India and Iran Ink Decade-Long Chabahar Port Management Agreement

Amb Anil Trigunayat

For India the first ever contract for managing the foreign port is a significant development even as several Indian companies have been engaged in developing ports in Oman, Myanmar and Israel and elsewhere. And this 10 year-term lease agreement further strengthens the bilateral ties between India and Iran while bolstering confidence and boosting trust of trading communities from the region.

Chabahar port has mostly remained in the news virtually since the inception of this strategic connectivity project between India and Iran. Due to the unending saga of cross border terrorism by Pakistan against India, the ensuing uncertainty and the need to connect with Afghanistan and Central Asia — the two vital partners, New Delhi embarked on developing this deep-sea port which would be mutually beneficial.

Eventually this agreement was to feed into a major over two decades-old connectivity corridor “INSTC’(International North South Transport Corridor) with Russia, Iran and among thirteen other countries in the region and beyond. The love-hate tango between the US and Iran has often caused problems, especially on the smooth progress of the project, due to the fear of CAATSA and other secondary sanctions feared by many Indian firms, which had larger exposure to the West.

Though ironically, the Russia-Ukraine war has refocused attention and accelerated the usage and further implementation of the Chabahar project, while integrating it with the INSTC.

Progress of the Project

Both New Delhi and Tehran have shown requisite commitment to advancing the Chabahar project since 2003 which eventually picked up in 2012. But during the important and successful visit of Dr S Jaishankar the Indian Foreign Minister to Tehran in January this year, in the backdrop of Houthi challenge in the Red Sea, he met Iranian Minister of Roads and Port Development Mehrdad Bazrpash. They discussed long term cooperation, development and management of Chabahar port and other connectivity projects, including the smooth functionality of the 7200 Kms long multimodal INSTC corridor.

During his call on President Ebrahim Raisi the security of the shipping lanes as well as the speedier implementation of the Chabahar Port development plans were underscored.

The New Agreement

In continuation to this and the previous visit of Indian Minister of Ports and Shipping and in less than six months of framework agreement discussions that Dr Jaishankar had, the new contract was signed on May 13 by India Ports Global Ltd (IPGL) and Iran’s Port & Maritime Organisation (PMO). This agreement was signed in the presence of India’s Ports, Shipping and Waterways Minister Sarbananda Sonowal.

This agreement was to be for a ten year period and would replace the management of Shahed Beheshti terminal which was undertaken on a yearly basis by the India Ports Global Limited (IPGL).

“The long-term bilateral contract on Chabahar Port Operation was signed between Indian Ports Global Limited (IPGL) of India and the Port & Maritime Organisation (PMO) of Iran, enabling operation of Shahid-Beheshti in Chabahar Port Development Project for a period of 10 years” and this 10 year-long lease agreement further strengthens the bilateral ties between India and Iran while bolstering confidence and boosting trust of trading communities from the whole region.

Accordingly, IPGL will inject approximately $120 million into the port’s development, alongside an additional $250 million in financing, making the contract’s total value reach $370 million. In its budgetary provisions for 2024-25 , the Ministry of External Affairs has allocated ₹100 crore as well.

For India the first ever contract for managing the foreign port is a significant development even as several Indian companies have been engaged in developing ports in Oman, Myanmar and Israel and elsewhere. Chabahar ‘s strategic location and proximity to and obviates the distrusted and disrupted connectivity through Pakistan be it Karachi or Gwadar. It helps in providing assistance directly to the landlocked Afghanistan. Last year India supplied 20000 tonnes of wheat to Afghanistan via Chabahar port, when Islamabad started playing truant even for passage of humanitarian assistance to the struggling population of Afghanistan.

Even Iran has received some assistance. It also provides another outlet for energy rich region by obviating the exposure to the other gulf choke points like Strait of Hormuz and Red Sea especially with regard to energy supplies. Likewise, it helps in rendering project and infrastructural development both in Afghanistan and Central Asia.

No doubt this news of long-term agreement has been seen by the US in the light of its degrading relationship with Iran which apart from Russia remains one of the most sanctioned countries. Hence the threat of secondary sanctions remains real even as Chabahar itself has mostly remained out of the purview of US sanctions for providing relief supplies to a beleaguered Afghanistan. But anything ensuring long term relationship with their rivals does not meet with a simple US displeasure it has to accompany by threats. This time was also no exception.

The US Deputy Spokesperson implied threats for the Indian companies while underlining that “We are aware of these reports that Iran and India have signed a deal concerning the Chabahar Port, I would let the government of India speak to its own foreign policy goals, vis-a-vis the Chabahar Port as well as its own bilateral relationship with Iran. To which Dr Jaishankar reminded them that US should not take a narrow view of it and if you look at the US’ own attitude towards the port in Chabahar, the US has been appreciative of the fact that Chabahar has a larger relevance — and we will work at it.

Despite the rhetoric hopefully the Americans, in keeping with the Global Comprehensive Strategic Partnership with India, will appreciate the intent and outcome for a larger cause in which they are invested as well especially in Central Asia and hopefully in the welfare of Afghan people who deserve a better deal after what they have gone though in the last two decades and even more as result of USA’s Taliban to Taliban dance.

Ironically India’s both major connectivity initiatives are being held up due to the US role one way or the other. On the one hand the INSTC is restricted due to heaviest of sanctions by USA on Iran and Russia in turn impacting its strategic partner India and some Central Asian countries where it wants to get embedded. On the other major IMEEC (India Middle East Europe Economic Corridor) connectivity project in which USA, is a key player and its ambivalent role in the West Asian crisis has also extended the difficulty levels for its implementation again impacting on India’s connectivity ambitions.

A moot yet a searching question is — what kind of a Global comprehensive Strategic Partnership it is? Let us hope they will make a realistic assessment of the ground situation and make appropriate choices, while India is going ahead. In any case we need to find out ways to deal with such eventualities either through SPVs ( Special purpose Vehicles) or any other combination that could be sanction-immune.

Amb. Anil Trigunayat is a former Indian Ambassador to Jordan, Libya and Malta and is a distinguished fellow with leading think tank Vivekananda International Foundation.

The article was originally published in CNBC TV 18 as India-Iran port operation pact | Here’s the gains and pains of Chabahar on May 16, 2024.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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Acknowledgement: This article was posted by Aashnaa Mehta, a research intern at IMPRI.

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  • IMPRI Desk
  • IMPRI

    IMPRI, a startup research think tank, is a platform for pro-active, independent, non-partisan and policy-based research. It contributes to debates and deliberations for action-based solutions to a host of strategic issues. IMPRI is committed to democracy, mobilization and community building.

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  • Anil Trigunayat

    Former Indian Ambassador to Jordan, Libya, and Malta; Distinguished Fellow and Head of the West Asia Experts Group at the Vivekananda International Foundation.

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