How India’s deal to run Iran’s Chabahar port may help the Middle East navigate to a new futurehttps://en.majalla.com/node/321136/business-economy/how-india%E2%80%99s-deal-run-iran%E2%80%99s-chabahar-port-may-help-middle-east
How India’s deal to run Iran’s Chabahar port may help the Middle East navigate to a new future
The jewel in the crown of the International North-South Transport Corridor that links Russia with the Middle East shows how new forms of co-operation can bring trade breakthroughs
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How India’s deal to run Iran’s Chabahar port may help the Middle East navigate to a new future
India has sealed a formal, long-term $370 million deal to operate the port in the Iranian city of Chabahar, in a development that will resonate through regional and worldwide geopolitics.
The 10-year management agreement follows a series of short-term predecessors and is expected to lead to renewed investment into the port, at a time when major world powers are vying for influence over key global trade routes.
New Delhi hopes that Chabahar will help ease the sense of competition between major powers and fast-rising states, and become an example of what co-operating and shared investment between countries can achieve.
India’s Minister of External Affairs Dr. S. Jaishankar made that clear to reporters when taking questions on the deal, which was signed in May: “This is actually for everybody’s benefit, I don’t think people should take a narrow view of it... If you look at even the United States’ own attitude to Chabahar in the past, the US has been appreciative of the fact that Chabahar has a larger relevance.”
He added that the new deal offered further benefits for the wider region, showing how such deals can work, as well as helping with further development at Chabahar itself.
And so the immediate likely beneficiaries are India, Iran, and Russia, but there are other countries that may also gain. Al Majalla looks at the landmark reached by the international agreement in Chabahar, and what it might lead toward.
Arguably the biggest interest in the region comes from two landlocked countries that may stand to benefit greatly: Armenia and Afghanistan.
The International North-South Transport Corridor
The Chabahar port is a key point connecting Russia's Baltic Sea coast with India's Arabian sea ports on a 7,200 km route known as the International North-South Transport Corridor (INSTC).
It was first envisioned in an agreement in 2000 by Russia, Iran, and India. The INSTC agreement was later expanded to include Turkey, Azerbaijan, Kazakhstan, Armenia, Belarus, Tajikistan, Kyrgyzstan, Oman, Ukraine, and Syria, with Bulgaria as an observer.
As a trade route in and out of India and the Baltic, the INSTC is about 30% cheaper and 40% shorter than existing alternatives. It has a transit time of between 25 and 30 days. The equivalent way through the Suez Canal takes between 45 and 60 days.
There are also other advantages. The line between Iran's Bandar Abbas port to Chabahar is more than 600 km closer to India and is a deep-sea port, which means it can accommodate full-size containers.
India's investments in Chabahar's Shahid Beheshti Terminal will make it more efficient, thus achieving these savings in time and money for India and other countries interested in using the port.
Along with all the advantages of quicker trade, the INSTC also has strategic geopolitical significance for India, allowing it to avoid Pakistan and helping offer a balance to China's influence in the region.
Arguably the biggest interest in the region comes from two landlocked countries that may stand to benefit greatly: Armenia and Afghanistan.
In January, Iran granted Armenia access to its Chabahar and Bandar Abbas ports to facilitate trade with India. Armenia is in competition for the so-called "western route" of the INSTC with its regional rival Azerbaijan, which offers a quicker land route to Russia.
Nonetheless there is confidence in Armenia that it has something to offer the INSTC. Haykaz Nasibyan, secretary-general of the Ministry of Economy, said: "Armenia can become a significant participant and implementer in forming an alternative freight route, offering an alternative corridor to connect India and Iran to Europe through Georgia and the Black Sea and to connect Europe to India.
"The corridor can be a link to the Russian Federation by land route. In this process, the fact that Armenia is the only country that has signed the Comprehensive and Extended Partnership Agreement (CEPA) with the European Union and is a member of the Eurasian Economic Union (EEU) is essential".
A general view of the Chabahar port during the inauguration ceremony in February 2019.
