Chabahar Port: building a gateway to prosperity in south-eastern Iran

Joe Baker 5 April 2018 (Last Updated March 29th, 2019 09:38)

Iran has allowed India to take over part of the strategic Chabahar Port, allowing the country to bypass Pakistan to reach markets in Afghanistan and Central Asia. The long-awaited deal is expected to enhance regional connectivity, but geopolitical challenges remain.

Chabahar Port: building a gateway to prosperity in south-eastern Iran
Iran’s Chabahar port provides direct access to the Indian Ocean, one of the most heavily trafficked sea-based trade routes in the world.

For more than 30 years, Chabahar Port has been Iran’s sole ocean gateway to the Gulf of Oman. Situated on the bank of Iran’s Sistan and Baluchestan Province, its strategic location has made it a focal point for expansion for the country. Now, with the assistance of nearby nations, the port seems to be on the path to meeting its true potential.

In May 2016, India signed an agreement to develop two berths in Chabahar Port, as part of a trilateral pact with Afghanistan and Iran. In return, ports along the western coast of India will be linked with Chabahar, providing a gateway for Indian goods and allowing them to pass through Iran into Afghanistan and beyond.

Fast forward to 2018, and the first expansion of the port has been inaugurated. Iran has leased operational control of Shahid Beheshti – the port’s first completed phase – to India for 18 months.

As the port makes progress to increase its capacity even further, Indian media outlets and government officials have consistently highlighted the benefits of the project for connectivity and international relations. Nevertheless, geopolitical challenges and India’s propensity for bureaucratic struggles still stand in the way.

Enhancing regional connectivity

Situated outside the Strait of Hormuz, Chabahar Port is safe from attempts by hostile powers to block trade via this route. It also provides Iran with direct access to the Indian Ocean, one of the most heavily trafficked sea-based trade routes in the world.

Developing Chabahar will allow Iran to receive larger ships, as well as boost employment and strengthen the Iranian economy.

“Landlocked Afghanistan will no longer need to depend on Pakistani ports.”

“The location of the port makes it attractive to the maritime industry [because] you don’t have that many warm water ports in the northern reaches of the Indian Ocean,” says Michael Kugelman, deputy director of the Asia Program at the Washington-based Woodrow Wilson Center.

Nevertheless, the significance of this development for India cannot be overstated. Historically poor relations with neighbouring Pakistan have meant that it has not been able to operate land-based trade routes through the country, hindering its connectivity with markets in Central Asia.

Chabahar will effectively solve the problem by serving as a gateway for India, which the country will bolster with investment on road and rail infrastructure in Iran.

“India has long sought better access to markets in central Asia, particularly gas markets, but it’s really been hamstrung in that effort to access those markets because of obstacles in Pakistan,” says Kugelman.

Meanwhile, landlocked Afghanistan will no longer need to depend on Pakistani ports, which have become a more unreliable option due to deteriorating relations between Islamabad and Kabul. In February, Asia Times reported that Afghanistan had already shifted 80% of cargo traffic away from Pakistan’s Karachi seaport to Iran’s Bandar Abbas and Chabahar ports.

Earlier in March, the Afghan Institute for Strategic Studies (AISS) released a report highlighting the significance of developing Chabahar. Researchers argued that the project would strengthen relations, as well as increase trade and transit ties between the three countries. According to AISS, India’s trade with Central Asia could increase by $400bn to $500bn in a matter of years.

Tensions with the US

So why has it taken so long for the three countries to capitalise on this opportunity? India and Iran did initially form an agreement to develop Chabahar Port in 2003, but since then the project has been hamstrung by geopolitical factors – most notably, the US’s shaky relationship with Iran.

Stretching back to the 1980s, the US has continually used sanctions to influence Iran’s policies and undermine its economy. In 2006, the UN Security Council initiated what would become a steady stream of restrictions on Iran with Resolution 1696, which demanded Iran suspend all activities related to uranium enrichment.

“Stretching back to the 1980s, the US has continually used sanctions to influence Iran’s policies”

While there has been little in the way of vocal opposition to Chabahar from the US Government, the country’s overall scepticism of projects that help fund Iran have put India in a difficult situation.

“India is always trying to strike a difficult balance between maintaining its strong and deepening relationship with the US, while at the same time addressing its own economic and energy needs which entails the need to maintain a good relationship with Iran,” says Kugelman.

The Chabahar project was revived with renewed vigour after the Obama administration waived sanctions on Iran in January 2016. Nevertheless, tensions have since reignited, with President Donald Trump threatening to throw this waiver under the bus if Iran fails to implement radical changes to its policies.

In March, the Afghanistan Chamber of Commerce and Industries (ACCI) told TOLOnews that US sanctions against Iran had slowed progress at Chabahar.

“Although we can send suggestions to our international partners, we are not sure that such issues against Iran will be resolved. Because these decisions are made by the big countries,” said ACCI’s international relations department head Azarakhsh Hafizi.

Pakistan and China

While India’s investment has been the main thrust behind the  Chabahar project, Iran has been pushing for investment from other parties. In March, Iranian foreign minister Javad Zarif declared that Tehran had invited Pakistan and China to participate in the Chabahar project.

This move has caused a stir in India, which has effectively been developing the port as a response to developments along the China-Pakistan Economic Corridor (CPEC). From a maritime perspective, CPEC infrastructure projects will link up with Pakistan’s Gwadar Port, located barely 72km away from Chabahar.

“Consignments of wheat have been passing from India to Afghanistan through Chabahar Port.”

Whether China will look to invest in Chabahar as means of bolstering CPEC activity in the region is still unknown. Nevertheless, Kugelman says Pakistan would be unlikely to involve itself in Indian affairs.

“It would take a lot for Pakistan to insert itself in what is one of India’s most prized transport corridor projects at this point in time,” he says.

“If these countries could find a way to set aside their political differences and essentially use these projects as confidence-building measures to help strengthen connectivity in a broader region that largely lacks that very thing, that would be great. But I just think that the levels of mistrust and the political constraints are just too large to allow this type of cooperation to occur.”

Since November last year, consignments of wheat have been passing from India to Afghanistan through Chabahar Port, ostensibly proving the effectiveness of the model. Nevertheless, Kugelman says that the country’s tendency to take its time with major infrastructure projects, in combination with geopolitical factors, means it is unlikely that the port will be fully operational by the end of the year.

“[India is] notorious for having a rather inefficient, unwieldy bureaucracy that really struggles to implement major projects, including infrastructure projects, and you see this across the board,” he says.

Nevertheless, Kugelman believes that while problems that have plagued Chabahar’s development are still prevalent, the will of the countries involved to see the project through has never been stronger.

“[Indian] Prime Minister Modi has clearly taken a personal interest in moving forward with this project, and I think the Iranian leadership feels the same way,” he concludes.