India-Iran Chabahar Port Pact

SYLLABUS:

GS 2 > International relations   >  India and Global Powers  >   India-Iran Relations

REFERENCE NEWS:

• Recently, India and Iran signed a 10-year contract for the operation of a terminal at the strategically important Chabahar port in Iran.

MORE ON NEWS:

• The agreement was signed between Indian Ports Global Ltd. (IPGL) and the Port and Maritime Organisation (PMO) of Iran.
• IPGL will invest approximately USD 120 million to equip and operate the port for the duration of the contract, and the two sides will further extend their cooperation in Chabahar thereafter. India has also offered a credit window in rupees equivalent to USD 250 million for mutually identified projects to improve infrastructure related to the port.
• The agreement was signed in the presence of the Union Minister of Ports, Shipping, and Waterways and the Minister of Roads and Urban Development of Iran.

ABOUT CHABAHAR PORT:

• Chabahar is a deep water port in Iran’s Sistan-Baluchistan province. 
• The port is located in south-eastern Iran, on the Gulf of Oman and at the mouth of Strait of Hormuz.
• It is the only Iranian port with direct access to the Indian Ocean.
• Being close to Afghanistan and the Central Asian countries of Turkmenistan, Uzbekistan etc., it has been termed the "Golden Gate" to these land-locked countries.
• It is the Iranian port that is the closest to India, and is located in the open sea, providing easy and secure access for large cargo ships.

SIGNIFICANCE OF THE CHABAHAR PORT FOR INDIA:

• Strategic Gateway to Central Asia and Afghanistan: 
  • Chabahar Port is a crucial asset for India, providing a vital alternative route to Afghanistan and further into the resource-rich regions of Central Asia. This is particularly important given Pakistan's denial of land access. 
  • Chabahar Port is also considered a key component of India's "Connect Central Asia" policy, which is a comprehensive strategy encompassing far more than just the pursuit of energy, oil, and natural resources. This holistic policy aims to foster cooperation across various spheres, including politics, culture, and defense.
• Counterbalance to Chinese Influence: 
  • The port serves as a strategic counter to the Chinese-developed Gwadar port in Pakistan, part of China's Belt and Road Initiative. 
  • By developing Chabahar, India positions itself as a key player in regional connectivity and infrastructure development, which is crucial in the face of expanding Chinese geopolitical influence in Asia and Africa.
• Economic and Commercial Benefits: 
  • Chabahar Port enhances the transport and shipment of goods between India, Iran, Afghanistan, and Central Asia, significantly reducing transportation costs and time.
  • Its role as a commercial hub is amplified by its potential to facilitate energy exports from Central Asia and Iran, which are endowed with vast oil and natural gas reserves. This capability underscores Chabahar's importance as a node in regional energy cooperation.
• Humanitarian Role: 
  • The port was instrumental in the shipment of humanitarian aid.
  • For instance, during the Covid-19 pandemic, million tonnes of wheat and pulses have been trans-shipped from India to Afghanistan through Chabahar port.
  • This not only showcases its utility in crisis situations but also strengthens India's role and image as a key regional benefactor.
• Future Connectivity Projects: 
  • The port is pivotal to the success of the International North South Transport Corridor (INSTC), a multi-modal transport project involving several countries, aimed at reducing the journey time between India and Europe. This corridor is expected to enhance trade ties significantly and improve economic integration between the involved regions.

• Political and Diplomatic Engagement: 
  • The recent signing of a 10-year contract for the operation of the port underscores the strong on-going diplomatic ties between India and Iran, despite external pressures and geopolitical tensions, notably from the U.S. administration. 
  • This engagement is crucial not only for maintaining the operational efficacy of Chabahar but also for securing continued access to Iran's substantial oil and natural gas resources, reinforcing the port's role in India’s energy security strategy.

CHALLENGES:

• Risk of US Sanctions: 
  • A major challenge is the tension between the US and Iran, with the US historically imposing sanctions on Iran, labeling it part of the "axis of evil." India's involvement with Chabahar requires careful navigation of these tensions due to its strategic ties with the US.
  • For instance, just a day after India and Iran signed the agreement to operate Chabahar Port, US State Department deputy spokesperson warned that entities engaging with Iran could face the risk of sanctions.
• Competition from Nearby Ports:
  •  Chabahar faces stiff competition from Pakistan’s Gwadar port, which is being developed by China as part of the China-Pakistan Economic Corridor (CPEC).
  •  Gwadar port presents a direct route for trade flows in the region and is part of the larger Belt and Road Initiative (BRI), which has significantly more funding and strategic importance from China.
• Economic Viability:
  • The economic viability of the port, given the sanctions and the intense regional competition, remains a question.
  • For instance, western sanctions on Iran have severely reduced India’s energy imports from the country, impacting overall trade volumes. This reduction could significantly affect the volume of trade passing through Chabahar port, undermining its economic justification.
• Operational Challenges: 
  • Despite the strategic importance, the project has faced several operational challenges including slow construction and development pace. Initial timelines have been disrupted multiple times. Issues such as funding, logistical challenges, and coordination between multiple countries have hindered swift progress.
• Security Issues: 
  • The security scenario in Sistan-Baluchistan, where Chabahar is located, and its proximity to the volatile region of Balochistan adds to the risks associated with operating and investing in the port.
• Dependence on Regional Stability: 
  • The utility of Chabahar as a route to Afghanistan and further into Central Asia is heavily dependent on regional stability. The changing political landscapes in Afghanistan, particularly with the withdrawal of US troops and the takeover by the Taliban, have further complicated the scenario. This instability can jeopardize the entire premise of accessing Central Asian markets via Afghanistan.
• Integration with the INSTC: 
  • While Chabahar is strategically positioned to be part of the International North South Transport Corridor (INSTC), the success of this integration is contingent upon multi-national cooperation and alignment of strategic interests among all parties, which includes dealing with the repercussions of the war in Ukraine and its impact on relations with Russia.

WAY FORWARD FOR INDIA'S ENGAGEMENT WITH CHABAHAR PORT

• Diplomatic Engagement and Multilateral Cooperation: Intensify diplomatic efforts to address the complexities around U.S. sanctions on Iran, working closely with Western and regional powers and advocating in multilateral forums for Chabahar Port's strategic significance.
• Diversification and Enhancement of Port Use: Diversify cargo types and expand services at Chabahar to include transshipment and container handling, positioning it as a crucial node in global supply chains.
• Strengthening INSTC Integration: Accelerate the development of the International North-South Transport Corridor (INSTC) and integrate Chabahar fully to boost its economic potential, streamlining customs and improving infrastructure.
• Focus on Regional Stability and Development: Utilize Chabahar as a platform for regional development and stability, supporting local communities and initiating joint development programs with Iran and Central Asian countries.
• Expand Commercial Partnerships: Form partnerships with nations and international corporations for improved access to Central Asia and Afghanistan through Chabahar, sharing investment costs and risks.
• Strategic Marketing and Global Outreach: Launch a global outreach program to promote Chabahar as a gateway to Central Asia, host international trade and logistics conferences to showcase the port’s capabilities and attract stakeholders.

PRACTICE QUESTION:

Q. "Chabahar port is more than just a maritime facility for India; it is a cornerstone of its strategic autonomy, regional outreach, and economic diplomacy in West Asia and beyond." Discuss. (10 marks, 150 words)