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A Eurasian Vision for Chabahar: How will Chabahar become an International Transit Hub?

At a time when the geopolitical landscape of Asia Pacific is changing dramatically after the Coronavirus Pandemic, West Asia’s theater as the heartland of the world is becoming more critical to new great power
October 2020
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Masoud Hamyani

 At a time when the geopolitical landscape of Asia Pacific is changing dramatically after the Coronavirus Pandemic, West Asia’s theater as the heartland of the world is becoming more critical to new great power competitions as a series of events like the laying of the Chabahar-Zahedan railway and the exchange of the draft of a strategic agreement between Iran and China sparked the controversial debate by Indian media on the trajectory of Iran-India relationship in coming years.

While Iran has reiterated its commitment to its shared vision with India on Chabahar as an international transit hub for the sake of regional economic integration, a cursory glance at the opinion section of Indian media may suggest that Indian opinion-makers' narrative on Chabahar has put the security dimension weigh of this port above the commercial benefits and in this context, Iran-China partnership has been interpreted as India's loss.

Moreover, on Iran-China strategic deal, some have questioned this move and exclaimed that Iran is embroiled in a debt trap diplomacy, ignoring the fact that Iran is a country which can sit at the negotiation table with the great powers and meanwhile safeguard its interests, as manifested in the JCPOA talks.

How does Iran think about Asia and India?

Since Iran was misread by some analysts in Indian strategic circles, it is imperative to look at India from Iran's perspective again. For many years in Iranian academic circles, it has been argued that despite the geographical proximity and civilizational ties with the East, Iran disproportionally has put more energy on the West. In fact, Iran’s “Look East Policy” was laid out with respect to the "Asian Century" and gained its momentum in recent years, despite the initial frustration in the first decade of the 21st century on the support of Asian partners for UNSC resolutions. Iran's new "Look East Policy" fructified gradually after the 2008 global financial crisis as China openly became an alternative source of investment and technology, especially at the time when the trade is being weaponized by the US different administration.

Similarly, Iran's calculus on India is that of an alternative source of trade and investment. While India itself is also looking for technology and investment, Chabahar could be seen as an arc of a wide range of partnerships between Iran and India within the Great Eurasia where their interests are converging.

Chabahar as an arc of partnerships

Currently, Chabahar port consists of two-port complexes, named Shahid Kalantari port and Shahid Beheshti port. The first terminal in Chabahar is also handling about 2.1 million tonnes of cargo per year and the latter terminal is to reach 8.5 million tonnes of capacity soon.

Flourishing of Chabahar depends on connecting to all markets across Eurasia as the port enjoys the special strategic status and it is the gateway to Afghanistan, Central Asia, Caucasia, Southwest Asia, Russia, and Europe in such a way that Prime  Minister of India, Narendra  Modi, coined it as "Golden Gate".

Aiming to provide more new markets for Chabahar, Iran has offered several commercial incentives in the areas in the vicinity of Chabahar in an aim to attract foreign investments; in this line, a Free Trade–Industrial Zone (FTZ) has been established. The Chabahar FTZ is divided into nine functional zones, with 26% of the territory being allocated to the trade and service sector, 49% to industry, and 25% to tourism and residential purposes.

As far as India is concerned, Chabahar as a deep seaport and commercial hub offers an attractive opportunity for all the regions, especially India. In the short-term, the port would strengthen India’s trade with Iran by lowering transportation costs. Given India's growing appetite for energy in different fields, Chabahar FTZ could turn into the largest industrial complex especially on the downstream oil and gas and petrochemical sector in the region. The port would also help the Indian agriculture sector to obtain cheaper access for fertilizers and other commodities from Iran.

In the long-term, financing and developing Chabahar as a hub for international transportation in the region would help India become more integrated into the Eurasian Union's economy. But at the first step, the regional trade arrangements need to be facilitated, as P. Stobdan, former envoy of India to Kazakhstan, has suggested that: "the proposed Free Trade Agreement (FTA) between India and the Eurasian Economic Union (EAEU) could facilitate an unimpeded flow of raw materials as well as an inflow of capital and technology to Eurasia through new industrial infrastructure along Chabahar and INSTC routes"

Iran's Infrastructures and Initiatives:

There are some existing infrastructures which can effectively facilitate India's access to the regional markets, including a modern highway which has been built to connect the Chabahar port to Zahedan(680-km) and further from Zahedan to Mashhad (950-km) which is located nearby the Zaranj-Delaram road, the latter being built by India for connecting this route to Afghanistan.

Iran has built the gas pipeline from Asalouyeh to Iranshahr, close to Chabahar at a distance of about 300 km by road and also a petro chemical complex spread over 3000 hectares of land which will provide access to natural gas feedstock. These facilities can revive India's proposed plan to spend $20 billion on developing energy and petrochemical projects at the port of Chabahar.

