Chabahar port opens door for India to Central Asia, giving an edge over China

Chabahar port is important not only for India but also for Afghanistan and Central Asia.

With the partition of the sub-continent in 1947, India lost connectivity to Afghanistan and Central Asia. Chabahar port in Iran provides us access to both. It has therefore enormous geopolitical significance for India. The Union Minister for Ports, Shipping and Waterways, Sarbananda Sonowal visited Chabahar on 13th May to witness the signing ceremony of the Long-term Main Contract for the development of Shahid Beheshti Port Terminal in Chabahar. This agreement is a sequel to the first long-term contract for 10 years signed during the visit of Prime Minister Narendra Modi to Tehran in 2016. As Indian Ambassador to Iran, I had the privilege of negotiating the MoU for Indian participation in the port project. This was signed by the then Minister of Ports, Shipping and Waterways Nitin Gadkari in 2015. The new agreement builds on the progress achieved so far.

Importance of Chabahar Port

Chabahar port is important not only for India but also for Afghanistan and Central Asia. It broadens their options. They have been hitherto dependent either on Shahid Rajayee port in Iran’s Bander Abbas, or Karachi port in Pakistan. The former is congested; the latter is exposed to a rapidly worsening situation. Pakistan uses transit as leverage to extract political and monetary concessions from Afghanistan. There has been pilferage as well as long disruptions in the past.

Transit to Afghanistan and Central Asia will require improving hinterland connectivity for the port. This requires building a railway line from Chabahar to Zahedan and Sarakhs, which is located on Iran’s northern border with Turkmenistan and Afghanistan. It is connected by railway line to Turkmenistan and in turn it has rail connectivity with the Central Asian Republic.

Connectivity to Chabahar Port

Chabahar port could also develop into a trans-shipment hub for trade with Africa. At present, Jabel Ali serves as trans-shipment hub; Chabahar is closer. Located in Iran, the port could have easy access to cheap bunker fuel. At present, most ships visiting India have to go to Fujeira port in UAE to get bunker oil. However, use as a trans-shipment hub would require the development of port facilities. Chabahar will also need a regular shipping line connecting the port to India. Without this, it will be difficult to attract cargo to the port.

Chabahar is located in the Sistan-Balochistan province of Iran. This borders increasingly restive Balochistan province in Pakistan. This area witnessed terror strikes by Pakistan based terrorist groups. This led to an exchange of missiles by the two countries in January of this year. This has been followed by attempts by both sides to calm the situation. Iraninan President Ebrahim Raisi visited Pakistan after these incidents. Though there will be a spillover of disturbed situations in neighboring Pakistan, the situation on the Iranian side is far more stable.

Chabahar Competes Gwadar

China has invested in Gwadar port across the border with Chabahar. It is developing Gwadar as a naval base. There is an essential difference here. Unlike Gwadar, Chabahar port is a civilian facility open to trade with all countries. China and Pakistan are not at all happy with the Indian presence in Chabahar.

During my visits to Chabahar, I found the port town is well developed. The Iranian government has lavishly spent money on developing the infrastructure in and around the city. According to available media reports, it has also done considerable work on the railway line connecting Chabahar to Zahedan in the north.

The Iranian government is also developing a Free Trade Zone in Chabahar. This is part of the Government’s plan to develop it as the second biggest petrochemical hub after Assaluyeh on the west coast. There is already Chinese investment in the Free Trade Zone. Some Indian companies have also visited it in the past.

Trade Relations with Central Asia

Central Asian Republics have evinced interest in Chabahar. At present, Indian trade with that region is minuscule. In the absence of connectivity, trade has to move through a very long route via China which pushes up the cost. Development of Chabahar will open up a shorter route making Indian exports more competitive and vice-versa.

While China has invested $900 million in Gwadar, Chabahar requires much less investment. According to media reports, under the new agreement signed yesterday, India will offer a credit line of $ 250 million in addition to investment of $ 120 million. There are complications. The US State Department spokesman stated that doing business with Iran will attract sanctions. He also said there was no exemption for Chabahar. EAM Dr S Jaishankar said that this is a bilateral matter between India and Iran. The Indian participation in Chabahar has no link to the crisis in the Middle East, which is the immediate reason for deepening of US sanctions against Iran.  We need to follow up the signing of the new agreement with rapid implementation. This is critical for the development of the port. It will also underline India’s continued engagement with Iran, which is an important regional power.