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India’s World – India-Iran deal on Chabahar Port

India’s World – India-Iran deal on Chabahar Port



India and Iran have finally signed an agreement for the development of the strategically important Chabahar Port. The port of Chabahar is located in the south of Sistan and Baluchistan Province.  It is the only Iranian port with direct access to ocean. The port will give India an alternative route to Afghanistan and Central Asia bypassing Pakistan. Pakistan does not allow land cargo to Afghanistan and beyond. From Chabahar port cargo meant for Afghanistan can use the existing Iranian road network up to Zaranj on border with Afghanistan. This would not only establish access to five major cities of Afghanistan but also further north to central Asia.

Chabahar Port is located at 72 km west of China-developed Gwadar port in Pakistan’s restive province of Baluchistan, on the mouth of the Straits of Hormuz in the Persian Gulf. It provides India a land-sea access route into Afghanistan and Central Asia through the Bandar Abbas-Caspian Sea axis. It will also impart significant strategic leverage to India giving it access to Afghanistan and to the energy-rich Central Asia bypassing Pakistan. It also cuts down transit time by a third accruing significant time and cost savings.

India, which has invested over $2 billion in Afghanistan, plans to link the Chabahar port with the Zaranj-Delaram road, the garland highway, India built in Afghanistan by upgrading the Chabahar-Milak road opening alternative access to sea port for Afghanistan’s connectivity to regional and global markets. India has already committed $100 million to develop the port. The Chabahar deal has been long pending due to U.S. pressure on India in light of the severe sanctions imposed on Iran.

The project is expected to increase trade and economic engagement between the two countries. Although India and Iran originally agreed to develop the project in 2003, both nations have failed to make much progress on this front due to Western sanctions on Iran linked to its controversial nuclear program. But following the signing of a provisional agreement over Iran’s nuclear program in April, the Indian government increased its efforts to deepen the country’s commercial ties with Iran. The US, on the other hand, has raised objections over doing business with Iran, and cautioned that there is no certainty of reaching a final accord with Iran on the nuclear issue by a June 30 deadline.

Relationship between India and Iran have been cordial enough to sustain a very deep energy relationship, with India importing a fair amount of Iranian hydrocarbons, though India has reduced these imports in recent years due to US sanctions on Iran. At the same time, there are tension points between the two owing to India’s desire to improve relations with the US. The US has been asking India and other countries not to rush into doing business with Iran as it was yet to work out a deal with Tehran on the latter’s contentious nuclear programme.

The deal is significant for bilateral relations as it would signify that India is committed to supporting a major infrastructure project in Iran. The port will be used to ship crude oil and urea, saving India transportation costs. India intends to lease two berths at Chabahar for 10 years. The port will be developed through a special purpose vehicle (SPV) which will invest USD 85.21 million to convert the berths into a container terminal and a multi-purpose cargo terminal.