Geopolitical Ramifications of Chabahar Port

The Chabahar port is located at the Makran coast in Sistan and Baluchistan Province of Iran. It lies next to the Gulf of Oman and sits right at the mouth of Strait of Hormuz, and it is the only Iranian port that opens in the Indian Ocean. This port is only 700 KM away Zahedan one of the cities close to Afghanistan border and approx. 1800KM from Sarakh in Turkmenistan border.  It lays approximately at 650KM from Dubai’s Jabel Ali Port. Pakistan’s Karachi Port is at the distance of 845KM, Mumbai at 1560KM and Pakistan’s deep-sea port at Gwadar at 76 N.M. (146KM).

The port is also considered as the gateway to Central Asia and Afghanistan and further North from India Ocean. Iran also has a Bandar Abbas Port; however, its capacity is limited as it cannot handle 250,000-ton ocean-going cargo ships. Therefore, at present all the massive oceans going ships docs at the deep sea Jabel Ali Port in UAE, and all the cargo then transported to Bandar Abbas Port.

Chabahar has two distinct ports, namely Shahid Kalantari and Shahid Beheshti. Shahid Kalantari is a traffic port with five berths, while Shahid Beheshti also has five berths with plans of future regional hub port. By extending the Shahid Beheshti port complex in 2017, Chabahar port’s present capacity is 2.5 million tons (M.T.) per annum which has been expanded to 8 M.T. per annum. It is expected that it will reach 20 million M.T. per annum during the final phase of the project. Mohammad Reza Pehlevi initiated the port building work in the 1970s. The initial plan was to construct a naval base at Chabahar, but, before he could realise his dreams, he was ousted in the famous Islamic Revolution of 1979. Since then the work on the Chabahar has been stalled.

Google satellite image of Chabahar Port

During Khomeini’s time, this port became extremely significant. As this was the only Iran’s port that opens in the Indian Ocean and served Iran for the exchange of goods and other essential supplies during protracted Iran-Iraq war as the Strait of Hormuz was choked.

Road and Railways Connectivity from Chabahar

As termed earlier that this port is the gateway which provides connectivity to Afghanistan, Central Asia and further North into Eurasia. It is said that once the Chabahar port development work is completed, it will be able to serve the connectivity to the region in the north aided with many hinterland connectivity projects through railways, roads and waterways. Iran is working with several countries in projects like International North-South Transport Corridor (INSTC) which bring aboard the likes of Russia, Ukraine, Turkey, Oman, Syria, Central Asian Republics and India.

Especially concerning Chabahar, India and Afghanistan are crucial as these countries are involved in projects like a roadway from Chabahar to Milak at the Afghanistan border similarly, Chabahar-Faraj-Bam railway, Chabahar-Zahedan-Mashhad rail link, which will be further stretched to Herat and Mazar-e-Sharif in Afghanistan and Termez in Uzbekistan. Iran is also planning to build the Iranrud canal through Iran, which will connect the Caspian Sea with the Persian Gulf. According to the Ashgabat agreement which was signed in 2011 among Iran, Oman, Turkmenistan and Uzbekistan and Qatar, for the establishment of an international transport and transit corridor.

India’s Interest and Chabahar Port

India and Iran started talks on the developing the Chabahar port in as early as 2001. The agreement regarding the development of Chabahar port was signed in 2003, and the same has been documented in the New Delhi Declaration. The primary underpinning of the agreement was to focus on connectivity including the Chabahar Port and Chabahar-Fahranj-Bam railway network and also to strengthen India, Iran and Afghanistan relationship. Unfortunately, the talks on the Chabahar ports and its connectivity went into cold-storage as no concrete development happened till 2016.

Prime Minister Narendra Modi visited Iran in 2016 and pledge up to the U.S. $ 500 million to expedite the development and operation of Chabahar port under the trilateral agreement amongst Iran-India-Afghanistan and additional $ 16 billion in Chabahar free trade zone. Despite Economic sanctions on Iran, India completed the Zaranjh-Delaram with the investment of the US$ 135 million which connects the Kabul-Herath highway to Chabahar port. India Ports Global LTD took over the management of Shahid Beheshti Port at Chabhahar in December 2018, and close to 4.5 metric tons of cargo have moved through the port, including exports from Afghanistan that started in February 2019.

Apart from the connectivity, energy cooperation and the expansion of the market by bypassing Pakistan, there are much other strategic interest India has in this project. If the whole region is looked with a hawk eyed view while considering the external powers like China, the U.S., Pakistan, which is significant for India, Russia, Iran, Saudi Arabia, one will understand that this region is extremely complicated.

