June 3, 2024
📰 FEATURE STORY
Is the Chabahar Port deal good for India?
India and Iran are two countries at an interesting time right now. The former is in the midst of an election. The latter just saw its President Ebrahim Raisi perish in a chopper crash. So, signing a 10-year deal for India to develop and operate the Iranian port of Chabahar is quite significant.
The port is an important trade gateway and corridor between India, Afghanistan, and Iran. However, Raisi’s death, combined with the possibility of sanctions from the United States, has complicated things. Not to mention that the Taliban retook control of Afghanistan. Was this deal a mistake? Will it do any good for India?
Context
Following economic liberalisation in the 1990s, India’s engagement with the world began to increase, and the country looked at trade routes as an element of its geopolitical strategy. When the Taliban took over Afghanistan in 1996, India and Iran began to work more closely. Both backed the Northern Alliance. India also needed an alternate trade route since Pakistan blocked land transit access to Afghanistan.
The easiest routes to Central Asia or Russia are through Pakistan and Afghanistan. The next best alternative was through Iran. This is where Chabahar comes in.
Chabahar is located at the mouth of the Gulf of Oman. It’s Iran’s first deepwater port which puts it on the oceanic trade map. The port is west of its border with Pakistan. There’s another port, relatively nearby, that’s being built by China in Pakistan.
In 2002, Iranian President Syed Mohammad Khatami’s National Security Advisor Hassan Rouhani held discussions with his Indian counterpart Brajesh Mishra. When Khatami visited India the following year, he and Prime Minister Atal Bihari Vajpayee signed several agreements, of which Chabahr was one.
Things began to gain traction only in 2016 when Prime Minister Narendra Modi and President Hassan Rouhani announced India would invest $500 million to develop the port. The catalyst was China’s ambitions. First was the Belt and Road Initiative (BRI), and second was its partnership with Pakistan to develop the Gwadar Port and the China-Pakistan Economic Corridor.
Adding another wrinkle to this situation is the China-Iran 25-year cooperation program in which China will invest over $400 billion in exchange for discounted energy prices and BRI cooperation.
As far as Iran is concerned, its development budget for the port’s home province increased by over 2,000% since 2018. That was as clear a sign as any that Chabahar would be an integral part of Iran’s engagement with the East. Inside Iran, there has been debate on how to maximise its competitive advantage while minimising risks to itself.
As far as India is concerned, the port holds great significance for its economic and trade ambitions. However, the US has mentioned possible sanctions on any country or entity doing business with Iran. India is in a precarious position here. But is the port project and everything that comes with it worth it?
VIEW: It’s necessary for India
Geopolitically speaking, the necessity of the Chabahar port for India has only grown over the past few years. As countries look for alternatives to the Suez Canal trade route, the importance of this port project can’t be overstated. There’s also the China factor. Given its ever-expanding reach into South Asia and the Indian Ocean, the port project takes on greater significance.
On the trading front, this port opens up new opportunities for India. It’s the closest gateway to landlocked and resource-rich Central Asian countries. It’s not merely a conduit between India and Iran. It’ll help connect India with Afghanistan and Central Asia. Even though this region is rich in raw materials, energy, and minerals, trade is low due to connectivity issues. Uzbekistan, Kazakhstan and Turkmenistan have also expressed interest in the port, which will provide India access to new markets.
Looking beyond Central Asia, the port is also important for India’s access to Russia in the north and to the Balkans and Western Europe. India has batted for the port to be included in the International North-South Transport Corridor (INSTC). The INSTC is seen as the shortest trade route between India and Russia. A 2014 study by the Federation of Freight Forwarders’ Association of India stated that this route was 40% shorter and 30% cheaper than the Suez route.
COUNTERVIEW: A risky proposition
Within days of the contract being signed with India, President Raisi’s death can be a setback. While Iran’s foreign policy is unlikely to see any significant changes, its next leader could see things differently. The ongoing Israel-Palestine conflict is another factor to consider. The war doesn’t seem like it’ll end anytime soon, with Iran supporting Palestine. A waiver of sanctions from the US could be less likely.
India will have to work twice as hard to convince the US that the port will benefit the entire region. However, since the US pulled out of Afghanistan, it’s unlikely to want to assist the Taliban in any way. The US also doesn’t want India broadening the port’s scope to the INSTC and trade with Russia, given its invasion of Ukraine. If the US does go ahead with sanctions, it could minimise the port’s full potential. That won’t be good news for India.
The port itself isn’t well integrated with global shipping lines. According to data from the UN on port connectivity, Chabahar lags behind some of West India’s busiest ports in its port liner shipping connectivity index. There are plenty of things for India to keep an eye on concerning this port and its future. It’s a definite risk, given the geopolitical situation in the region and the need to balance relationships with neighbouring countries and the US.
Reference Links:
- Chabahar Port and Iran’s Strategic Balancing With China and India – The Diplomat
- Why Chabahar port, seen as counter to Pakistan’s Gwadar, matters to India – India Today
- India-Iran Chabahar Deal Signals Resolve Amid A World In Flux – NDTV
- Chabahar Port: India’s counterweight to China’s BRI in Eurasia – ORF
- The Chabahar minefield – Deccan Herald
- Does India risk US sanctions over Iran’s Chabahar Port deal? – Al Jazeera
What is your opinion on this?
(Only subscribers can participate in polls)
a) The Chabahar Port Deal is good for India.
b) The Chabahar Port Deal is bad for India.
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