Setting the precedent of surging ahead in the pursuit of overcoming the barriers of connectivity, India formally took over operations of the Chabahar port on December 24th. The historic moment which can be reckoned as major foreign policy milestone have boosted India’s efforts of rebuilding war-torn Afghanistan. India’s joint venture company, India Ports Global company began functioning from its offices at Shaheed Behesti Port Chabahar. Soon Joint Secretaries of all the three countries-India, Iran and Afghanistan held first follow-up committee meeting for implementation of the trilateral Chabahar agreement. They agreed on the routes for trade and transit corridors between three countries and finalisation of the protocol to “harmonise transit, roads, customs and consular matters”. They even discussed measures to decrease logistics costs. Second round of meeting will be held on February 26th 2019 to promote and popularise the port.

Pakistan denied land access to Indian goods crippling India’s trade with Afghanistan and Central Asian countries. Ever since India has been exploring ways to bypass Pakistan. Giving a major fillip to India’s connectivity, Prime Minister Modi on his visit to Iran signed trilateral agreement for Establishment of International Transport and Transit in 2016. India even signed a MoU with EXIM Bank which extended a line of credit of $150 million for refurbishing the port and $85 million towards development of two berths at Chabahar.

In 2003 NDA-I regime headed by Prime Minister Atal Bihari Vajpayee realised the strategic significance of the Chabahar, the only Iranian port along the Makran coast which has direct access to Indian Ocean. Indian government subsequently initiated talks with Iran government. But with Iran coming under sanctions regime in 2005, talks on Chabahar talks took a back seat. Incidentally, against the backdrop of Iran signing a Joint Comprehensive Plan of Action (JCPOA) or widely known Iranian Nuclear Deal with P5 countries and Germany, when all economic sanctions were lifted on Iran, India finalised the Chabahar deal. After President Trump unilaterally pulled out from the JCPOA in May 2018 a fresh round of US sanctions kicked off from November 4th. A gloom of uncertainty loomed over Chabahar port agreement. Subsequently India held talks with American officials seeking waiver of port from US sanctions.

India relentlessly worked towards reconstruction of Afghanistan by offering unstinted financial support, training Afghanistan security forces and in capacity building. Last year when Afghanistan was hit by drought India shipped 1.1 million tonnes of Wheat through Chabahar port. This move not only paved way for operationalisation of the port but expanded the trading opportunities with land-locked Afghanistan. Pakistan by refusing transit of Indian goods through its territory tried to consolidate its control over Afghanistan through Taliban. India steadily worked towards exploring the alternate access to Afghanistan through Chabahar. Simultaneously, India opened air-cargo corridor to Afghanistan to overcome Pakistan barrier for trade. In 2017, Iran offered India a proposal to manage phase I for two years, subsequently Tehran gave India approval for operating two berths and few terminals in Phase II for ten years. In the meanwhile, China intensified its efforts to develop the Gwadar port 76 nautical miles from Chabahar.

Going by the pace of Chinese construction, observers believed that Chabahar would face stiff competition from Gwadar located in Baluchistan province of Pakistan. Back then Union Minister for Shipping, Road Transport and Highways Nitin Gadkari announced that Chabahar operationalisation would start by end of December. America which is fighting war against in Afghanistan for the past 17 years appreciated India’s efforts. Trump acknowledged India’s role in his South Asia strategy. Last month America announced its exemption for Chabahar port and added that, “it relates to reconstruction assistance and economic development of Afghanistan. These activities are vital for the ongoing support of Afghanistan’s growth and humanitarian relief”. India’s fervent efforts finally bore fruit and formal operations began this week.

Chabahar besides providing alternate sea access to Afghanistan will play a pivotal role in bolstering India’s attempts to buttress connectivity with Russia. India is planning to construct a railway line to Zahedan which can connect to International North-South Corridor. Currently Indian shipments to Afghanistan are transported on the Delaram-Zaranj road constructed by New Delhi. Road from the Afghan-Iran border to Chabahar already exists. Afghan Permanent representative to UN welcomed America’s decision, “The Chabahar port remains an important gateway for providing commercially viable access to the sea linking the Indian Ocean with Afghanistan, Central Asia and beyond. In this regard we appreciate the collaboration and flexibility of our strategic partner, the United States to work with Afghanistan, Iran and India towards exempting the port from its sanctions”.

Challenges

India’s venture in the Gulf region through which nearly 70% of the imports flow to the rest of the World is a real game changer. India leasing operationalisation of Chabahar for a decade from Iran at the height of US-Iran rivalry is replete of several challenges.

India Ports Global (60:40 joint venture between Jawaharlal Port Trust and Deen Dayal Trust, Kandla) is a private entity. Now government of India is slowly obtaining shares of the company, otherwise the private company would have faced the threat of getting black listed for doing business with Iran as per American sanctions. In 2016, Indian Ports Global signed an agreement Aria Banader Iranian port to run the container and multi-purpose terminal at Shaheed Behesti port. Iran even demanded a Euro-denominated bank guarantee in 2016 to generate minimum business at the port. Since fresh round of US sanctions, Iran has come down. As per latest estimates the port is assured of annual business worth $22.95 million. Weeks before final operations are to begin at Chabahar, armed Sunni-group Ansar a-Furquan carried out a suicide bomb attack that killed two people and left 43 injured. This reminded India of complex discord in the region. Besides the exemption on Chabahar port, America sanctioned waivers to eight countries including India for importing oil from Iran till March 2019. India prefers Iranian crude for its 60-day credit, free shipping and insurance. Iran is the largest supplier of oil to India.

