December 16, 2017

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An alternate route: Chabahar Port for India

Chabahar Port

The first phase of the Iranian Chabahar Port, which India is developing to open a trade route to Afghanistan and Central Asia, bypassing Pakistan, was inaugurated on the 3rd December. The Chabahar port is crucial as Pakistan does not allow India to send goods to Iran and Afghanistan through its territory by land. It is also expected to act as a counter to the Gwadar port in Pakistan, barely 100km away, which is being developed by China.

The China-Pakistan Economic Corridor (CPEC) is a $62bn connectivity project envisioned to stretch from the western Chinese city of Kashgar to Pakistan’s Arabian Sea port of Gwadar, located near Iran and Persian Gulf shipping lanes. It is a major component of Beijing’s broader Belt and Road Initiative. Pakistan is a significant partner for China as it links China to the Central Asia, Southern Asian region and Middle East, and the deep-sea port Gwadar offers direct access to the Indian Ocean and beyond. It’s taken decades of work to build the road from China’s Xinjiang to Gwadar, but it’s finally partly operational. Gwadar port, which is still under construction, is owned by the Pakistan government’s Gwadar Port Authority (GPA) and operated by state-run Chinese firm China Overseas Port Holding Company (COPHC), which will run it for 40 years.

In August 2017, Pakistan’s Ambassador to China, Masoud Khalid, was quoted saying work was well in progress on Gwadar port and that he was confident it would be fully operational in three to four years. “In fact,” he said, “Ships have now started arriving and they are bringing cargo and equipment for the work on the port. All in all the progress is good.”

Gwadar port in Pakistan and Chabahar in Iran are not mere ports but geopolitical launch pads that can alter the strategic balance in the region. The Gwadar port— close to the Straits of Hormuz— allows China to access the Indian Ocean. China can monitor US and Indian naval activity in the Persian Gulf and Arabian Sea while its proxy Pakistan can control the energy routes from there. On the other hand, Chabahar is India’s trump card and gateway to Afghanistan, Central Asia, Russia, and beyond. It can allow India to monitor Pakistani and Chinese naval activities in the Indian Ocean Region and Gulf.

Ahmad Bilal Khalil, a researcher at the Center for Strategic and Regional Studies, Kabul, says in an article for The Diplomat: “The rivalry between Chabahar and Gwadar mostly hinges on two factors. First, analysts posit that the probability of a Chinese and Indian military (especially navy) presence in these ports will increase Sino-Indian rivalry in the Indian Ocean. Second, there is an expectation that Chabahar port will diminish the importance of Gwadar port (the end of CPEC) as a transit hub and route for Central Asian republics and Afghanistan.

“Strategically, though Pakistan may give permission to China to use Gwadar militarily, it will definitely be on Pakistani terms. Moreover, Pakistan might also use the port for its own military purposes. However, Iran, for her part, may not agree to allow India to use Chabahar for military purposes. Iran may not want to enter into the Sino-Indian strategic rivalry at a time when Sino-Iranian economic, political, and strategic relations far outweigh Indo-Iranian relations. Bilateral trade between India-Iran is $14 billion, compared to $51.8 billion between China and Iran. Moreover, Iran and China agreed in Janary 2016 to increase bilateral trade to $600 billion in the next 10 years.  Moreover, it was China (along with Russia) that vetoed United Nations Security Council resolutions against Bashar al-Assad’s regime in Syria, a strategic ally of Tehran.”

Pakistan and Indian economies are highly complementary— the two countries also share a common border, history, and cultural similarities. Yet, despite this, trade ties between the two largest economies in South Asia remain weak.

Nasir Iqbal, director research, Benazir Income Support Programme (BISP), Pakistan, notes in his paper Pak-India Trade and MFN: Short Run vs. Long Run Impact: “In 1995, India granted most favoured nation (MFN) status to Pakistan, but Pakistan did not reciprocate. Pakistan decided to extend MFN status to India in 2011, with an aim for this to become effective from 1 January 2013, but this target was missed. The South Asia Free Trade Area (SAFTA) has likewise failed to live up to expectations. In 2004, the two countries had signed the agreement, along with six other South Asian nations, but there has been no substantial improvement in the trading environment and no increase in bilateral trade.”

