Friends, for the last few days one news that has been getting front-page coverage in newspapers is that CHABAHAR PORT of Iran. Recently India and Iran signed a 10-year contract to operate this strategic Iranian Port of Chabahar. A day after the contract was signed, a US State Department spokesperson said that any entity considering business deals with Iran needs to be aware of the potential risk of sanctions. Earlier Chabahar had got a waiver from the US sanctions under the US administration led by President Donald Trump.
This is a deep water port located in the Sistan-Baluchistan province of Iran. It is closest Iranian port to India, and is located in the open sea, providing easy access for large cargo ships.
A trilateral agreement was signed in May 2016, during the visit of PM Modi to Iran to establish the International Transport and Transit Corridor (Chabahar Agreement). This agreement was signed by India, Iran, and Afghanistan. India is participating in the development of the first phase of Chabahar port in cooperation with the Government of Islamic Republic of Iran.
India has so far supplied six Mobile Harbour Cranes ( two 140 tonnes and four 100 tonnes capacity) and other equipment worth 25 million US $. The Indian company, India Ports Global Limited (IPGL), through its wholly owned subsidiary, India Ports Global Chabahar Free Zone (IPGCFZ) took over the operations of the Chabahar Port from 24th December 2018.
Since then, it has handled traffic of more than TEUs of Container traffic and more than 8.4 million metric tone (MMT) of Bulk and General Cargo. This port has also facilitated the supply of humanitarian assistance, especially during Covid 19 pandemic. Till date, a total of 2.5 million tones of wheat and 2,000 tonnes of pulses have been trans-shipped from India to Afghanistan through Chabahar port. In 2021, India supplied 40,000 litres of environment friendly pesticide (Malathion) to Iran fight locust menace through this port.
What is the significance of Chabahar Port?
This port is a vital link connecting Mumbai to Euroasia via different corridors of the International North-South Transport Corridor (INSTC), spanning over 7,200 km, include sea routes, and rail and road links to connect Mumbai with Euroasia and central Asia.
Though India announced its plan to invest in the strategic Chabahar port in 2003 (NDA government led by PM AB Vajpayee), a formal agreement was signed between India and Iran only in 2015 (NDA government led by PM Narendra Modi). Construction picked up in when India pledged an investment of US $ 500 million to develop Chabahar port.
The proposal of INSTC was initiated by the agreement between India, Iran, and Russia in September 2000. Since then, INSTC agreement has been ratified by 13 countries, including Russia India, Iran, Turkiye, Azerbaijan, Belarus, Bulgaria, Armenia, Central Asian Republics, Ukraine, and Oman. According to estimates, the INSTC will reduce transit time to 25-30 days from 45-60 days and decrease the freight cost by 30% compared to Suez canal route, which has lately faced disruptions due to regional conflict.
India has taken a bold and proactive approach by utilizing the Chabahar port and INSTC to establish direct connectivity with hydrocarbon rich and strategically vital Euroasian region. This approach upholds the sovereignty and territorial integrity, which sets it apart from BRI and China-Pakistan Economic Corridor(CPEC) projects. Central Asian countries recognize India-led connectivity projects as game-changers for the region. They are determined to amplify their trade through INSTC and Chabahar to lessen the reliance on China and mitigate the related geopolitical threats.
Way Forward
Indian investors and shippers were reluctant to invest in the Chabahar port as India mainly used short-term agreements for port operations. However signing this 10 year deal with Iran on 13th May 2024 will boost investors’ confidence. It also highlights India’s assertive and proactive foreign policy in the face of disruptions in the global supply chains following the pandemic, the conflict in Ukraine, and the middle East crisis. India is looking the investments done in Chabahar and INSTC as a strategic counter to China’s growing regional influence amidst geopolitical conflicts.
USA’s U-turn on Chabahar Port
The reversal of 2018 waiver specifically for Chabahar port is perplexing. This waiver was intended to support Afghanistan by allowing development of the port and its associated railway, and facilitating the transport of non-sanctionable goods for Afghanistan’s reconstruction and economic development. Chabahar port is of strategic importance for India’s regional connectivity plans. The port serves as a crucial gateway for India goods to reach Afghanistan and beyond, enhancing trade and connectivity in the region, particularly with Central Asia. Moreover it provides Afghanistan with an alternative route to international markets, thereby reducing its dependency of Pakistan.
With the support of Euroasian countries to INSTC, USA will find it difficult to stick to their sanction policy on this matter.
Waiting for your feedback on this blog.
Anil Malik
Mumbai, India
16th May 2024