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Iran, India Sign Deal on Development of Chabahar Port

By Nigar Bayramli May 16, 2024

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India signed a 10-year contract with Iran to develop and operate the Iranian port of Chabahar, on May 13, 2024. / IRNA news agency

India has recently sealed a pivotal deal with Iran concerning the operation of the strategic port of Chabahar, providing an alternative route for India’s trade and connectivity in the region.

The agreement was signed between Iran’s Minister for Roads and Urban Development, Mehrdad Bazrpash, and India’s Minister of Ports, Shipping, and Waterways, Sarbananda Sonowal, during a ceremony in Iran’s southeastern port city of Chabahar on May 13, as reported by the IRNA news agency.

Under the new contract between India Ports Global Limited (IPGL) and the Ports and Maritime Organisation of Iran (PMO), the Indian state-run firm will invest approximately $120 million to develop and operationalize the Shahid Beheshti container terminals and general commodity depots in Chabahar Port, located in the province of Sistan-Baluchistan.

This ten-year development contract is an updated version of the initial trilateral India-Iran-Afghanistan Transport and Transit Corridor agreement signed in May 2016. India has been advocating for the Chabahar Port project since 2016 to enhance regional trade, particularly its connectivity to Afghanistan. India initially signed a tripartite agreement with Iran and Afghanistan, but Afghanistan is no longer part of the arrangement following the Taliban’s assumption of power in 2021.

Additionally, India has extended a credit window equivalent to $250 million for mutually identified projects aimed at improving Chabahar-related infrastructure. Earlier commitments from India included a pledge to invest $85 million in the terminal and the supply of six mobile harbor cranes (two of 140 tonnes and four of 100 tonnes capacity) and other equipment worth $25 million.

The implementation of the agreement has faced delays, partly due to Western sanctions imposed on business deals with Tehran. Shortly after India finalized the agreement to operate the Chabahar port, Vedant Patel, principal deputy spokesperson for the US State Department, reiterated the ongoing nature of US sanctions on Iran and the commitment to their enforcement.

“Any entity, anyone considering business deals with Iran - they need to be aware of the potential risks that they are opening themselves up to and the potential risk of sanctions,” he said.

However, in 2018, the US had granted India exemptions for the development of the Chabahar port and the construction of a railway line connecting it with Afghanistan. The US State Department’s 2018 policy had specifically waived sanctions for the Chabahar port.

In response to the US recent warning, Indian Minister of External Affairs S Jaishankar stated on May 14 that the project would benefit the entire region, emphasizing that the US had acknowledged the broader relevance of the Chabahar port in the past. He stressed the importance of communication and persuasion in ensuring everyone understands the mutual benefits of the project.

During a meeting with the visiting Indian Minister of Ports, Iranian Foreign Minister Hossein Amir-Abdollahian described India as a “trustworthy” partner, expressing readiness of various branches of the Iranian government to facilitate the implementation of the Chabahar port deal.

Sonowal, on his part, described the signing of the deal as “important and historic,” signaling a “firm step” by India to establish itself in the global supply chain and maritime sector. He highlighted that the agreement would pave the way for an alternative trade corridor for India, Iran, Afghanistan, and Central Asian countries.

Both India and Iran aspire to transform Chabahar Port into a transit hub for the International North-South Transport Corridor (INSTC), which offers an alternative route bypassing the sensitive Persian Gulf and Strait of Hormuz.

With a discharge and loading capacity exceeding 8.5 million tons, the Chabahar Port is crucial for the INSTC project, which spans over 7,200 kilometers and aims to facilitate freight movement among India, Iran, Afghanistan, Azerbaijan, Russia, Central Asia, and Europe.

Located in Iran’s southeastern province of Sistan-Baluchistan, the Chabahar Port is poised to become a central node for the multi-mode transport project, providing a vital link for trade across continents.