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Chabahar port will strengthen central Asian countries connectivity, regional supply chains and global peace

  • Chabahar port marks not only a significant milestone in the bilateral relations between India and Iran but also a crucial step towards regional economic integration and connectivity; paving the way for increased global trade, investments and peace.

The Chabahar Port, situated in southeastern Iran’s Sistan-Baluchistan province, is a deep-water port that stands as the sole Iranian port directly connected to the ocean. The name “Chabahar” is a combination of two Persian words, with “Chahar” meaning four and “bahar” meaning spring. This port is divided into two distinct sections: Shahid Kalantari and Shahid Beheshti. India’s interest in developing the port dates back to 2003, to bolster trade connectivity with Afghanistan and Central Asia.

The agreement to move forward with this initiative had been under discussion for more than a decade. In 2012, the first trilateral meeting involving India, Iran, and Afghanistan took place to accelerate investments in trade and transit, particularly through Chabahar. In 2013, India pledged investments of USD 100 million for Iran’s inaugural deep-water port at Chabahar. In 2015, a bilateral agreement was signed between India and Iran, where India pledged to invest USD 500 million to upgrade one berth (Shahid Beheshti terminal) in Chabahar and build a 600-meter-long container handling facility.

In 2016, a trilateral agreement was reached involving India, Iran, and Afghanistan to create the International Transport and Transit Corridor, connecting India to Central Asia, Europe, Afghanistan, and beyond. This led to the initiation of the port’s development, with the first phase being inaugurated. India Ports Global Limited took over a portion of Chabahar’s operations in 2018. Since then, India has overseen the handling of over 90000 TEUs of container traffic and more than 8.4 MMT bulk and general cargo. The port has notably played a vital role in aiding the distribution of humanitarian assistance, especially during the Covid-19 pandemic.

Finally, after a long journey of more than 10 years, the signing of a Long-Term Contract for the development of Shahid Beheshti Port Terminal, Chabahar took place. The contract was signed between India Port Global Limited (IPGL) and Ports and Maritime Organization (PMO) of Iran in the presence of Indian and Iranian Ministers in Iran. This contract has replaced the 2016 pact which previously needed to be renewed on an annual basis. The Indian delegation was led by the Hon’ble Union Minister of Ports, Shipping and Waterways and AYUSH, Shri Sarbananda Sonowal, who travelled to Iran with the Iranian counterpart H.E. Mehrdad Bazrpash, Minister of Roads and Urban Development of Iran.

According to the contract, IPGL will commit to further equipping and operating the port for the duration of the Contract. Furthermore, the contract will be renewed once the initial 10-year period comes to an end. To enhance the port’s capabilities, IIGPL plans to invest around USD 120 million. Additionally, India has extended an IN Credit window worth USD 250 million, specifically for collaborative projects aimed at enhancing the Chabahar Port.

Deepening of regional integration between India and Iran, Afghanistan and the Central Asia

The long-term agreement between India and Iran for the development of Shahid Beheshti Port Terminal marks a significant milestone in the bilateral relations between the two countries. This contract signifies the strong bond and growing partnership between India and Iran. The agreement is expected to boost trade to unprecedented levels in the upcoming years. The port will provide India with an opportunity to expand its investments in Iran, a crucial partner for energy security. This move will lead to a substantial decrease in India’s oil import costs and streamline trade processes by allowing direct cargo shipments to and from Iran without additional docking expenses in the UAE.

In 2022-23, India’s trade with Iran stood at USD 2.3 billion, of which exports accounted for USD 1.6 billion and imports stood at USD 672 million. However, the trade trajectory is expected to flourish many times in the coming years. Not only Iran, this contract is expected to act as a gateway to increase trade with Central Asian countries and Afghanistan. The Central Asian comprises Kazakhstan, Turkmenistan, Uzbekistan, Kyrgyzstan, and Tajikistan. India’s total trade with this group is around USD 1.2 billion, out of which total exports accounted for USD 911 million and imports at USD 360 million. Furthermore, in 2022-23 India’s trade with Afghanistan stood at USD 889 million, with exports at USD 437 million and imports at USD 452 million. The signing of this historic agreement is anticipated to multiply trade and promote greater regional integration.

The strategic and economic importance of the pact for India

This is a historic agreement for the maritime sector of the region as India and Iran signed this long-term agreement on Chabahar Port, heralding a new age of trade and marine cooperation as well as trans-shipment. This will be boosting trilateral trade among India, Iran and Afghanistan to the new trajectories. As India continues to invest in Chabahar Port, its efficiency and capacity will be further enhanced, solidifying India’s commitment to the region’s economic development.

The strategic positioning of Chabahar presents a remarkable opportunity for its development as a trans-shipment hub. With a deep draft of 16m, the Port is well-suited for accommodating large shipment vessels. Moreover, its proximity to bustling trade routes, such as the Asia-Europe and Asia-Asia trade routes, facilitates the transportation of substantial cargo volumes.

In addition, Chabahar is envisaged as a crucial link in the eastern route of the International North-South Transport Corridor (INSTC), facilitating the movement of goods between India and Central Asian countries. This collaboration between India and Iran on developing infrastructure and logistics along the 7,200-km INSTC aims to reduce transportation costs and time, promoting trade between these regions. This monumental contract would not only expand existing trade volumes but also open new trade opportunities.

Moreover, it strengthens the supply chain resilience in the region. It will increase India’s contribution in the global value chains. The introduction of regular ships between Chabahar Port and Indian ports has brought stability and confidence to traders, providing them with visibility and predictability in their supply chain operations.

The agreement includes creation of a Free Trade Zone which is expected to attract billions of dollars of investments. This integration of the port with a free zone enhances its attractiveness, while the incentives provided by India, such as discounts on charges related to vessels and cargo, strengthen the trade activities in Chabahar, promoting economic development and collaboration.

In conclusions, the signing of the Long-Term Contract for the development of Shahid Beheshti Port Terminal in Chabahar marks not only a significant milestone in the bilateral relations between India and Iran but also a crucial step towards regional economic integration and connectivity. India will play a balancing act between the two countries and take proactive measures to promote global peace. This agreement solidifies the deepening partnership between the India, Iran and central Asian countries; paving the way for increased global trade, investments and peace.

As India continues to invest in Chabahar Port, its strategic positioning and infrastructure improvements will further enhance its role as a vital trans-shipment hub and a key component of the International North-South Transport Corridor. With the creation of a Free Trade Zone and the introduction of incentives, Chabahar is poised to attract substantial investments and bolster economic development in the region. This long-term commitment underscores India’s dedication to fostering regional stability, resilience, and prosperity through collaborative initiatives like Chabahar Port.

Source: DIRECTUS



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