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Chabahar Port and India No. 80 January 2018 Chabahar Port and India On February 10, 2018, Iran signed an port to develop fresh links with post Taliban agreement to lease the operational control Afghanistan and Iran needed Chabahar to of Chabahar port to India for 18 months. provide an investment boost in a sanctions era. As furious changes roil the region with deep Both projects moved slowly. Gwadar was implications for the energy business, India has to be completed in 2005 while for Chabahar begun to make a guess about the economic India and Iran could not even reach the stage future of the competing countries. Till recently of setting the dates for its completion. The by not showing any partisanship especially crucial point to note about Chabahar and among the members of the Gulf nations who Gwadar is that they were not envisaged as control the oil buckets, India had struck true ports to reach Southern Europe. “Pakistan to the saying of Ehud Barak, former Prime intends to take on other Gulf ports, especially Minister of Israel. “The Middle East is a region Oman’s Salalah and UAE’s Jebel Ali and offer Policy BriefPolicy where predictions go to die”. Central Asian states their most efficient warm- History: The changes in Indian appraisal water access to both the west and the east”.3 of the desert politics did not happen overnight. (sic) This has been underscored by the former India was offered Chabahar in 2003 by Iran Indian government led by UPA too. Former “under which India committed to make bulk of external affairs minister Salman Khurshid investment to develop the infrastructure of the said “the port is the most cost-effective route port. However, the progress of work was very for New Delhi to reach the Central Asian slow due to United States (US) sanctions over markets…to facilitate import of minerals from Iran”.2 The offer came a year after Pakistan and Afghanistan”.4 China signed a deal in April 2002 to build the In the case of Chabahar, the Iran $248 million deep-sea port at Gwadar in the government planned to build it as the mouth RIS RIS former. Under the original agreement, China of a free trade zone (20 year tax exemption was to fund three-quarters of the project, at and duty free import) with linkage to central a cost of $198 million through loans and Asia. As an OECD note prepared by the grants. The remaining $50 million is to come Afghanistan trade ministry notes Afghan from Pakistan. Both Pakistan needed Gwadar investors are also expected to be present in RIS Policy Briefs are prepared on specific policy issues for the policy-makers. This Policy Brief has been prepared by Mr. Subhomoy Bhattacharjee, Consultant, RIS. — Research shaping the development agenda 1 the proposed free trade zone. To make some tons from the current 2.5 million tons. As of of those possible India built the Delaram now the investment from India is expected to to Zaranj Highway for $135 million.5 The be about $85 million but the overall Indian highway, designed and constructed by India’s exposure to the project is estimated at $ 500 Border Roads Organisation was opened for million. commercial traffic in January 2009 by then The shipping ministry set up Indian Ports Afghan President Hamid Karzai. The highway Global, an unusual state led venture for India brings Afghanistan freight traffic to the Iranian in the ports sector. It is a joint venture between border at Zaranj. “The city of Zaranj serves JNPT and Kandla Port Trust and is expected as the border crossing between Afghanistan to follow up the Chabahar project with more and Iran, and historically it is of significant such in other countries. One project where importance to the trade route between it plans to bid is Payra in Bangladesh. It is Central Asia, South Asia and the Middle East. The highway thus provides land-locked unusual because the Indian government had Afghanistan an alternative way to access the assiduously avoided such an exposure in the Arabian Sea and the Persian Gulf, instead of international arena for any projects it had a relying solely on the Pakistani routes”.6 These stake in, except for those involving trade in considerations explain the position of both commodities. ports. Chabahar, for instance, cuts the distance The change in tactics for India has become to Kabul by 700 kilometres than Karachi, necessary after one element of the future had creating a huge potential savings of $ 1000 become clear. China’s inexorable march to per container.7 secure its energy supply is determining its Post sanctions: The circumstances outreach among the nations of Indian Ocean became propitious for Chabahar, once Iran and the Middle East and forcing India to react. signed landmark nuclear