On Monday, among other agreements with Iran, Prime Minister Narendra Modi signed a deal to develop the Chabahar port for which India will extend $500 million. The historic pact makes Chabahar the first foreign port which India is involved in developing to such a large extent.

Apart from the bilateral agreement between India and Iran, a trilateral transit and trade corridor deal was also signed by India, Iran and Afghanistan which would ensure easy movement of goods between the three countries, bypassing Pakistan.

In this picture released by the official website of the office of the Iranian supreme leader, Supreme Leader Ayatollah Ali Khamenei, right, speaks with Indian Prime Minister Narendra Modi during their meeting in Tehran, Iran, Monday, May 23, 2016. A portrait of the late Iranian revolutionary founder Ayatollah Khomeini hangs on the wall. (Office of the Iranian Supreme Leader via AP) In this picture released by the official website of the office of the Iranian supreme leader, Supreme Leader Ayatollah Ali Khamenei, right, speaks with Indian Prime Minister Narendra Modi during their meeting in Tehran, Iran, Monday, May 23, 2016. A portrait of the late Iranian revolutionary founder Ayatollah Khomeini hangs on the wall. (Office of the Iranian Supreme Leader via AP)

Another pact was signed to set up a 0.5 million tonne aluminium smelter plant by state owned NALCO. Further, India would be involved in the creation of a railway line linking Chabahar with Zaranj in Afghanistan. This will give India easy access to four major cities of Afghanistan — Kandahar, Kabul, Mazar-e-Sharif and Herat.

Location

The Chabahar port is situated in South Eastern part of Iran, and on the northern coast of Gulf of Oman. It is surrounded by Afghanistan in the North, Pakistan in the North-East and India in the East. It is the only Iranian port with direct access to the ocean. The location of the Chabahar port is of strategic importance to India in linking trade routes from the Indian Ocean to Afghanistan, Central Asia and also to Europe; thereby avoiding a land route through Pakistan.

India’s interest in Chabahar since the 1990s

Relations between India and Iran took off in the 1990s, when the two countries came together to support the Northern alliance in Afghanistan against the Taliban. Since then, there have been persistent, but slow efforts at boosting economic ties between the two countries. One of the largest suppliers of oil to India, Iran has always been of huge strategic importance to the country despite international pressures to halt friendly relations between the two sides.

The Chabahar port was partially developed by India in the 1990s. Since the partition of the country in 1947, India’s trade access to Afghanistan has been thwarted by Pakistan. While no Indian goods can move to Afghanistan through Pakistan, only a trickle of goods from Afghanistan can reach India. Trade interests in Afghanistan and in Central Asia, made it imperative for India to look for an alternative route, which was provided by Chabahar.

Tehran: Prime Minister Narendra Modi inspects a guard of honour at Mehrabad airport in Tehran on his two days visit in Iran on Sunday. PTI Photo by Shahbaz Khan Tehran: Prime Minister Narendra Modi inspects a guard of honour at Mehrabad airport in Tehran on his two days visit in Iran on Sunday. PTI Photo by Shahbaz Khan

In 2003, the then Prime Minister Atal Bihari Vajpayee had announced the decision to build a port at Chabahar giving India access to Afghanistan and Central Asia. However, sanctions applied on Iran by Western countries made it difficult for India to make progress in developing the project. The sanctions were lifted on January 16, 2016, opening up an opportunity for India to once again concentrate efforts on enhancing economic ties with Iran.

The strategic importance of Chabahar for India grew further when China started developing the Gwadar port in Pakistan, thereby providing a trade route between the Western province of Xinjiang with the Arabian sea.

International Response

The strongest pressure against strengthening relations between India and Iran has been from the United States. Since 2002, fear of developing nuclear facilities in Iran had resulted in economic sanctions being placed on the country by the US and EU. The US had been persistent in their attempts to stop India from importing oil from Iran and furthering economic ties. The US pressure gained further currency when India signed the India-United States Civil Nuclear Agreement.

However, citing strategic autonomy and necessity to keep the country’s interests first, the Indian government decided to not join the US-EU forces in enforcing sanctions on Iran. Defying international pressure, India used the Chabahar port for the first time in 2012 to transport 100,000 metric tonnes of wheat to Afghanistan as part of humanitarian aid. However, the economic sanctions on Iran made it difficult for India to develop Chabahar to the extent necessary.

In early 2016, Iran agreed to cut down on the scope of its nuclear activities. This was followed by the economic sanctions on Iran being lifted, thereby widening the scope of relations between India and Iran.

Way ahead

At present, majority of Iran’s seaborne trade is handled by the Bandar Abbas port. Chahbahar has much higher trading and shipping capacity than Bandar Abbas. The decision of the Indian government to invest in the Chahbahar port marks high trade prospects for both the countries.

Apart from creating an easy passage between India and Afghanistan circumventing Pakistan, the port would also eventually enable better trade relations with Europe. The trade route would cut down cost and time of trade with Europe by up to 50 per cent.

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