Not just China, Chabahar Port win may help India counter Suez crisis, delays in IMEC

The initial agreement on Chahbahar was inked in 2016 during Modi's visit to Iran.

On May 13, India signed a historic agreement to manage the Chabahar port for the next 10 years, a crucial route on Iran's southeastern coast along the Gulf of Oman that will open up a trade route between South Asia and Central Asia via Tehran.

In 2016, Narendra Modi's official visit to Iran ended in a string of agreements and understandings, including one on developing the strategic Chabahar port.

Both sides decided to give full play to the strategic location and unique role of Iran and India for promoting multi-modal connectivity within and across the region and hoped that India’s participation in developing Chabahar Port will open a new chapter in bilateral cooperation and regional connectivity, and encourage more maritime links and services between the two countries.

The new long-term agreement is intended to replace the original contract, which covered only the operations at Shahid Beheshti terminal of Chabahar Port and was renewed every year. India signed a tripartite agreement with Iran and Afghanistan to develop the terminal in May 2016.

With the signing of this agreement, India will, for the first time, take over the management of a port overseas - Chabahar is seen as a key connectivity link to Afghanistan, Central Asia and the larger Eurasian space and is also expected to help counterbalance Pakistan's Gwadar port and China's Belt and Road Initiative.

"The competition for regional dominance between India and China can be seen in the development of ports in the regions. Indian involvement in the Chabahar port is important in securing India’s interest in the region," said Air Marshal M Matheswaran, President, the Peninsula Foundation.

Beyond the obvious geopolitical advantages, this development can also help India overcome delays and disruptions elsewhere.

According to India Ports Global (IPGL), Chabahar can emerge as a potential global trading hub – and an arena for geopolitical competition. It may also allow India and Iran to reduce their dependence on the Suez Canal for transporting cargo to Europe.

This is especially crucial given that the Suez Canal has been fraught with repeated attacks from the Yemen-based Houthi rebels since the conflict broke out between Israel and Gaza in late 2023, leading to disruptions and delays for maritime commerce.

"Apart from being easily accessible from India’s western coasts, it serves several important functions. For starters, by having access to the port, India can reduce its commute time to Central Asia by one-third. Second, a link between Afghanistan and India could be built without going through Pakistan and this could help the already established diplomatic, security and economic relationship between New Delhi and Kabul," IPGL said as part of its annual report for 2022-23.

Not just the ramifications of the Suez Canal crisis, but India's management of this crucial port in Iran could also help the South Asian nation bypass the impact of any potential delays in the realisation of the India-Middle East-Europe Economic Corridor (IMEC) initiative.

In an interview to news agency Press Trust of India, External Affairs Minister S Jaishankar said that a delay in implementation of the IMEC in view of the current situation in West Asia is a matter of "concern" and the expectation generated following the firming up of the initiative in September last has to be "adjusted" a bit now.

And, hours ahead of the signing of the management pact for the Chabahar port, Jaishankar said that this pact with Iran could clear the path for bigger investments and more linkages coming out of the sea port.

"It is crucial for India to demonstrate the value of this port by prioritising and initiating urgent cargo shipments. The endorsement of the Chabahar contract is particularly timely, given the ongoing uncertainties in the Middle East that may delay the realisation of the IMEC initiative," according to Ajay Srivastava,  Founder of Global Trade Research Initiative (GTRI).

Termed as a historic initiative, the IMEC aims to roll out a road, railroad and shipping network among Saudi Arabia, India, the United States and Europe.

Srivastava further said that Indian cargo from key ports such as Kandla, JNPT, Mumbai, Mormugao, Cochin, and Mangalore can utilise the Chabahar Port as a strategic gateway for exporting goods to Central Asian countries including Turkmenistan, Uzbekistan, and Kazakhstan. By leveraging Chabahar, we can also establish connections with Northern Europe through Iran and Russia.

While India’s imports to Central Asian nations mainly include precious and semi-precious stones, chemicals, iron and steel, machinery, mineral oils, copper goods, plastic goods, wool, and leather, it exports items including coffee, tea and spices, pharmaceutical products electrical and mechanical equipment.

Given the current world order, the long-term management of the strategically important Chabahar port could very well mark a new era for India in global trade and geopolitics.