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India’s move to sign a 10-year contract for the operation of the Chabahar port is a bold and strategic step for many reasons. First, a recap.

Since at least 2013, India had been mulling over the development of the Chabahar port on Iran’s East coast in the Sistan-Baluchistan province, overlooking the Gulf of Oman. For India, this is the nearest Iranian port, much closer than Bander Abbas, which lies on Iran’s West coast. However, western sanctions over Iran’s nuclear programme had stalled the progress on Chabahar.

The JCPOA Story

The signing of the Joint Comprehensive Plan of Action (JCPOA) in 2015 between Iran on one hand and the US, UK, France, Russia, China, Germany, and the European Union on the other eased the way for India to commit to the development of the Shahid-Beheshti terminal of the Chabahar port. When Prime Minister Narendra Modi visited Tehran in 2016, he earmarked $500 million for the work. A trilateral agreement between Iran, India and Afghanistan on the ‘Establishment of International Transport and Transit Corridors’ was also signed with the objective of facilitating the movement of goods between India and Afghanistan. Since 2018, the port’s operations have been managed by the New Delhi-backed India Ports Global Limited (IPGL).

Three years after the US signed the JCPOA, former US President Donald Trump pulled out of the deal. But given that the Chabahar port was considered critical for stabilising Afghanistan, as also the fact that this was the route India used to bypass Pakistan and send humanitarian aid to the country, the port was exempted from reimposed US sanctions on Iran. Even so, the changed dynamics made things difficult and India dragged its feet in other logistical areas, such as the construction of the railway line from the port to Zahedan. The delay irked the Iranians, and now and again came veiled threats of linking Chabahar to Gwadar in Pakistan. Ultimately, it took eight more years before India and Iran could finalise the general framework for cooperation. Monday’s agreement is thus, in a way, a culmination of those efforts.

The Search For ‘Alternatives’

The pact, signed between the IPGL and Iran’s Port Maritime Organisation (PMO) in the presence of Sarbananda Sonowal, India’s ports, shipping and waterways minister, will now enable the operation of the Shahid-Beheshti terminal. It has a total area of 254 hectares – 16 hectares of which is open storage area – and a warehouse spread over 30,000 square metres.

Under the agreement, the IPGL will invest approximately $120 million in equipping the port. India has also offered a credit window equivalent to $250 million for mutually identified projects aimed at improving Chabahar-related infrastructure, officials said.

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The importance of the port for India cannot be overemphasised, especially as countries scramble to search for alternatives to the Suez Canal trade route. Chabahar scores high in those calculations. Though the original intent behind the port was to bypass Pakistan in accessing Afghanistan, it was also meant to counter the China-developed Gwadar, 170 kilometres away. The latter is part of Beijing’s China-Pakistan Economic Corridor (CPEC), a flagship project under the ambitious Belt and Road Initiative (BRI). With Beijing’s rising influence in South Asia and the Indian Ocean – most recently highlighted in events in the Maldives – the Iranian port takes on an entirely new salience.

Chabahar is equally important for India’s trade and connectivity ambitions. It is easily India’s closest gateway to landlocked but resource-rich Central Asian states. “Chabahar Port’s significance transcends its role as a mere conduit between India and Iran; it serves as a vital trade artery connecting India with Afghanistan and Central Asian Countries,” Sonowal said after the signing of the agreement.

A Gateway To Many Places

Envoys and officials from Central Asian countries have often told this author how coveted the Indian market is for them. Access to the Arabian Sea will also open up Southeast Asian markets to them. That’s important given the fact that even though Central Asia is a valuable source of raw material, energy, and minerals, trade remains low due to connectivity troubles. The shortest route to the warm waters of the Indian Ocean and to South Asia and further afield was through the Af-Pak region, but the ongoing turmoil in the area has come to pose problems for Central Asian states. This is why countries like Uzbekistan, Kazakhstan and Turkmenistan have been seeking to get involved in the Chabahar port project. In fact, a Joint Working Group has also been established, and its first meeting was held in 2023.

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Beyond Central Asia, Chabahar is also important for India’s access to the Russian Federation in the North as well as to the South Caucasus, the Balkans and West Europe. In 2020, India’s External Affairs Minister, S. Jaishankar, pitched for the inclusion of the Chabahar port complex in the International North-South Transport Corridor (INSTC), which comprises the Caspian Sea littoral states and culminates inside the Russian Federation. The INSTC is the shortest trade route between India and Russia. A 2014 study by the Federation of Freight Forwarders’ Association of India found that it was 30% cheaper and 40% shorter than the Suez route, reducing transit time for Europe-bound shipments to an average of 23 days from the usual 45-60 days.

The Route To Europe

The Ukraine conflict has helped put in focus the potential of the INSTC. With Russia under sanctions and European neighbours like Finland blocking the common borders, it becomes imperative for India to find other routes to both East and West Europe. Here again, a route through Iran, Armenia, Georgia via the Black Sea can help India reach Greek Ports – a subject that was discussed during the visit of Greek Prime Minister Kyriakos Mitsotakis to New Delhi in February this year.

Lastly, Chabahar also becomes important as the India-Middle East Europe Economic Corridor (IMEC) hangs in limbo amidst the Gaza crisis. 

Strategically, all these routes also offer alternatives to the Turkey- and China-backed Middle Corridor, connecting Beijing to Europe through Central Asia, the Caspian Sea, and the South Caucasus.

India As A Leader Of The Global South

Such foresight, however, is also contingent on firm resolve, and it is in this context that India’s Chabahar agreement should be seen as a bold step amidst the current geopolitical flux. It is a time when the usual West-led world order is being seriously challenged by China and Russia, who seek to offer an alternative. Much of the Global South is caught in the middle, but as the expansion of groupings like the BRICS reflects, many of its members are not against the idea of exploring alternatives.

Iran, whose relations with the US have nosedived because of the Gaza war, its military support to Russia, as well as the Red Sea crisis caused by its Houthi surrogates, has thrown its lot with Russia and China. In this climate, India, which sees itself not just as a member of the Global South but as one of its leaders, will have to do a careful balancing act. Therefore, to ink such a deal right now speaks of a great resolve.

Beyond US Threats

Soon after the announcement of the agreement, Vedant Patel, deputy spokesperson of the US State Department, said, “Broadly, you’ve heard us say this in a number of instances, that any entity, anyone considering business deals with Iran, they need to be aware of the potential risk that they are opening themselves up to and the potential risk of sanctions.” India had once ceded space to China in Iran when it halted trade and investments under the threat of sanctions. Yet, after the reimposition of American sanctions on Iran in 2018, the Chabahar port was granted a waiver. Similarly, India had also been threatened by US sanctions under CAATSA for its procurement of the S-400 Triumf missile system from Russia. New Delhi went ahead with it – just as it continued to buy Russian oil in spite of the sanctions against it, even selling it back to the European Union. Iran and the US continue to engage in secret negotiations too.

On Monday, Jaishankar said the Chabahar Port will definitely see more investments and connectivity linkages. While India will be seeking investments from the private sector, Iran is developing the area around Chabahar as an industrial, free trade and tourism zone in a bid to garner investment. The potential is immense, and it seems India is resolved to move ahead.

(Aditi Bhaduri is a journalist and political analyst)

Disclaimer: These are the personal opinions of the author