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Expanding connectivity via Chabahar Port

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Development of this port makes huge economic and strategic sense for India as it wants to bypass Pakistan, which does not allow transit of Indian goods through its territory, says Rajaram Panda

The outreach initiative of the Narendra Modi Government covering almost all continents of the world — Asia, Africa, Europe, Latin America — has injected a new element of activism in India’s foreign policy. As a major supplier of strategic petroleum resource, the Middle Eastern region is extremely important for energy-deficient and petroleum importing countries. As a result, there are certain countries that are spreading their influence with the intention to sway policies in their favour. Balancing such acts is one cardinal foreign policy plank of India. In this narrative, India’s outreach to Iran assumes significance. This article deals with some of the recent developments in India-Iran relations.

Iran’s emergence in India’s strategic calculus came into prominence after sanctions on Iran were removed in January 2016. This was followed by a flurry of visits by senior political leaders, unearthing the unexplored economic potentials that both share. The visit of Petroleum Minister Dharmendra Pradhan in April 2016, quickly followed by External Affairs Minister Sushma Swaraj the same month set the stage for deepening engagement between the two.

The most noticeable development has been cooperation on the energy field and acceleration in the development of the strategic Chabahar Port. The development of the port in the Gulf of Oman is a key project in India-Iran relations. India is the key partner. Its progress became slow as Iran came under sanctions because of its alleged nuclear programme. In the post-sanction Iran, the project received serious attention by both. The MoU for the project was signed in 2003 during the prime ministership of Atal Bihari Vajpayee. India had signed an agreement with Iran detailing an enterprising roadmap for strategic cooperation between the two nations. Unfortunately, this agreement came unstuck because of sanctions imposed by the US under President George Bush, who clubbed Iran among the “axis of evil” along with Iraq and North Korea. Further plans to develop were kept on hold.

All that changed in 2015, when Iran signed a historic deal with the five permanent members of the UN Security Council plus Germany (P5+1). Iran agreed to halt its nuclear weapons-making capabilities in exchange for lifting economic sanctions. This historic agreement is again under threat as US President Donald Trump is desperate to nullify it. The agreement not only ended Iran’s isolation from the global market but also provided India a strategic opportunity by opening trade links. Development of this port makes huge economic and strategic sense for India as it wants to bypass Pakistan, which does not allow transit of Indian goods through its territory.

The use of Chabahar Port in Iran shall facilitate the transport of Indian goods further forward by roads and rail to Afghanistan and onward to Central Asian nations. As a long-term strategy to further its economic interests, India has already built the Delaram-in Zaranj Highway on Afghanistan border to facilitate movement of goods from Chabahar. India sanctioned around $35 million for the construction of two berths at Chabahar and the development of a container terminal. This was a response to Pakistan’s Gwadar Port built with Chinese assistance. India also hopes to build the Chabahar-Zahedan-Mashhad railway line and wants to supply rail tracks, rolling stocks, signalling and other equipment. No wonder Iran sought India’s cooperation in the development of Chabahar Port. The project is seen as a “defining partnership, which has the potential of connecting the entire region”. Swaraj and her counterpart Mohammad Javad Zarif agreed to fast-track the Chabahar Port project.

In 2003, India and Iran agreed to develop the Chabahar Port, but the venture moved slowly because of the sanctions on Iran’s atomic programme. Western nations lifted some of those sanctions in March 2016. According to state-run Oil and Natural Gas Corporation, India is ready to invest $20 billion in the development of the port and has requested Iran to allocate adequate land in the Chabahar Special Economic Zone. The port will cut transport costs and time for Indian goods by a third. Iran plans to turn the Chabahar Port into a transit hub for immediate access to markets in the northern part of the Indian Ocean and in Central Asia.

For India, this port will open up a route to landlocked Afghanistan where it has security ties and economic interests. India has built a 220-km road to the port from Afghanistan. Chabahar is along the coast from Gwadar Port in Pakistan, which is why India’s involvement in the development of the Chabahar Port is crucial. In 2015, Roads and Highways Minister Nitin Gadkari visited Iran and signed a preliminary pact on the development of the port, and Swaraj’s visit was another step in that direction.

