Despite the US pressure, India and Iran sign $370 million deal, reviving Chabahar Port’s strategic importance, which would be beneficial for both countries
The Indian Ocean-facing Iranian port of Chabahar is back in the spotlight thanks to a new 10-year, $370 million agreement between India and Iran, signed on May 13. This deal marks an important step in the long-standing partnership between the two countries, aimed at enhancing regional connectivity and economic growth. India’s Chabahar Port project in Iran is more than just a commercial endeavour-it’s a strategic masterstroke aimed at reshaping regional trade dynamics and strengthening geopolitical ties. Located on Iran’s southeastern coast in the Sistan-Baluchestan province, Chabahar Port offers India a golden gateway to Afghanistan and Central Asia, circumventing Pakistan and providing a counterbalance to China’s influence in the region. Chabahar is the only Iranian port outside the Straits of Hormuz.
The Chabahar Port stands out for several reasons. Firstly, it is the only Iranian port with direct access to the Indian Ocean, providing a critical transit hub for goods travelling between India, Iran and beyond. The project includes the development of port infrastructure and the construction of a railway linking Chabahar to the Iranian city of Zahedan, close to the Afghan border, effectively creating a new trade corridor. This port is pivotal for India as it seeks to bolster its economic and strategic presence in Central Asia. Traditionally, India’s trade routes to Afghanistan and Central Asia have been blocked by Pakistan, which does not allow Indian goods to pass through its territory. Chabahar provides a much-needed alternative route, facilitating access to these markets without relying on Pakistani cooperation. The idea for jointly developing Chabahar began during the 2003 State visit to India by Iranian President Muhammad Khatami. At that time, India and Iran shared strategic interests, viewing Pakistan’s political interference in Afghanistan as harmful. Both supported the Northern Alliance, led by Ahmad Shah Massoud, against Pakistan-backed Pashtun groups. Developing Chabahar on Iran’s Indian Ocean coast naturally extended this Indo-Iranian partnership.
China’s Belt and Road Initiative (BRI) has seen substantial investments in ports and infrastructure across Asia, often referred to as the “String of Pearls.” Gwadar Port in Pakistan, just 72 kilometres east of Chabahar, is a cornerstone of this strategy. By developing Chabahar, India not only counters China’s influence but also positions itself as a key player in the regional logistics network.
Chabahar is also vital for Afghanistan. The landlocked nation has been heavily reliant on Pakistan’s Karachi Port for its imports and exports. Chabahar provides a viable alternative, potentially reducing Afghanistan’s economic dependence on Pakistan. In 2016, India, Iran and Afghanistan signed a trilateral agreement to develop Chabahar, demonstrating a shared commitment to regional stability and economic cooperation. The port is expected to significantly increase trade volumes and create jobs in Afghanistan, fostering economic resilience.
For India, the Chabahar Port project is a testament to its ability to manoeuvre through complex diplomatic landscapes. Iran, often isolated due to international sanctions, sees India as a crucial partner in its economic development. India’s investment in Chabahar signals its intent to strengthen bilateral ties with Iran, enhancing energy security by facilitating greater access to Iranian oil and gas. The port also serves as a symbol of India’s growing assertiveness on the global stage. By investing in Chabahar, India underscores its readiness to take on infrastructure projects that have far-reaching geopolitical implications. This move aligns with India’s broader “Act East” and “Connect Central Asia” policies, aimed at deepening trade and cultural linkages with East and Central Asian countries.
Despite its potential, the Chabahar project faces significant challenges. The re-imposition of US sanctions on Iran has cast a shadow over the port’s future, creating uncertainty for investors and complicating financial transactions. However, India has received some exemptions from these sanctions, allowing the project to progress, albeit cautiously.
Moreover, regional instability poses risks. Iran’s internal political dynamics and its relations with global powers add layers of complexity to the project’s execution. Chabahar, the only Iranian port outside the Straits of Hormuz, is back in the news. The US-envisioned India-Middle East-Europe Economic Corridor (IMEC) is now stalled due to Gaza hostilities. The Suez Canal is also risky due to the Houthi threat. Thus, an alternative route through the Caspian Sea and Russia seems likely.
The Chabahar Port project is a cornerstone of India’s strategy to enhance its regional influence and economic reach. By providing an alternative trade route to Afghanistan and Central Asia, countering Chinese influence and strengthening ties with Iran, Chabahar is much more than a port-it’s a pivotal piece in India’s geopolitical chessboard. While challenges persist, the successful development of Chabahar could redefine trade and economic partnerships in the region, heralding a new era of connectivity and cooperation. This situation presents a win-win for both India and Iran. For India, Chabahar offers a strategic alternative to bypass regional instability, ensuring uninterrupted trade routes to Europe and Central Asia. For Iran, the development of Chabahar boosts its economy and strengthens its regional influence by providing a vital link in global trade networks.
(The writer is an associate professor, views are personal)
