Introduction
The signing of a long-term agreement between India and Iran for Indian operations at the Chabahar port marks a significant milestone in their strategic partnership. This accord, inked during India's Ports and Shipping Minister Sarbananda Sonowal's visit to Tehran, underscores the pivotal role Chabahar plays in India's ambitious plans to forge greater connectivity with Iran, Afghanistan, and the landlocked Central Asian states. With a $250 million credit window offered for infrastructure development around the strategic facility in the Gulf of Oman, India has laid the foundations for its long-term involvement in this crucial maritime hub.
Strategic Significance
Chabahar port's location on the open sea provides easy and secure access for large cargo ships, bypassing the sensitive and busy Persian Gulf and Strait of Hormuz. Both India and Iran view the deep-water port as a vital hub for the International North-South Transport Corridor (INSTC), an alternative shipping route that circumvents the traditional maritime chokepoints. This strategic positioning not only enhances regional connectivity but also bolsters India's trade interests and security in the region. The International North-South Transport Corridor (INSTC) is a notable 7,200-kilometer multi-mode freight transportation project connecting India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia, and Europe.
In December 2017, the first phase of the Shahid Beheshti port was inaugurated, and that same year, India shipped its first wheat consignment to Afghanistan via Chabahar. By 2019, Afghan exports to India started passing through the port, bypassing the traditional Pakistani route. Twenty-three trucks carrying 570 tonnes of dried fruits, textiles, carpets, and minerals were transported from Zaranj in western Afghanistan to Chabahar in Iran.
Chabahar holds significant strategic importance compared to Bandar Abbas, another key Iranian port, as it is located beyond the Straits of Hormuz. This positioning ensures that trade and commercial activities at Chabahar can continue uninterrupted, even if the Straits of Hormuz are closed.
Countering China's Belt and Road Initiative
The Chabahar port agreement comes amidst India's consistent opposition to China's Belt and Road Initiative (BRI), particularly the China-Pakistan Economic Corridor (CPEC) that infringes upon India's sovereignty by traversing through Pakistan-occupied Kashmir (PoK). Pakistan's Gwadar Port, situated in the restive Balochistan province, has raised security apprehensions for India, given its potential to disrupt India's energy and oil imports via the Gulf of Oman.
By strengthening ties with Iran and asserting control over Chabahar Port, India aims to counter China's persistent efforts to expand its influence in South Asia through the BRI. The port serves as a strategic counterweight to Gwadar, potentially undermining China's ambitious economic and geopolitical ambitions in the region. Interestingly, Gwadar was not always part of Pakistan. It was under Oman's rule for nearly 200 years until the 1950s, before being sold to Pakistan in 1958. Gwadar was initially offered to India, but the Indian government, led by Prime Minister Jawaharlal Nehru, declined the offer. The Modi government has been taking several measures to uphold India’s trade interests and security. Recently, the Ministry of External Affairs (MEA) approved the bid by the India Ports Global Limited (IPGL) to take over operations at Myanmar’s Sittwe Port in the Bay of Bengal. In addition to enhancing its capabilities as a Net Security Provider and strengthening partnerships with friendly countries, India is focusing on maritime trade as a key strategy to maintain and expand its dominance in South Asia, particularly in the Indo-Pacific region. Notably, 80% of India’s external trade and 90% of its energy trade are conducted through the Indian Ocean.
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Union Shipping Minister Sarbananda Sonowal highlighted the strategic importance of Chabahar Port on social media, noting its location on Iran's southwestern coast and its easy access to India's west coast. He emphasized that the port forms a crucial link in the International North-South Transport Corridor (INSTC), and a long-term contract will significantly boost economic activities, enhancing India's role in global trade and commerce. A government official remarked, "There were concerns that without a long-term agreement with Iran for the port, the industry would be hesitant to plan its long-term supply chain through it. This should now be streamlined."