In the context of China’s deepening ties with Pakistan and the recent signing of energy and infrastructure agreements with that country worth $46 billion, India’s swift response with the Gulf countries and trade deals with Iran assumes significance as such moves could have been spurred to circumvent China’s attempt to spread its strategic outreach in the Gulf and beyond. The fact that India was one of a handful of countries that continued trade links with Iran despite it being isolated by Western countries against its disputed nuclear programme helps. Iran recognises that India is its second-biggest oil client after Beijing. No wonder, Iran has proposed a free-trade agreement with India.

December 3 was a landmark day in the development of the Chabahar Port when the Iranian Government launched the first phase. Just a month ago, India had sent its first consignment of wheat to Afghanistan via the port, the first since Iran, India, and Afghanistan signed a historical trilateral agreement in May 2016, promising to develop the port and establish it as a critical transit corridor. Indian goods transported to Central Asia and Afghanistan are given “preferential treatment and tariff reductions at Chabahar Port”. It has been agreed upon that the port’s cargo carrying capacity shall be augmented from 2.5 million tonnes to 80 million tonnes. India has agreed to commit $500 million to Chabahar, besides preparing investment plans for infrastructure development, such as road and rail connectivity.

The strategic consideration behind India’s involvement in the port cannot be missed. Pakistan has always remained a hindrance to India’s outreach to Afghanistan via land. Since the US forces withdrew from Afghanistan after overthrowing the Pakistan-friendly Taliban Government in Afghanistan, Pakistan has viewed India’s growing influence in the war-ravaged nation through development aid as a threat. The Chabahar Port will also act as a counterbalance to China’s growing influence in Pakistan through the China-Pakistan Economic Corridor, which is a part of an ambitious Belt and Road Initiative (BRI) to expand its sphere of global economic and strategic influence. The Gwadar Port developed by China at the cost of $57 billion is mere 100 km away from the Chabahar Port. Besides, both India and Iran want a stable Government in Kabul and eliminate the Taliban influence. Pakistan has been trying to negate this.

Once Chabahar Port is completed, it will be easy to link it to the 7,200 km-long International North-South Transport Corridor (INSTC), a multi-modal connectivity route initially set by Iran, Russia, and India in September 2000. The INSTC links the Indian Ocean and the Persian Gulf to the Caspian Sea via Iran, extending to the northern corners of Europe through St Petersburg in Russia. It is expected that the INSTC will help cut down on costs and time taken for transfer of goods. The Chabahar route plus the INSTC could boost trade to a total of $170 billion from India to Eurasia ($60.6 bn in exports and $107.4 bn in imports), experts say.

It may be noted that the INSTC was conceived well before China’s One Belt One Road (OBOR) initiative. After 17 years in the making, it is expected to be operationalised mid-January 2018 and could be a game changer for India’s Eurasia policy with the first consignment slated to be sent from India to Russia. A Russian railway operator is expected to play a key role in the INSTC. The estimated capacity of the corridor is 20-30 million tonnes of goods per year. This alternative connectivity initiative to countries in the Eurasian region is India’s second corridor after the Chabahar Port to access resource-rich Central Asia and its market.

As against China’s BRI project, that lacks transparency and has a suspected hidden agenda, the INSTC is inclusive. While in Sochi to attend the Shanghai Cooperation Organisation Summit meeting early this month, Swaraj emphasised this point in an indirect criticism of China’s BRI project. Making a stopover at Tehran on her way back from Sochi, Swaraj had a meeting with Zarif and reviewed the implementation of the Chabahar Port project, besides issues of mutual interest. These connectivity routes shall unfold plenty of opportunities for India and open up prospects for linking with other connectivity projects that the five Central Asian and other Eurasian countries have undertaken among themselves.

Started by three countries, the INSTC has now been expanded and includes 11 new members -Azerbaijan, Armenia, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkey, Ukraine, Belarus, Oman, Syria and Bulgaria (as observer). It is expected that Finland, Estonia, and Latvia would join in the near future, demonstrating the INSTC’s inclusive character — indeed a massive move and a step further towards achieving globalisation. 

The writer is ICCR India Chair Visiting Professor at Faculty of Economics and Business Administration, Reitaku University, Japan.

Views expressed are personal and do not reflect either that of the ICCR or the Government of India. E-mail: rajaram.panda@gmail.com

 
 
 
 
 

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