India and Iran signed a 10-year contract for the operation of Iran’s Chabahar port. This long-term agreement is between Indian Ports Global Limited (IPGL) and Iran’s Port and Maritime Organization (PMO) for the operation of Shahid-Beheshti Terminal. The signing of the long-term agreement with Iran is part of India’s strategic and economic vision for Central Asia.
Chabahar port is important for India
- Chabahar is the only sea port of Iran. It is located on the Makran coast in the Gulf of Oman in Sistan and Baluchistan province.
- Chabahar has two main ports, Shahid Kalantari and Shahid Beheshti ports.
- Iran proposed the construction of Shahid Beheshti port to India and India accepted the proposal.
Progress regarding Chabahar port agreement
- India signed a Memorandum of Understanding (MoU) for the development of Chabahar Port in May 2015.
- In May 2016, India, Iran and Afghanistan signed a trilateral agreement to establish an international transport and transit corridor, also known as the Chabahar Agreement.
- The agreement aims to improve transport and trade connectivity between the three countries by using the Chabahar port in Iran as a major transit point.
- However, finalizing the long-term agreement was hampered by a number of factors, including differences over certain clauses of the agreement.
- India wanted arbitration in a neutral country, while Iran wanted the process to be conducted in its own country’s courts or in a friendly country.
- The main point of dispute was where arbitration should take place to resolve disputes. Now, both parties have agreed to a deal that satisfies their respective interests. The agreement states that any disagreements should be resolved through open communication and cooperation between the leaders of the two countries.
- This latest long-term agreement aims to replace the initial contract with a term of 10 years with automatic renewal provisions.
Importance of Chabahar Port
- Alternative trade routes: Historically India’s access to Afghanistan and Central Asia has largely depended on transit routes through Pakistan.
- Chabahar port provides India an alternative route for trade in Afghanistan and Central Asia, for which India was earlier dependent on Pakistan.
- Additionally, the Chabahar port will facilitate India’s access to Iran, which is the main entry point of the International North-South Transport Corridor (INSTC), which connects India, Iran, Russia, Central Asia and Europe by road. , connects via rail and sea.
- Economic Benefits: Chabahar will play an important role in India’s efforts to enhance relations with resource-rich Central Asian countries and Afghanistan.
- This will help India diversify its trade routes and expand access to markets in Russia, Eurasia and Europe, in addition to Iran and Afghanistan.
- Cargo movement through the INSTC route is expected to result in savings of 30% in cost and 40% in transportation time, ensuring quick turnaround at cost competitors.
- Central Asian countries, which are rich in resources but do not have direct access to the sea, such as Kazakhstan and Uzbekistan, have shown interest in using Chabahar to connect to the Indian Ocean region and enter the Indian market.
- Humanitarian assistance: Chabahar port can serve as an important entry point for humanitarian assistance and reconstruction efforts into Afghanistan.
- Chabahar Port has played a vital role in the supply of humanitarian aid during the COVID-19 pandemic.
- India has exported 2.5 million tonnes of wheat and 2,000 tonnes of pulses to Afghanistan through Chabahar port.
- In 2021, India sent 40,000 liters of eco-friendly insecticide malathion to Iran through the port to combat locust attacks.
- Strategic influence and regional stability: By developing and operating the Chabahar port, India can enhance its strategic influence in the Indian Ocean region, thereby strengthening India’s geopolitical position.
- The Chabahar port will act as a counter to China’s development of the Gwadar port in Pakistan.
- Additionally, due to the docking facilities available at Chabahar, India can respond effectively to cases of piracy and serve as the first line of defense in the Arabian Sea.