- Prime Minister Narendra Modi’s Iran visit, significance:
- To diversify (and increase) India’s oil and gas supplies;
- To enhance connectivity and trade with Afghanistan, Central Asia and beyond via Iran;
- Given Iran’s growing regional influence—to hedge its geopolitical bets in the region vis-à-vis other players, notably Pakistan, Saudi Arabia and the Gulf Cooperation Council members.
- A secondary objective is to balance China’s growing influence and also to engage the US in ensuring that India’s interests are protected in the region
- For India’s objectives, the port of Chabahar has become the crucial gateway to step up relations with Iran.
- Located on the Makran coast, Chabahar is a relatively underdeveloped free trade and industrial zone, especially when compared to the sprawling port of Bandar Abbas further west.
- For India, Chabahar is of strategic importance for following reasons.
- It is the nearest port to India on the Iranian coast, which provides access to the resources and markets of Afghanistan and Central Asia.
- The Chabahar as a transit point will be the center of a regional trade, investment and transportation hub with links from the Indian Ocean to Central Asia. For the first time, India will get access to the region through friendly nations
- Chabahar and its road connectivity to Central Asia: From Chabahar port, the existing Iranian road network can link up to Zaranj in Afghanistan, about 883 km from the port. The Zaranj-Delaram road constructed by India in 2009 can give access to Afghanistan’s Garland highway, setting up road access to four major Afghan cities –Herat, Kandahar, Kabul and Mazar-e-Sharif. Mazar e Sharif is near to Uzbekistan.
- Afghanistan will get a politically sustainable connectivity with India: The Chabahar-Zahedan-Zaranj corridor is a potential game-changer for regional connectivity, as it gives an alternative access for Afghanistan to India via the sea. This connectivity will enhance the development nature of economic engagement between the two countries.
- No need to depend on China sponsored Road and Belt projects to connect with Central Asia: At present, central Asia is getting lot of connectivity projects sponsored under the China sponsored Road and Belt Policy. India is not a part of the endeavor and in this context, an own initiative will help India to avoid dependence on China sponsored Central Asian connectivity.
- It is located 76 nautical miles (less than 150km) west of the Pakistani port of Gwadar, being developed by China; this makes it ideal for keeping track of Chinese or Pakistani military activity based out of Gwadar.
Despite the strategic import of Chabahar for India, there has been very little progress on it for several reasons.
- Iran’s unenthusiastic support for the project.
- Although the idea was first mooted in 2003, it was only in 2012 on the sidelines of the 16th Non-Aligned Movement Summit in Tehran that Iran conceded to set up a joint working group to operationalize the port project as part of the trilateral cooperation agreement between Afghanistan, India and Iran on investment cooperation, trade and transit.
- A key factor behind Iran’s reluctance was the opposition by the Army of the Guardians of the Islamic Revolution (the so-called Revolutionary Guards), which reportedly uses the port to ship arms to Yemen and militant groups in the region.
- For instance, India’s 2011 detention of Nafis 1, a vessel that sailed from Chabahar, on suspicion of carrying arms and ammunition for terrorist groups in Somalia raised the hackles of the Revolutionary Guards.
- Economic viability of the project is suspect.
- Has so far been able to invest only $85 million to build a couple of berths.
- India recently indicated that it was willing to invest up to $20 billion—one of its largest overseas ventures—to develop the port, petrochemical and fertilizer plants in the Chabahar SEZ, it remains to be seen if it can raise the funds.
- Gwadar – China has already invested over $1 billion and committed another $46 billion for the 3,000-km long economic corridor to link Gwadar to Kashgar in Xinjiang province and its One Belt, One Road project,
- It is unclear whether the Chabahar route will generate enough trade and traffic to justify the investment.
- In fact, Tehran, which has been playing hardball with India and demanding greater Indian investment in Chabahar, itself plans to invest $4 billion to build a refinery in Gwadar to process 400,000 barrels of oil per day.
India, Iran and Afghanistan have signed a historic trilateral contract for the establishment of a transport and transit corridor among the three countries. The deal was signed at the visit of Prime Minister Modi where he met Iran’s President Hassan Rouhani and Afghan President Ashraf Ghani.
The central point of the deal is the construction of the Chabahar port by India in two phases. Two firms – India’s India Ports Global Private Limited (IPGPL) and Iran’s Ports and Maritime Organization (PMO) have signed the agreement for the construction of the port. The IPGPL will develop two terminals and five multi-cargo berths in Phase-1 of the Chabahar project with an initial investment of $500 million by India.
As the West imposed ban on Iran has ended, there will be more expansion of Iran bound trade. India has increased its crude purchase from Iran ever since the end of the ban. With reducing remittance attraction and reciprocal commitment with Arab countries, Iran may get a higher role in India’s economic engagement. Hence, in future, there is higher scope and benefit for mutual trade between the two countries and the new port deal is very important as a trade facilitator.