There is a need to update the infrastructure in both Armenia and Azerbaijan for one of the two routes to operate fully.
Relations between India and Armenia have warmed recently with key deals in defence, while Azerbaijan has so far been a bigger trade partner for the South Asian powerhouse. Additionally, it is also on the current route connecting India to Russia, which passes by sea from Mumbai to Bandar Abbas in Iran, then from Tehran to Bandar Anzali by rail, from where it goes by rail via Azerbaijan or by sea to Astrakhan in Russia.
There are concerns in New Delhi, however, at Azerbaijan's growing partnership with Pakistan, most recently displayed at a closed-door meeting between Azerbaijan, Pakistan, and Turkey in July in Astana, during the Shanghai Cooperation Organisation summit. Switching the route to Armenia could prove to be of strategic importance to New Delhi.
There are concerns in New Delhi, however, at Azerbaijan's growing partnership with Pakistan, most recently displayed at a closed-door meeting between Azerbaijan, Pakistan, and Turkey in July.
Afghan investment
Meanwhile, Afghanistan has made a commitment to invest in the Chabahar. The Taliban Government has pledged around $35 million to the initiative, highlighting its significance to them. Afghanistan is currently dependent on Pakistan for access to international markets through ports in Karachi and elsewhere.
World Bank data suggests that Afghanistan has grown its trade with India by 43% to $570mn in 2023. Allowing Pakistan any leverage over this vital partnership could prove quite risky. Although New Delhi does not officially recognise the Taliban state, the Indian economic machine seems willing to work with anyone in Kabul as long as they do not get too close to Islamabad.
In November 2023, Afghani official Mullah Abdul Ghani Baradar Akhund visited the port and urged the Iranian side to act quickly.
"Connecting to Chabahar port will grant Afghanistan access to markets in Europe, the Middle East, India, and China, thereby strengthening Afghanistan's global relationships. Chabahar port offers a more efficient route, being tens of kilometers closer than Bandar Abbas and hundreds of kilometers shorter than Karachi, resulting in unprecedented reductions in export costs and transit times," he said.
Central Asia
The former Soviet republics of Central Asia also all lack direct access to maritime trade.
Kazakhstan and Turkmenistan are on the Caspian Sea coast, but it is a large lake rather than the open sea.
Kazakhstan and Turkmenistan had a trilateral meeting, also involving Afghanistan, in April. Kazakh Deputy Prime Minister Serik Zhumangarin and Uzbekistan's Director General of the Transport and Communications Agency Mammetkhan Chakyev stated that this "eastern route" of the INSTC held great potential for their region. A rail link between Chabahar and Sarakhs, on the Iran-Turkmenistan border, is a vital part of this route.
Although Kygyzstan is a smaller state, it had no less interest in developments around the Chabahar port.
Back in 20222, its ambassador to India, Asein Isaev, said: "If we use the Chabahar port, it will take only two weeks to deliver goods from India to Kyrgyzstan and Central Asia. Now, it takes 30-45 days through different ports and other countries".
For goods to reach Kyrgyzstan through Iran, they would also have to cross Turkmenistan and Uzbekistan.
"We see a great practical value in the Chabahar project and, no doubt, with its full implementation, the scope and opportunities for India and Uzbekistan, and Central Asia as a whole, will expand. It will only play a positive role," Uzbekistan's ambassador to India, Farhod Arziev, said in an interview given several years ago.
Uzbek's President Shavkat Mirziyoyev made a historic visit to Iran in 2023, the first time a president from that country had made such a trip in 20 years.
This flow of diplomacy shows that there is no shortage of major players in the region that stand to gain from India's deeper role at Chabahar.
It will, without doubt, be mentioned when India's Prime Minister Narendra Modi makes his first visit to Moscow since the invasion of Ukraine.
The Kremlin has said that "all issues are on the agenda", and the future development of trade links as pioneered at Chabahar , and their potential to reshape trade and geopolitics, will be among them as the world watches the summit.