agreement with Djibouti in Africa, Gwadar in Pakistan and P5+1 nations in 2015. It lifted the sanctions Hambantota in Sri Lanka are all Chinese run on the country making it possible for India ports coming up too close to Indian coasts. to push investments in the country. The lead While Wickremesinghe has emphasised that was taken by the ministry of shipping from Chinese navy will not call at Hambantota, that October 2014 onwards by sending delegation is more of an exhortation than a statement of to Tehran and receiving reciprocal ones to position. Sri Lanka owes $ 8 billion in debt to march from an MoU signed in 2016 to an China, the port is like a sale of real estate to investment contract. The MoU was signed meet its dues. Djibouti is a port for Chinese between Indian Prime Minister Narendra navy and so will be Gwadar. Possibly next on Modi, Iranian President Hassan Rouhani and the cards is the proposed deep sea port, Payra Afghanistan President Ashraf Ghani to build in Bangladesh though India too plans to bid a trilateral Transit and Transport Corridor for it through the same SPV that it has set among the three countries using Chabahar up for Chabahar—Indian Ports Global. An Port as one of the regional hubs. energy blockade from the seas may seem far fetched at this juncture for India to encounter, Under the MoU, India Ports Global but instead of a difficult war that nuclear will refurbish a 640 meter long container nations cannot wage, it is quite a plausible handling facility, and reconstruct a 600 threat to reckon with since it can be waged at meter long container handling facility at far less cost but with devastating impact for the port. The company will modernize the economy. ancillary infrastructure by installing four rail- mounted gantry cranes, sixteen rubber-tire Would one Chabahar ensure a checkmate gantry cranes, two reach stackers, two empty in India’s favour. Hardly so! Yet it is the handlers, and six mobile harbor cranes. Upon beginning of a long running detente for India completion of the works Chabahar’s shipping around the Persian Gulf. India has already handling capacity will be increased to 8 million begun to use the two berths it has committed 2 RIS Policy Brief # 80 to develop at the Shahid Beheshti port to send longer accept payment for gas and oil in Indian the first few consignments of grain to Kabul. rupees even though it was a currency to bypass With Afghanistan in tow, India will need the strict sanctions regime imposed on it to to work towards integrated development of restrict its access to banking channels.9 There connectivity infrastructure including ports, are some common to both. As India and Iran road and rail networks to open up greater looked across the waters from Chabahar, the opportunities for access to regional markets hitherto politically solid bloc on the other side, and “integration of the three economies”. Gulf Cooperation Council, the alliance of six The Indian participation in the expansion states led by Saudi Arabia (which established it of Chabahar port is also in keeping with the in 1981 at its capital Riyadh) almost dissolved Iranian government’s priorities. The port lies in the same week. Earlier this year, Qatar outside the Strait of Hormuz one of the three was accused of breaking ranks with the other choke points in the Indian Ocean, the others members of the bloc that included Kuwait, being Straits of Malacca and Bab el Mandab the United Arab Emirates (UAE), Bahrain, Strait and so largely insulated from any and Oman for having cultivated relations with conflagration in the Gulf. As D. P. Srivastava, Iran. The others broke off diplomatic relations former Indian ambassador to Iran, who had with Qatar and enforced a crippling blockade. curated the Chabahar deal in its infancy notes: Though Kuwait has invited Qatar back to “Expansion of the port will also bring more the annual meeting of the six, in response UAE trade and development to Sistan-Balochistan, and Saudi Arabia have formed a new “joint a strategic province bordering Pakistan and cooperation committee”. India has so far been Afghanistan with few natural resources. In used to deal with the GCC as a bloc that is recent years, the region has also witnessed an largely Sunni against the Shia majority countries upsurge in terrorist attacks by groups based that are led by Iran. It was a relatively easy in Pakistan”.8 There are other advantages too. equation that has now broken down. To ramp India plans to invest in an urea plant adjacent up investments back home, India has in the past to the port. For Iran, this makes sense to couple of years fostered competing relations raise productivity in its investment starved with these countries.
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