India has been closely working with Afghanistan to create alternate and reliable access routes, bypassing Pakistan.  In 2015, the Afghan President Ashraf Ghani visited India— and stressed the importance of the Chabahar Port. Ghani and Prime Minister Narendra Modi vowed to work closely with Iran to make the Chabahar Port a reality and develop it as a viable gateway to Afghanistan and Central Asia. They agreed that routes beyond the existing ones would provide a major impetus to Afghanistan’s economic reconstruction efforts. That set the ball rolling. Over the next year, coordination between the three countries led to the signing of the trilateral agreement between India, Iran and Afghanistan in May 2016. And in the year and a half since, the Indian shipping ministry has worked at a brisk pace towards developing the project.

Mid-November 2017, Afghan chief executive Abdullah Abdullah was quoted saying Afghanistan would no longer depend on Pakistan for transit trade with the opening of the strategic Chabahar Port. At the beginning of the Cold War, Afghanistan-Pakistan relations were soured and even severed due to “Pashtunistanism” and the issue of the Durand line border between the two countries. Cold bilateral ties also damaged Afghan trade through Pakistan.

While the first phase of Chabahar has been completed, India, Iran and Afghanistan are committed to developing the port into a massive project that can handle a cargo of 80 million tonnes — the existing capacity is just 2.5 million tonnes. This targeted commitment came a month after India sent its first consignment of 1.1 lakh tonnes of wheat for Afghanistan through the Chabahar Port on October 29 this year.

Read this particular opening to an article written by Anilesh S. Mahajan for Business Today:

There was jubilation all around at Deendayal Port Trust – the former Kandla port – on October 29, as the first of six shipments of wheat bound for Afghanistan left Indian shores. What was so special about the shipment? It was the first time any large consignment from India was travelling to landlocked Afghanistan bypassing Pakistan. Over the next few days, the wheat was shipped 650 nautical miles (1,200 km) to Chabahar port in Iran, and thence another 635 km by road to Zahedan on Afghanistan’s western border. Until India began building two berths at Chabahar port – which have been leased to it by Iran for 10 years – surface transport from India to Afghanistan was impossible without passing through Pakistani territory. The new route is so crucial to both India and Afghanistan that both External Affairs Ministers, Sushma Swaraj and Salahuddin Rabbani, respectively, monitored the consignment’s departure via video conferencing.

Chabahar is expected to be fully operational by the end of next year. India plans to send seven shipments of wheat to Afghanistan through Chabahar by the end of January. The wheat will be trucked from Chabahar to western Afghanistan, putting to test the route’s viability and the plan to broaden the cargo flow before the port is fully operational. India’s state-run railway body IRCON International will set up a railway line at Chabahar to move goods right up to Afghanistan. The 500km rail link between Chabahar and Zahedan will link India to the rest of Iran’s railway network. India will also supply $400mn of steel rails to Tehran. There are plans of a fertiliser plant through a joint venture with the Iran government. Securing hydrocarbon sources is a priority for India as New Delhi and Tehran would look to expand the basket in the coming years.

The distance between India’s Kandla Port and Chabahar Port is quite short, thereby reducing the transportation costs of the goods. It can be inferred that this is a win-win situation for India. The Chabahar deal would also help in countering the China’s string of Pearl of strategy against India.

Once the Chabahar port is fully developed, goods from India will not only travel up to Afghanistan, but beyond, along the yet-to-be developed International North-South Transport Corridor (INSTC) to Central Asia.

L to R: Indian Prime Minister Narendra Modi, Iranian President Hassan Rouhani, and President of Afghanistan Ashraf Ghani, during the signing of the Trilateral Agreement in 2016

 

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