To overcome sanctions barrier, India and Iran have signed an agreement on November 2nd for oil payment in rupees and 50% of these funds had been earmarked for exports. India is exploring the possibility of similar payment mechanism with Russia, Venezuela. Iran couldn’t risk the possibility of zeroing of imports from Iran considering its ever-increasing demand for oil which make up for 83% of India’s total imports. Beside energy security good ties with Iran are extremely important for India to over Pakistan barrier and to bolster its trade and commerce with Chabahar serving as the connectivity hub.

Indo-Iranian Ties

India’s ties with Iran are several centuries old. In contemporary times strengthened the North Alliance to overthrown the Taliban regime in Afghanistan. Iran, western neighbour of Pakistan is always at logger heads with Islamabad rooted in sectarian differences. Going by the old logic of enemy of an enemy is a friend India renewed friendly ties Iran to hedge against Pakistan in this multipolar world.

Despite the convergence over Afghanistan issue in 1990s there are several irritants in Indo-Iranian relations. In 2005, India supported the International Atomic Energy Agency report backed by American at the UNSC leading to imposition of multilateral sanctions against Iran for its stealth nuclear infrastructure and nuclear ambitions. Angered by India’s stand, Iran cancelled LNG exports to India. Indian Space Agency, ISRO launched an anti-Iranian Israeli spy satellite in 2008. India and Iran had serious differences over the ONGC explorations in 2010 and the much-touted oil pipe line between India and Iran never took off.

On the other hand, Iran extended financial support to Kashmiri insurgents fighting government of India during the 1987-elections. Similarly, in 2012 Iran is alleged to have sponsored attacks against Israeli diplomats in New Delhi. While Iran stayed away from making an issue out of strengthening Indo-Israel relations, India never interfered in sectarian Iran-Saudi Arabia rivalry in the Gulf region. Both countries did tough balancing act, made several adjustments to prevent relations from deteriorating beyond point of no return.

Notwithstanding the sanction regime prior to the finalisation of JCPOA, during Obama regime, India continued to import oil from Iran by making payments in rupees. India thus made every effort to sustain the energy partnership. But now the precarious Indo-Iranian relations are challenged by the burgeoning US-Iran confrontation.

Geopolitical Ramifications

Unilateral withdrawal of American from the JCPOA and subsequent imposition of sanctions has left the country in a lurch. Prospects of a slippery financial situation frustrated the Iranian public who have been bearing the brunt of growing inflation, stalled incomes and unemployment. Protests erupted across the country. People rebelled against the Hassan Rouhani government that painstakingly negotiated nuclear deal with the west. Fundamentalists and Iranian clergy lashed out at America for reinstating second round of sanctions on Iran. Trump’s relentless attacks on Iran pushed into Russian orbit. Iran and Russia having fought Syrian on the same side are now seeking to strengthen their ties. Given, Iran’s importance for energy security and strategic geographic location in its global connectivity initiative, China ramped up cooperation with Tehran. Javad Zarif, foreign Minister of Iran, invited China to invest in Chabahar before unilateral American sanctions. Considering the ongoing the trade conflicts between China and America, Chabahar wouldn’t have be granted exemption had China invested in the port development.

On the contrary, pestering Afghan war is making America desperate. Trump administration is losing patience. It openly castigated Pakistan for failing to rein in on Taliban. Unlike in the past when Iran and Russia were on the opposite sides, Tehran is now on same page with Russia, China and Pakistan with respect to Taliban. Indian interests find congruence with those of America with respect to Afghanistan. Essentially Trump’s disruptive foreign policy decision and growing rift with Iran steadily changed the geopolitical power equations.

Win-Win Scenario

By seeking waiver of sanctions, India asserted the strategic importance of Chabahar port in its efforts to revive war-torn Afghanistan and for enhancing prospects of trade and commerce with Central Asian countries. Through operationalisation of port, India ensured that Iran could partake some economic returns providing much needed succour. In the process, New Delhi sent a message that despite its robust defence cooperation and growing ties with America, India will not make comprises on its strategic interests.

While Iran might be miffed by India cutting the oil imports from Iran to zero by March end, relentless anti-Iran campaign by America will increase India’s leverage. Iran will be forced to expedite the conclusion of agreement for use of local currencies in trade. This can prove beneficial for India’s agricultural exports as well. Incidentally, India and Iran are close to finalisation of Preferential Trade Agreement (PTA) that would reduce tariffs on identified 80 to 100 products purchased from other country.

Chabahar is India’s first foreign port investment which has potential to shore up India’s trade potential. This is a huge opportunity to Iran as unlike the Bandar Abbas port which opens into Gulf of Hormuz, Chabahar is a deep port and opens directly into Indian Ocean.

In the first week of December, in response to Iran’s test firing of a medium range-ballistic missile capable of carrying multiple war heads, America deployed Nimitz class aircraft carrier USS John C Stennis as a deterrence and task force that can support America’s fight against IS in Syria and war in Afghanistan. Iran had also deployed an anti-aircraft stealth destroyer in Straits of Hormuz. Thus, it its maiden foray into the Middle East, India will inadvertently witness and experience the intense confrontations in the region.

Disclaimer: The opinions expressed within this article are the personal opinions of the author. MyIndMakers is not responsible for the accuracy, completeness, suitability, or validity of any information on this article. All information is provided on an as-is basis. The information, facts or opinions appearing in the article do not reflect the views of MyindMakers and it does not assume any responsibility or liability for the same.