Chabahar Port: The Snags and Opportunities

The Chabahar Port is a strategic seaport located in South Eastern Iran on the Gulf of Oman. It can be said that the Chabahar port holds great strategic and commercial importance for the state of India. Owing to this great advantage that we have over the area, the union government initialized a bilateral agreement to develop Shahid Beheshti (One of the two sub ports of Chabahar Port) in 2003 but the negotiations failed soon owing to the sanctions imposed on Iran by the United States and United Nations. The negotiations once again gained momentum in 2016 under the NDA-led union government when both the nations agreed upon refurbishing the Shahid Beheshti Port. It is noteworthy that India has always been at the forefront as far as the development of Chabahar Port is concerned.


The importance of this Irani port to India is not only restricted to trade and commerce but has a wider scope, the most evident one being, the service of the port as a Gateway to Afghanistan. Amidst such a scenario, when Islamabad denied New Delhi the transit access facility for the movement of goods, Iran gained a huge commercial advantage. The Chabahar Port is 800 km closer to the Afghanistan border than Pakistan's Karachi port is. Not only Afghanistan but the Chabahar Port also can be rightly attributed as India’s Gateway to Central Asia as the estimated travel time from our Kandla port is just a single sailing day which used to be two or three sailing days earlier through the Suez canal. Recently, a trilateral meeting was held between India, Iran, and Uzbekistan on the joint use of Chabahar Port. India affirmed that it welcomes Uzbekistan and even other Central Asian economies to use the port and collectively unleash the economic potential which the port holds. As Islamabad outrightly denied transit access to India, Chabahar Port is the only point of connectivity and accessibility between India and Central Asian Markets. The commercial benefit which India can reap out of the Chabahar Port is enormous and the following fact bears testimony to it. Central Asia is known as the Global Import Basket with average annual imports of 67 Billion US Dollars and the contribution of Indian Exports to this mammoth figure is just 0.5%. Upon fuller and efficient utilization of the Chabahar port, Indian exports would likely manifest a surge that would eventually abate our high trade deficit.


With the whole of Central Asia willing to collaborate with India and hold joint operations on the Chabahar Port with the rationale of commercial profits, India’s political influence over the area would likely witness a rise and in the contemporary milieu, this assertion becomes highly convincing as the traders, firms, and nations are wary of the Chinese. India could emerge out as a major power in South Asia reaping the attached advantages. Chabahar port not only paves the way towards Central Asia but towards Africa also, an economy where Indian trade is an important aspect. Therefore, India’s commercial and political stature and influence might tremendously increase but only upon the fuller and efficient utilization of the port.


India’s trade ties with Central Asia are not just a contemporary event but hold great historic importance as well. Our ancient trade route – Uttarapath – stretched across River Ganges, ran through the state of Punjab to Taxila (Gandhar) and further to Bactria in Central Asia. This vital trade route continued to remain in service till the 7th Century AD. Apart from this, the trade ties with Central Asia continued till the Delhi Sultanate. The Chabahar Port can prove to be effective enough to revive our ancient trade relations and develop their contemporary relevance. On the same lines, The International North-South Transit Corridor (INSTC) was established years back, yet it is not fully operational pertaining to some major impediments, a significant one being the lack of a logistics provider. For instance, shipment from India reaches the Chabahar Port, next in line stands the paramount requirement for a logistics provider which will seamlessly transport the shipment from the port to the destination. This hurdle is caused due to the difference in custom operations from one country to the other which makes cross-border transit an arduous task. But on these grounds, two major developments have taken place in the last few decades which have removed the impediments for India to a great extent. Firstly, India signed the TIR Convention (Transports Internationaux Routiers) which aims to facilitate seamless cross-border transit movement of goods within and amongst the signatory nations. It has far-reaching advantages and will help save a lot of time and resources by streamlining the procedures at the borders. The TIR Convention promotes the hassle-free movement of goods through the borders which have even stimulated the logistic firms to enter into the arena, which were earlier reluctant to do so owing to the onerous custom procedures. Secondly, India’s Navratna PSU – Concor entered into an agreement with the Russian Railway Logistics Company to apportion the responsibility for the transport of all Indian exports with Russia and make them seamless thereby encouraging Indian exporters. This MOU will make use of the INSTC infrastructure and will facilitate the intermodal shipment of the goods not only between India and Russia but any other Central Asian market. For instance, the Concor will ship the cargo to the Chabahar Port and then the RRL will undertake the responsibility to deliver that cargo whether in Moscow or any other INSTC Signatory Nation. Therefore, these two major developments have significantly strengthened the INSTC Regime yet we have a long way to go.


Now coming to the challenges, the biggest one comes from the United States, which has imposed sanctions on Iran. Such sanctions have made the nations, firms, and traders reluctant to use the Chabahar port. Even the foreign banks are refraining from honoring the ‘Bill of Lading’ which pertains to the Chabahar Port. Most vessel operators in India have a stringent conviction that routing their goods via Chabahar Port would possibly restrict their freedom to trade with other nations owing to their Chabahar transit. This is nothing more than a psychological fear as sanctions are imposed on Iran, not on the destination countries and the port is used just as a transit point.


With challenges comes a ray of hope, U.S. President-elect – Joe Biden made it clear that he wants to develop bilateral ties with Iran. Amidst such a scenario, it might be right to say that the sanctions on Iran would be lifted once the new administration takes the charge. This uplift would have wide-ranging implications with the dominant one being the materialization of economic and political opportunities for India. Apart from that, India’s economy might witness rapid growth with exports rising to Central Asia. Even the psychological fear which traders bear in mind would face away and the trade would be conducted in a much more efficient and seamless manner.


The need of the hour is initiative. Indian business holders need to step further and take initiative to strengthen trade ties with Central Asia as many countries like Japan and UAE which are even military allies of the United States, despite sanctions, using the Chabahar Port to further their trade growth. The fairly good trade relations with Iran and Central Asia have great economic potential which India needs to encash and this can be done only by fuller utilization of the port. On part of the government, there is a need to develop confidence among our traders so that they can strengthen their trade relations with Iran without the fear of US Sanctions. Ambiguity as a part of India’s foreign policy might prove to be fatal for our economy and we might miss out on a strikingly visible economic opportunity.


Written by- Deepansh Bhati