According to the Centre, India's engagement with Chabahar extends beyond commercial interests. "India's sustained involvement in Chabahar underscores its role as a trade anchor in the region and strengthens its position in the global supply chain. The port will be used for humanitarian aid shipments, reaffirming India's commitment to regional development and showcasing its dedication to fostering goodwill and stability," Sonowal stated in an official release. A 10-member delegation, including officials from the Ministry of Ports, Shipping and Waterways, and the Ministry of External Affairs, headed by Sonowal, arrived in Tehran on Monday to finalize the agreement. The visit was facilitated by an exemption from the model code of conduct for the ongoing Lok Sabha elections, granted by the Election Commission last week.
External Affairs Minister S Jaishankar, speaking at an NSE event in Mumbai, pointed out, "The port has not been able to grow due to the lack of a long-term agreement. With this new arrangement, we anticipate larger investments and improved connectivity." He explained that previous operations were ad-hoc due to complications regarding the combination of partners, but the long-term agreement is expected to pave the way for substantial investments in the port. "Chabahar will connect us through the INSTC to Russia and Central Asia," he added. Raju Kumar, Tax Partner at EY India, elaborated on the strategic benefits of Chabahar Port for India's oil and gas sector, highlighting its potential to diversify import routes, access new Central Asian markets, develop infrastructure, enhance energy security, and increase geopolitical influence. This strategic positioning allows India to mitigate risks from traditional import routes, expand its energy footprint, bolster infrastructure capabilities, ensure a stable energy supply, and assert its presence in regional geopolitics.
Enhancing Maritime Trade and Connectivity
Chabahar port's strategic location and India's investments are poised to enhance maritime trade and connectivity between South Asia, Central Asia, and the wider Eurasian region. Sonowal highlighted the port's pivotal role as a link between the affluent Central Asian markets and the economies of South Asia, fostering trade, economic partnerships, and improved connectivity between these regions. The Indian government has demonstrated its commitment to developing Chabahar as a regional and global transport corridor, adhering to internationally recognized standards, promoting good governance, upholding the rule of law, and ensuring equality at the port.
Overcoming Challenges
The long-term agreement, valid for 10 years and subject to subsequent extensions, replaces an initial pact signed in 2016 that covered India's operations at the Shahid Beheshti terminal. Negotiations for the new contract were prolonged due to differences over a clause related to arbitration, as Iran's Constitution prohibits such arbitration from being referred to foreign courts. However, both sides have managed to resolve this issue, paving the way for the agreement.
Operational Progress and Future Plans
Since India Ports Global Chabahar Free Zone (IPGCFZ), a subsidiary of state-run India Global Ports Limited (IGPL), began operations at the Shahid Beheshti terminal in December 2018, it has handled over 8.4 million tonnes of bulk and general cargo, including trans-shipments from various countries. The Indian side will invest about $120 million to further equip the terminal with equipment such as mobile harbor cranes, rail-mounted quay cranes, rubber-tyred gantry cranes, reach stackers, forklifts, and pneumatic unloaders. India's investments in Chabahar mark its initial foray into overseas infrastructure ventures, and plans are underway to expand the port's capacity from its current 8 million metric tonnes to 18 million metric tonnes in the next phase. Connecting the port to the railway network through the 700-km Chabahar-Zahedan railway line, for which an agreement was inked in 2016 between Indian Railways' IRCON and Iranian Railways' CDTIC, could lead to a substantial increase in cargo volume.
Geopolitical Tensions and Regional Dynamics
The Chabahar port agreement holds particular significance amidst the ongoing geopolitical turmoil in West Asia. Recent confrontations between Iran and Israel, with military clashes following accusations by Tehran of airstrikes on an Iranian diplomatic facility in Syria, have escalated tensions in the region. India has expressed apprehension over these developments and has maintained diplomatic communication with Iran regarding various concerns, including attacks on ships linked to India by Yemen's Houthi rebels, suspected to have ties with Iran.
Conclusion
India's strategic embrace of Chabahar port reflects its determination to safeguard its trade interests, maritime security, and regional influence in the face of China's expanding footprint through the Belt and Road Initiative. By fostering economic partnerships and bolstering connectivity with Iran, Afghanistan, and Central Asian nations, India aims to assert its position as a net security provider and a key player in the Indo-Pacific region. The long-term agreement on Chabahar not only solidifies India's commitment to the region's economic development but also underscores its aspirations to become a major maritime power in the evolving geopolitical landscape.
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