India Should Not Miss Out On Chabahar Opportunity In Iran – Analysis

India-Iran flags

 Monish Gulati  June 3, 2015  1, Analysis, Business  No Comments

By Monish Gulati

Recently India and Iran have signed an inter-governmental MoU on India’s participation in the long delayed development of the Chabahar port in Iran’s Sistan-Baluchistan Province. The MoU involves a joint venture (JV) investment of $85.21 million that will allow operation of the port for 10 years. The Indian JV will develop two berths at Chabahar, one to handle container traffic and the other a multi-purpose cargo terminal. In the second phase,

India will reportedly invest $110 million to further upgrade and expand the port. With sea-land access to Afghanistan as part of the MoU, New Delhi has plans to build a road-railroad network from Chabahar to Milak in Iran in order to link it with the Indian-built 223-km Zaranj-Delaram road in Afghanistan. The Chabahar port, on the Gulf of Oman, is 72km from Pakistan’s Chinese-constructed port of Gwadar, India and Iran had first agreed to look at developing the port in 2003. It is now expected to be operational by December next year

The Chabahar MoU is seen strategically crucial to securing a land route to Afghanistan and Central Asia and an important prerequisite to Prime Minister Narendra Modi’s proposed July visit to Central Asia, which will have little to offer to without a viable trade route to the region. Chabahar is also seen as part of an Indian counter to the recently-announced $46-billion expansion of China’s strategic footprint in Pakistan, which has the port of Gwadar as its key terminal. However it is argued that such an assessment of the Chabahar port is restrictive, both in time and space.

Chabahar and INSTC

It was 12 years ago when the then Iranian president Mohammad Khatami offered India to develop Chabahar and its connectivity to the International North-South Transport Corridor (INSTC). Since then a lot has changed both at Chabahar and the INSTC.

The Chabahar port has a cargo handling capacity of 2.5 million tonnes (mt) a year, which is set to increase to 12.5 mt. Iran has made the area adjacent to Chabahar town a free trade zone in addition to allowing transit of goods into Central Asia using the International North-South Transit Corridor (INSTC). At present some Indian traders are using Chinese ports to ship goods into Kazakhstan.

Iran plans to use Chabahar for transhipment to Afghanistan and Central Asia while reserving the port of Bandar Abbas as a major hub for its trade with Russia and Europe.

However, Bandar Abbas, which is located in the congested waters of the Straits of Hormuz, can be subjected to a blockade. Further Bandar Abbas, which handles 85% of the country’s seaborne trade, can only accommodate vessels up to 100,000 tonnes. Cargoes brought by ships of 250,000 tonnes, have to tranship their loads using smaller vessels in UAE. Chabahar on the other hand will be Iran’s first deep-water port of global standards with direct access to the Indian Ocean and the outlet for the INSTC.

INSTC is a multi modal transportation corridor conceived on September 12, 2000 in St. Petersburg by Iran, Russia and India for the purpose of promoting transportation cooperation among the member states. This corridor connects the India Ocean and Persian Gulf to the Caspian Sea via Iran, and then goes on to connect to St. Petersburg and North European through the Russian Federation.

The INSTC today has two rail and road routes moving along the east (through Turkmenistan) and west (through Azerbaijan) coast of the Caspian Sea connecting to Russia and its transportation networks, further on to Northern Europe. Small sections of the rail links at Chabahar and on the Iran-Azerbaijan border are expected to be completed soon. INSTC provides a rail link to Herat, Afghanistan and has an additional rail link at Sarakhs to Turkmenistan. It also provides a sea-based section connecting Iran and Russia through the Caspian Sea.

Chabahar’s free trade and industrial zone will soon have access to natural gas as a power source. A 300-km Iranshahr-Chabahar gas pipeline costing $700 million is expected to be completed in next two years by a Russian company. India’s decision to utilise the Chahbahar industrial zone has strong economic prospects.

Strategic Context

India is moving ahead with a slew of sub-regional and bilateral pacts on road and rail connectivity sans Pakistan in its East; an indication that India is not factoring in the prospect of Pakistan making available its transport network to the SAARC (South Asian Association for Regional Cooperation) grid in the near term. Two, India has scrapped the proposed $10.8 billion steel, power and mining project of SAIL-led consortium in Afghanistan, which had been conceived in November 2011; a major driver of India quest for connectivity to Afghanistan through the Chabahar port. Three, low potential of trade with Central Asia has only served to weaken the business case for development of Chabahar rather than bolster it. Four, many analysts put India’s options with respect to the “Silk Road Economic Belt” and a “21st Century Maritime Silk Road,” otherwise known as the “One Belt One Road” (OBOR) or New Silk Road strategy, as simply to join OBOR or seek an alternate.

Therefore India should redefine its access to the Chabahar port, not as a shunt to Pakistan or as a route to Afghanistan or Central Asia but as an all-weather choke point-free porthead to a multi-modal transport corridor to the Caucasus, Russia and finally Europe; an alternative to the OBOR.

Iranian trade negotiators have also become more assertive with Indian counterparts as hopes rise of international sanctions on Tehran easing later this year. It is expected, as Iran would like to maximise returns for its oil and gas resources, show preference to countries (Russia and China) that have supported it during the sanctions period and allocate commercial contracts in line with its geo-political strategy. China has expressed a strong interest in Chabahar port, while several countries including France are looking at the industrial zone adjoining the port.

In the case of Chabahar it is strategically prudent for Iran to partner India. A Chinese hold on both, Gwadar and Chabahar, will lead to loss in leverage for not only for Iran but also for other countries in the region. It makes perfect strategic sense for India to operationalise Chabahar and INSTC at the earliest.

*Monish Gulati is Associate Director (Strategic Affairs) with the Society for Policy Studies. He can be contacted at m_gulati_2001@yahoo.com. This article was published at South Asia Monitor.

About The Author

Monish Gulati

Monish Gulati is a Senior Fellow with Society for Policy Studies, New Delhi. He can be reached at m_gulati_2001@yahoo.com

http://www.eurasiareview.com/03062015-india-should-not-miss-out-on-chabahar-opportunity-in-iran-analysis/