One the one hand we have Iran whose economy is crippling from the economic sanctions from the U.S. and the west but possess a massive amount of Natural Oil and Gas and other energy. One the other hand there is GCC countries whose economy’s primary identifier is Energy trade which passes through the straits of Hormuz, and Iran has greater control over the Strait of Hormuz which accounts for 40 per cent of today’s oil trade and one of the significant strategic Sea Lane of Communications (SLOCs).

Subsequently, there are apprehensions for India as well, the rising influence of China in the Indian Ocean with its increasing footprints in the likes of Gwadar, Djibouti, Maldives, Sri Lanka Bangladesh and Myanmar creates a strategic encirclement of India. However, now these ports are primarily for trade, but it may later be converted into permanent naval bases by China. China’s decision to offer 60 million Euros as credit facility to Tehran in July 2013 for the development of the Chabahar Port has also led to suggestions by Indian media that China is attempting to push India out of the Chabahar project. It was reported that the Indian Ministry of External Affairs (MEA) decided to create an inter-ministerial task force comprising the finance, external affairs, shipping and commerce ministries to expedite the process and fast-track an agreement with Iran as a response to China’s offer of investment at Chabahar.

Therefore, Chabahar port gives India that strategic edge to counter China in the Indian Ocean, which and it will, also make Iran as an ally to India. India maintains Farkhor Airbase one of her first military base outside her territory, and that is located in Tajikistan, Iran-Afghanistan-Tajikistan had inked a trilateral agreement for the Anzob Tunnel project which is not completed. It is providing safe and uninterrupted road access to Chabahar port from Tajikistan. In a wartime situation, India can safely manoeuvre her defence supplies to the base.

This port will also help India to establish politically sustainable connectivity to Iran and Afghanistan. Additionally, India will be able to help these countries during humanitarian and natural calamities crisis. The significance of Chabahar skyrocketed when the U.S. exempted it from the fresh sanction. Such development got appreciation from all the countries who will be benefited from the Chabahar Port project and is also considered against maintaining a strategic pressure against China’s Gwadar port project.

International Sanctions

The international sanctions imposed on Iran by the U.S. and the international community have forced India to work out different arrangements to pay for the imports from Iran. By the latest sanction put by the Trump Administration, any institution conducting financial transactions with Iran will have to face sanctions. The U.S. hoped such measures would discourage countries from importing oil from Iran, the Islamic Republic’s primary source of revenue. She thus views oil sanctions as a useful tool to cripple the Iranian economy, which may force it to give up its nuclear programme in exchange for the relaxing of sanctions.

Owing to the new sanctions regime both the countries were facing difficulties in payment arrangements, Indian companies were asked to deposit the money for the oil imports in the UCO bank in rupee account so that Iranian companies can use those funds to purchase agricultural products and medicines from India. The Indian government has exempted Indian importers from withholding tax of up to 40 per cent on the purchase of Iranian crude oil. This mechanism made the purchase of oil cheaper and also paved ways for oil transactions in rupees. However, India’s import from Iran is at the US$ 10-11 billion while its export is worth US$ 3-4 billion, the import-export gap is high, therefore to settle deficits in the trade bill. Investments in projects in Iran, like the Chabahar Port, maybe one such mechanism that India could be considering, given that the sanction regime does not target such investments.

Tangible Benefit to Iran

Various reasons have been explained regarding the mutual benefit of the Chabahar port among Iran, India, Central Asia and Afghanistan but one area is exceptionally crucial that is the location of this port. This is the only port in Iran which opens in the Indian Ocean, after years of oblivion finally this port has taken centre stage in the strategic location of the Persian Gulf. However, as mentioned earlier, this port is situated in the Sistan Baluchistan province of Iran, this is the exceptionally volatile province, and Sunni Baloch insurgency is a constant threat to Iran government, as well as ordinary Balochi people, have long been demanding for the independence since Iran and Pakistan have taken its control.

The daunting challenge is the deteriorating security situation in the region. Indian officials believe that Iranian reluctance to move faster on Chabahar may be linked to its anxiety about the troubled Sistan-Baluchistan region and the impetus that external influences brought to the region by a thriving port could provide to this insurgency. Several attacks have been carried out by extremist groups in Chabahar in recent times. Harakat Ansar Iran (HAI), which claimed responsibility for attacks carried out on the Chabahar Port in July 2013, have declared the attacks were meant to harm Iran’s economic interests. Although the insurgency has been contained after the execution of Abdolmalek Rigi in 2010, the leader of the insurgent group Jundullah, the prospects of the insurgency resurfacing again cannot be ruled out, raising the spectre of the port becoming the target of renewed militant activities.

The ongoing insecurity in the region, especially Afghanistan, is also a potential threat to the Chabhar from developing as the viable transit route to Afghanistan and Central Asia. For example, a few reports surfaced that the Taliban has a control on Zanranj-Delaram Highway. Afghanistan Chamber of Commerce and Industries also expressed their concern about the security of the Zanranj-Delaram Highway and Kabul-Kandahar highways.

