The re-imposition of US sanctions on Iran is the biggest threat to the Chabahar port. Both India and Iran must muster enough political will and economic rationale to justify its worth
Amid escalating tensions between the US and Iran, Mohammad Javad Zarif, Iran’s Foreign Minister, made a brief visit to New Delhi on May 14 to hold talks with his Indian counterpart Sushma Swaraj on the impact of US sanctions on his country’s oil industry. His trip came soon after he visited the United Nations. Post his visit, Zarif gave an interview to Fox News Sunday, which is being seen as an attempt to reach out to US President Donald Trump, whose disdain for the media as peddlers of “fake news” is not hidden. Zarif then headed to Qatar to attend a ministerial meeting of the Asia Cooperation Dialogue and then to Russia and Turkmenistan. While Zarif was in Russia, President Hassan Rouhani announced that Iran would cease to abide by certain nuclear limitations but stopped short of violating its 2015 nuclear deal. In this context, it is important that the fourth trip of Zarif in this leg is to India and the third after the US cancelled our sanctions waivers for import of Iranian oil.
During his visit, Zarif held discussions with Swaraj on issues of mutual interest, including the situation in Afghanistan, the development of Chabahar port, cooperation in various fields and regional and international issues. Regarding the ongoing US-Iran tensions, India made its stand clear that any decision on oil purchase from Iran will have to wait for the new Government in Delhi. But here, we will focus on issues concerning the implementation of the Chabahar port project — those as a result of the latest round of sanctions, though the port is out of the immediate purview of bans, and in general.
To clear the air, the purpose of the Chabahar port to be developed by India is entirely different from the Gwadar port in Pakistan being developed by China. The Chabahar is strictly an economic project and not a not a strategic-military one. On the other hand, China does not need Gwadar to trade with Central Asia or Russia — it has shorter land routes to conduct business. Moreover, the “String of Pearls” theory on potential Chinese intentions in the Indian Ocean Region isn’t taken seriously by either the bureaucracy or in think-tank circles. It is seen as an American attempt to sow India-China tensions and the term itself is coined in a US Army War College paper.
Though the Chabahar project is a potential game-changer as it offers a getaway to Central Asia and Europe but as of now, its potential remains largely untapped. Additionally, the US sanctions regime has not just delayed the project since the early 2000s but has also been stifling its growth. It is going to take a few years for Chabahar to register success and it is, perhaps, too early to sing paeans about it. To cite an example, the ambitious plan suffered a blow with manufacturers shying away from supplying essential equipment like cranes and forklifts for the construction of the Iranian port even when US sanctions had not kicked in late last year. Indian promises to delivery ratio, too, have been dismal during this Government’s tenure. Further, while greater funds were promised, much smaller amounts have been released.
This writer spoke to Mohsen Shariatinia, an assistant professor of regional studies at Shahid Beheshti University in Tehran, when he said that the “Chabahar is a mega project but it’s too early to judge the success or failure of this project.” Speaking about the Mumbai-Mundra-Kandla-Chabahar-Bandar Abbas shipping line, that connects the Indian city of Mumbai to Iranian southern port cities of Chabahar and Bandar Abbas and which was inaugurated only recently, he said that the main problem with this project was about financial resources. The Rouhani administration does not have enough money and the private sector has no economic motivation to invest in this line. If the two countries can reach an agreement on financial resources, a major issue would be resolved.
Shariatinia added that beyond the Indian Government, creating the economic justification of Chabahar for Indian companies is also very important. If they can access Central Asian and Russia markets via the International North–South Transport Corridor (INSTC), they can motivate investment and participation for this project. The future of Chabahar will depend on the political will of the Iranian and Indian Government on the one hand and economic justification of Chabahar for Indian and Iranian companies on the other.
Shariatinia added that in his assessment, the importance of the Russian economy is much more than Central Asian economies. If one takes a look at recent developments in Central Asia, one will notice that China is the biggest player and that there is no crucial capability or opportunity within the central Asian economy to be filled by India, Iran or other countries because China is already a dominant country in this geo-economic scene. The Russian market, on the other hand, has a huge potential for Indian businesses and if India can connect its rising economy with another big economy like Russia, it will be a great opportunity to enhance cooperation between Iran and India along the Chabahar. In my assessment, connecting just Indian and Russian economies will create enough economic justification for INSTC and Chabahar project.
This writer spoke to Behrooz Aghaei, ports and maritime director general of Sistan and Baluchistan province. Chabahar port comes under his jurisdiction. He said that despite what appears at first glance, the “Chabahar port’s exemption from sanctions” granted by the US is not going to help the people of Afghanistan. In fact, it increases transit expenses of its commodities by imposing sanctions on ports (which could have been better alternatives economically) and puts further restrictions on Afghan merchants. Analysis reveals that imposing sanctions on Iran’s ports as the most secure and less expensive routes for Afghanistan implies imposing sanctions on Afghanistan itself.
Aghaei says that as far as India is concerned, the significant point is that Indian commodities that transit to Afghanistan don’t have enough trade volumes to rationalise marine and road transportation expenses. Bearing in mind the trade volume of Afghanistan, Russia and CIS countries, which altogether is more than 16 million tonnes, and the insignificant share of Afghanistan, it can be said that without making possible the transportation of all India’s merchandise to the above-mentioned countries through Chabahar port, the so-called exemption of this port does not make any noticeable change in India’s trade. Therefore, Chabahar port’s exemption will only be a competitive advantage for India if all our merchandise for Afghanistan, Russia and CIS countries could be transported through the port without any restriction on banking transactions and insurance.
Aghaei adds that the noteworthy point about Afghanistan is that the exemption of Chabahar port will only be useful if there is no prohibition on vessels carrying merchandise entering and leaving it as well as on commercial transactions of cargo owners, merchants and shipping lines. Particularly banking transactions should be done without limitation.
The US may not agree to it. Its aim to provide a sanctions waiver to Afghanistan is to allow imports into that country. It is not concerned with the profits made by the Chabahar port. But it definitely will have an impact on the growth of the port. While Iran is under sanctions, Chabahar can never realise its full potential of being a route for Indo-Russia trade and trade to Europe via INSTC. Gwadar got a headstart over Chabahar, which was planned earlier, due to the US-Iran tensions and sanctions. Will we see Chabahar lag behind in trade due to it?
(The writer is an independent journalist working on cyber security and the geopolitics of India’s neighbourhood, focussing on Pakistan, Afghanistan, Iran and Bangladesh)
