapid economic growth and acceptance worldwide. Afghanistan is primarily dependent on commercial lines that pass through Pakistan; however, the Chabahar port provides a feasible alternative option. Chabahar has the potential to significantly boost Afghanistan’s economic growth and investment from India. Afghanistan is keen for India’s participation, and the Taliban government has invited India to start new economic projects. This would diversify Afghanistan’s trade and commercial routes, reducing its reliance on Pakistan.

The development of Chabahar port could enhance regional stability by promoting cooperation and connectivity among neighbouring countries. Despite the challenges posed by adversarial parties like Pakistan and China, investing in the infrastructure and logistics of Chabahar port could pave the way for a more prosperous future for Afghanistan and Central Asia as a whole.

-Altaf Mir,

PhD Scholar,

Jamia Millia Islamia

*****

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