Chabahar and Afghanistan

Geographically, Afghanistan is a landlocked country. She is surrounded by Central Asian states in the north, Pakistan in the south as well as in the east and Iran in the west. Apart from the radicalism, terrorism and political instability with a long history being in the midst of the great games of powerful states of the day.

The strategic competition for the location of this country has given her a significant amount of economic opportunities. She possesses a lot of natural resources like 60 million tons of copper, 2 billion tons of iron ore, and 1.4 million tons of rare earth elements which includes cerium, neodymium, and lanthanum. It also has a considerable amount of gold, silver, aluminium, mercury, zinc and lithium. The carbonite deposits in Helmand province are valued at $89 billion, with the population of the country at approximately $35 million. Hajigak mines of Bamyan province stock iron and other minerals of $1 trillion worth. Due to less consumption within the country, it also can export her natural resources. An Indian consortium has won the rights of these mines led by Steel Authority of India Limited (SAIL).

Additionally, India plans to construct a 900 km railway which will connect the Hajigak region with Chabahar. The connectivity will operationalise the iron and steel project of around $1.8 billion. From a long time, Afghanistan is dependent upon Pakistan for her trade with other countries. However, due to degraded political relation with Pakistan, Afghan traders have to face a substantial financial loss over time.

Similarly, Afghan-India trade also got hampered due to degraded political relationship between India and Pakistan. Thus in this context, Chabahar port has turn out to be a game-changer, for Afghanistan this port not only allow the trade with India but it will also allow the trade with other nations as this port is economically viable for the Afghan traders. In terms of distance, it is 700 km shorter than Iran’s Bandar Abbas port while 1,000 km closer than Pakistan’s Karachi port.  A back of the fag packet calculation shows that the Afghan businessmen will save 50 per cent of their shipping costs by using Chabahar.

The United States, on the other hand, have acknowledged India’s efforts in the capacity building in Afghanistan and Trump administration has always looked for options to take the U.S. troops out of Afghanistan as soon as possible. Apparently it also has a moral obligation of nation-building which is deterring it from coming out from Afghanistan. Therefore, this is one of the primary reasons that the U.S. made special provisions regarding the development of the Chabahar port.

Riding on the excellent relationships of India and the U.S., no doubt Indians have lobbied in favour of Chabahar and the same can be said about Afghanistan as well and it is also a sane thing to do because if Trump Administration wants to reduce its military burden from Afghanistan, it has to support regional investment in the Afghan economy. Without Chabahar, Afghanistan has to rely on either Bandar Abbas port of Iran or Pakistan’s Karachi Port, in either of the cases Afghanistan has to suffer immensely in the economic front.

Therefore, as mentioned earlier, Bandar Abbas port of Iran is old, and it is not a deep seaport, so the big cargo container unloads at the UAE’s Jabel Ali port, and then those cargoes are loaded in the smaller container ships and then transported to Bandar Abbas port. This arrangement is time-consuming as well as costly and on top it Bandar Abbas port is already seeing a significant increase in traffic.

Pakistan’s Karachi port is the traditional arrangement the Afghans have been accustomed to, and the U.S. cannot be forced to rely on its unpredictable relationship with Pakistan in order to secure resources. Pakistan’s alleged support for the Taliban makes it a disagreeable ally for Kabul. Before completely barring Indian access to overland trade routes, Pakistan imposed regulations in the hopes of encouraging Afghanistan to prioritise Pakistani imports and limit Kabul’s cooperation with New Delhi.  Between 2014 and 2015, Afghanistan’s trade with Pakistan was $2.7 billion, but unnecessary documentation requirements at Pakistani ports as well as erratic closings at the Chaman and Torkham border crossings led the Afghan government to have another look at its options.

Eventually, the series of stringent regulations boomeranged, and trade with Pakistan plummeted to $500 million in 2018 as Afghanistan moved trade to Iranian ports at both Bandar-e Abbas and Chabahar, where 80 per cent of Afghanistan’s cargo traffic now lies. At the same time, Trump administration made it very clear to the Afghans to stay away from the unfair trade or any means which can directly or indirectly help Iran, especially about the opium trafficking.

Conclusion

The Chabahar Port is a go-to deal for all the participating countries. It provides alternative options to Afghanistan other than Pakistan, which is economically viable. Strategically, it provides greater significance to India as well as the US. because it is closer to the Gwadar Port made by China. It will help India to observe Chinese activities in the region. Apart from the mentioned benefits to the participating countries, this port once completed, will have the potential to give some real economic competition to UAE’s Jabel Ali port.