Chabahar: New era of Indo-Iran relations

Beyond fuelling commerce and connectivity, Iran’s Chabahar port, which India has helped develop, will enhance India’s influence in Central and West Asia

November 24, 2017

Chabahar port opens a new and significant chapter for India by asserting the country’s strong hold in the region

Strategy to open up easy trade route between India, Afghanistan Russia, Iran, and Europe

India is pushing for greater economic and energy cooperation with the fast-growing markets of Central Asia

India’s Act East policy to be matched with a Think West policy to dramatically improve diplomatic relations

“Once we make up our mind, the distance between Kaashi and Kaashan is only half a step.” Prime Minister Narendra Modi quotes a Persian couplet by Mirza Ghalib during his visit to Iran in May 2016

When India successfully shipped wheat to Afghanistan from Kandla in Gujarat via Iran’s Chabahar port in October 2016, it opened a new chapter in economic diplomacy. The strategically placed Chabahar port will not just provide reliable connectivity to Afghanistan in the absence of land transit rights through Pakistan, it will also open up new opportunities of diplomacy and commerce in Central and West Asia.

India’s strenuous diplomatic efforts to reinvigorate bilateral relations with a post-sanctions Iran paid off in May 2016 when the countries signed 12 MoUs including a deal pledging US$500 million to develop the Chabahar port. For a long time, India has viewed Chabahar as a gateway to Afghanistan and the landlocked and largely-untapped markets of Central Asia. The port is located in the Sistan-Balochistan province on Iran’s southern coast and is easily accessed from India’s western coast.

Chabahar port will not just provide reliable connectivity to Afghanistan in the absence of land transit rights through Pakistan, it will also open up new opportunities of diplomacy and commerce in Central and West Asia

India has also signed a US$462 million agreement to help import steel rails, committing a total of $635 million to boost Iran’s infrastructure. Other agreements included a partnership to build the Chabahar-Zahedan railway line – part of India, Iran and Afghanistan’s trilateral agreement to create a trade and transit route from Chabahar to Afghanistan. This route will go beyond Afghanistan as India aims to integrate the Chabahar Afghanistan highway with the much bigger North-South Transport Corridor (INSTC) project that connects India, Russia, Iran, Azerbaijan and Europe.

The purpose of INSTC is to establish transportation networks among the member countries and improve connectivity to the mineral rich Central Asian countries. This is part of India’s overarching aim to push for greater economic and energy cooperation in the South, West and Central Asia that has been further emphasised by revival of its 2012 Connect Central Asia policy.   

Apart from the long-term implications of Chabahar, India and Iran are all set to benefit massively from improving bilateral relations. India will play a key role in Iran’s fast-growing energy and infrastructure sectors, while Iran looks to India for trade in diverse items such as rice, sugar, flat-rolled products of iron, woven fabrics, meat and motorcycles. During his visit to Tehran last year, Minister for Petroleum and Natural Gas, Dharmendra Pradhan established that Indian companies could invest up to US$20 billion in setting up petrochemical and fertiliser plants in Iran and another US$16 billion in Chabahar’s free trade zone.

Additionally, India will soon renew its oil deals with Iran, the third largest supplier of crude oil to India, according to officials. Reliance Industries Ltd has already started purchasing crude oil from Iran after a six year break and is looking for a long-term fixed quantity deal with the Arab state. Meanwhile, Mangalore Refinery and Petrochemicals Ltd and Essar Oil Ltd are currently the main buyers of Iranian oil in India, importing about 10 million tonnes per year. Besides, Indian Oil Corp is planning to double its imports from Iran to 4mt this year.

Chabahar is also expected to kick-start an old plan of building a 1,300 km undersea pipeline to transport liquefied natural gas (LNG) from Iran to Oman and then to Porbandar in Gujarat. According to the proponents of the plan, this pipeline will considerably reduce the cost of  supplying LNG to India. India’s ‘Act East’ strategy would be matched with ‘Think West’ to predict the future course of the country’s diplomatic policy in the region. And, Chabahar has just flagged off this jounrey.

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