NEW DELHI: It is unusual for an outgoing Union minister to fly abroad in the midst of Lok Sabha elections to facilitate a bilateral agreement. But Union shipping minister Sarbananda Sonowal did just that, with the permission of the Election Commission, when he went to Tehran on May 13 for the inking of a 10-year contract by India Ports Global Ltd with the Maritime Organisation of Iran.
Under the pact, India will invest around $120 million to develop and operate the Shahid Beheshti Port in Chabahar besides offering a credit window of $250 million for infrastructure upgradation.
The new contract replaces the initial pact set in motion in 2016 following Prime Minster Narendra Modi’s visit to Iran to keep India’s operations at the Shahid Beheshti terminal of Chabahar port going. It also obviates the need to renew the existing pact every year. The short-term contract was a dampener for shippers and businesses to use the port, as they were looking for a more permanent arrangement.
The deal is extremely critical to India’s national interests, as it opens up a faster route to lucrative world markets.
The Chabahar port’s unique location, just about 550 nautical miles from Kandla port in Gujarat, gives India easy access to Afghanistan, Central Asian countries and Europe. Sonowal’s visit amid the general elections showcases the importance New Delhi attaches to the Chabahar port.
Origin and scope
India had offered to develop the Chabahar port in 2003, a year after Pakistan and China signed a deal to build the $248 million deep sea port at Gwadar. However, a formal agreement was signed only in 2015. The construction of the port received momentum in 2016 when Prime Minister Narendra Modi pledged an investment of $500 million.
In 2016, an MoU signed with Iran turned into an investment contract. The MoU was signed between Prime Minister Modi, Iranian President Hassan Rouhani and Afghanistan’s President Ashraf Ghani to build a trilateral transit and transport corridor among the three nations and use Chabahar as a regional hub. The overall investment by India was expected to be $500 million.
The Chabahar project comprises two ports — the Shahid Beheshti and Shahid Kalantari. India’s investment is only in Shahid Beheshti and the first phase was inaugurated in 2017 following which India sent wheat to Afghanistan using this port. In 2018, Iran leased out the operational control of the Chabahar port to India for 18 months with periodic renewal. The development of the port is being done in four phases. On completion, its capacity will be 82 million tonnes per year.
India and Iran have been in talks for a long-term arrangement for the Chabahar port but it took many years to arrive at the present long-term agreement as Iran was not in favour of an international arbitration framework, saying it would require a constitutional amendment. Those differences have now been ironed out, paving the way for a long-term contract valid for a decade, which could be renewed on expiry. According to sources, India and Iran have agreed that matters requiring arbitration with regard to the operations of the Chabahar port will be referred to a three-member arbitration tribunal based in Muscat in accordance with the Singapore International Arbitration Centre.
India is already operating the Chabahar port under the existing limited-scope agreement. Last year, India used the port to send 20,000 tonnes of wheat as aid to Afghanistan. In 2021, it was used to supply environment-friendly pesticides to Iran.
This is the first time India will take over the full-scale management of an overseas port, which will also have a multiplier effect on trade with Iran and Afghanistan as efforts continue to directly tap the potential in Central Asia, bypassing the troublesome neighbour, Pakistan.
Why it matters
Chabahar, which in Persian means ‘four springs’, is a deep-water port in the Sistan Baluchistan province of Iran. Located in the open sea, it provides easy and secure access for large cargo ships. Described by 10th century Iranian scholar Al Biruni as the entry point to the subcontinent, it is close to the Gulf of Oman as well as the Strait of Hormuz, which is an important shipping route linking West Asia to Asia, Europe and North America.
Chabahar is also part of the proposed multimodal transport route also known as the International North-South Transport Corridor (INSTC). This corridor will link the Indian Ocean and Persian Gulf to the Caspian Sea via Iran and to northern Europe via Saint Petersburg. According to industry estimates, shipments through the INSTC route will take 15 days less compared to the Suez Canal route.
The port is easily accessible from Gujarat and Mumbai. “The distance between Kandla port and Chabahar is less than the distance between Mumbai and Delhi,” Union minister Nitin Gadkari had said in 2016.
From Chabahar, there is a road which goes up to Zaranj in Afghanistan. The 218-km road (built with India’s support) will give access to four major cities – Herat, Kandahar, Kabul and Mazar-e-Sharif. Once fully operational, it will also be an easier way to connect to Turkmenistan and Kazakhstan.
Transporting goods to Afghanistan through the Chabahar port will be easier than through land over Pakistan, which is fraught with risks. “The Chabahar port and the projects for connecting it to Afghanistan, Central Asia, and Europe are of strategic and economic importance to India. It is our most viable surface route to these geographies, since the direct land route via Pakistan is unavailable for political, security and geographical reasons. These projects will promote our economic engagement with the Eurasian landmass and our political relations with a region of great importance to us.
“By linking the Indo-Pacific with the Eurasian landmass, these routes provide access not only to India but to the wider international community. This is the big picture that, as External Affairs Minister S Jaishankar recently pointed out, countries talking about sanctions should recognise. Chabahar and Eurasian connectivity are not only about Iran, but about economic and strategic opportunities for many countries,” says P S Raghavan, Chairman, National Security Advisory Board.
Also, from a strategic point of view, India will be able to monitor China’s activities in the Persian Gulf through its Chabahar footprint. With the Adani group already operating the Haifa port in Israel, Chabahar will strengthen India’s presence on this route.
Chinese checkers
India’s takeover of the Chabahar port is seen as a counter to China’s String of Pearls—a network of military and commercial facilities along the Indian Ocean to encircle and trap India. These include China’s facilities in Chittagong (Bangladesh), Karachi and Gwadar (Pakistan), Colombo and Hambantota (Sri Lanka), and Kyaukphyu (Myanmar). Each ‘pearl’ masquerades as a commercial project, but strategic experts warn that these could be swiftly repurposed into Chinese naval facilities in case of a conflict involving India.
To mitigate the Chinese threat, India has also taken some steps, including military and strategic deals with several countries like Iran, Vietnam, Japan, the Philippines, South Korea, Indonesia, Singapore and Thailand. Apart from developing the Chabahar port in Iran, India is constructing a deep sea port in Sabang, Indonesia, and will assist Bangladesh in revamping the seaport in Mongla. In 2016, India constructed a deep water port in Sittwe, Myanmar.
While India has made significant strides by sealing the Chabahar deal, the ongoing US sanctions on Iran loom large over it. India has so far avoided being caught in the crossfire by convincing the Americans about the strategic importance of its bilateral pacts and got a waiver. The Biden administration has, however, said on record that the latest deal is not exempt from sanctions.
Some defence experts have also flagged Iran’s growing proximity with China, which could throw India’s net assessment off track. For example, China and Iran recently put into motion a 25-year development plan. The details of the agreement have not been made public but according to Iranian media, the opening of the first Chinese consulate in the port city of Bandar Abbas, which handles around 85% of Iran’s seaborne trade, in December 2022 was the first step of implementing the pact.
Re-engineering India’s logistical map
Exploring International North-South Transport Corridor that also involves Chabahar
India-Middle East-Europe Economic Corridor (IMEC), which was agreed to during the G20 Summit
Developing Sittwe port in Myanmar
To the East, resumption of work on India-Myanmar-Thailand Trilateral Highway. It will provide access to the Pacific
Examining viability of polar routes with Chennai-Vladivostok corridor