With this existing infrastructure, the Chabahar is flourishing day by day even during the Corona Pandemic. The Government of India to encourage the private sector has extended %40 discount by JNPT and DPT on cargo related charges as well as vessel-related charges for cargo in excess of 5000 tonnes for goods moving from/to Shahid Beheshti Port.

In a significant step, Iran has worked on developing its Bandar-e-Jask port project as a second oceanic port close to Chabahar which will offer a relatively risk-free shipping transit route to Iran’s key markets in the East, especially China and India. In addition, Jask will also be used to move crude oil feedstock supply to petro-refineries and petrochemical plants, with a view to increasing these exports as well to Asia. Having huge oil storage capacity available just a short direct sea journey away from India means that it is time to realize the construction of the Iran-India oil and gas pipeline. India also can use Jask port facilities to store its strategic crude oil reserve to meet emergency needs in case of disruptions in supply.

Since the Railway is key for greater Connectivity and access to the markets beyond Iran and Afghanistan, the proposed Chabahar-Iranshahr-Zahedan-Mashad Railway Corridor is the most ideal route to connect the port to Sarakhs on the Turkmen border and beyond to the Central Asian railway networks. Currently, this 610-kilometer north-south railway (Chabahar to Zahedan) is under construction by Iran on its own fund.

Iran also has signed an MOU with Afghanistan and Tajikistan to construct railway lines, water, and energy transmission lines and with the operationalization of railway infrastructure which is connecting Herat in Afghanistan to Khaf in Iran, it would connect Herat with Mashhad – Tehran and Bandar Abbas through railway line.

- Regional's Arrangements and Endeavors: 

Recently Russia reported that it is planning to build a port on the Caspian Sea near the city of Lagan to connect with operating ports of Iran, India, and Kazakhstan which can increase trade in the Caspian region and beyond.

In terms of software infrastructure and regulations, all cargo transit through Chabahar port is based on rules and regulations of the TIR Convention currently. In addition, a multimodal transport agreement which is called  Ashgabat Agreement is an important legal instrument that will facilitate regional transportation of goods between Central Asia, Iran, the Persian Gulf, and India.

Trilateral Chabahar Port Agreement between Afghanistan, India, and Iran is another initiative that could further cover Central Asian countries. The Second Meeting of the Follow-up Committee for the Implementation of Chabahar Port Agreement was held in December 2019 with the following decisions:

-To hold more Chabahar Day events in India and Afghanistan to promote the Port in 2020.

-To extend discounts to all incoming and outgoing cargo at all arrival and departure points of ports along with determining routes in three countries of Afghanistan, India, and Iran.

-To put in place suitable banking arrangements to facilitate trade and transit through the corridor.

-Welcoming the addition of Mormugoa and New Mangalore ports from India as part of the main routes for the said corridor.

-To undertake a study on the determined routes from Indian ports to Chabahar port and then to Afghanistan as well as on taxes, tariffs, charges, and other procedures and regulations at ports, customs, checkpoints, etc.

-To share details of respective nodal points /logistics service providers.

 

Chabahar and Re-Energizing the INSTC.

Chabahar port development plan and its inclusion as a beneficiary to the free trade zones (FTZ) advantages will be momentum in the development of the International North-South Transport Corridor(INSTC) and consequently international trade in the region. The Chabahar-Zahedan railway also is a part of INSTC which provides an opportunity for India to access not only to Central Asia but also to Russia, Caucasia, and Europe.

The INSTC Corridor itself is another axis of partnership. This connectivity project would be a game-changer in the region if cultivated properly. In addition to increasing the volume of bilateral trade, this corridor can be an attempt to address regional integration and it is a strong cause for a regional initiative.

The INCTC will be 40 percent shorter and 30 percent cheaper than the traditional route taken through the Suez Canal and it could help India, Iran, Central Asia, and Russia to boost up their bilateral trade. INSTC is a multi-modal transportation route linking the Indian Ocean and the Persian Gulf to the Caspian Sea via Iran, and onward to northern Europe via St. Petersburg in Russia.

The way forward:

Iran and India should see the Chabahar port through the bigger picture of Great Eurasia and this port could function as a focal point of regional supply chains or a consumer-producer network across Eurasia. To realize this ambition, the following steps are essential: 

- Comprehensive partnership between Iran and India with the Eurasian Economic Union.

-Introducing selected partner banks and Insurance Companies in order to offer a regional network for solving the cross border payments problems.

-The proposed Preferential/Free Trade Agreement (PTA/FTA) between Eurasian countries.

-Encouragement of participation of the private sector in all connectivity projects.

-Digitization of documents and designation of a single multi-modal operator, single tariff rate, and common border crossing rules among the member countries.

-Financing of the Chabahar and INSTC related projects by Asian Development Bank and the BRICS New Development Bank (NDB).

 

(The opinions expressed are those of the authors and do not purport to reflect the opinions or views of the IPIS)

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