View from Pakistan: Chabahar vs Gwadar

India and Iran concluded a long awaited port deal in Tehran on Wednesday, lending a big boost to efforts for promoting trade. The Chabahar port near the Iranian border with Balochistan reflects Prime Minister Modi’s keen interest in forging robust trade links with Central Asia, including landlocked Afghanistan.

In 2003, the two sides had agreed to execute the project, bypassing Pakistan, but the venture made slow progress due to Western curbs on Iran over its nuclear programme. The port’s expansion is expected to cut transport costs and cut freight time from India to Central Asia and the Persian Gulf.

Chabahar provides India an easier land-sea route to Afghanistan, where it has fostered close security cooperation and economic interests over the years. New Delhi has already spent $100 million on building a 220-km road in the Nimroz province of Afghanistan. The road will be extended to Chabahar. Afghanistan is expected to sign a transit trade agreement on using the port as an alternative route, which could jack up trade to $3 billion from $700-800 million.

The project’s strategic nature is illustrated by its location along the coast from the Chinese-funded Gwadar port in Balochistan. Noting the prospect of sanctions on Iran being lifted India plans to fast track the plan.

Modi’s sense of urgency in concluding trade pacts with Iran and other Gulf nations is apparently driven by Chinese President Xi Jinping’s signing of the $46 billion energy and infrastructure development agreements with Pakistan last month.

During his visit to Tehran, India’s shipping minister inked with his Iranian counterpart Abbas Ahmad Akhoundi a MoU on developing the port on the Gulf of Oman. Both sides overruled the US call for India and other countries not to rush into business with Iran. The US has exp-ressed its concern that India is moving too fast and could undermine the sanctions regime.

After an accord is reached on implementing the pact, Indian firms will “lease two berths at the port and operationalise them as container and cargo terminals”, providing Afghanistan with access to the sea.

The signing ceremony came on the heels of a warning from the US ambassador to India, who said countries engaging with Iran must wait for the outcome of Tehran’s discussions with P5+1.

With the next round of talks scheduled for May 12 at Geneva, the EU and the rest of the partners will join the negotiations three days later.   For its part, the Modi administration insists the development of the port in no way violates sanctions. The port will enable Iran to open up to the West once sanctions are lifted. India had also expressed its interest in developing a key oilfield, but Iran refused to give it gas marketing rights.

During the government of Vajpayee, India slas-hed oil imports from Iran, a move that left the two countries in rough weather. The situation worsened in 2014 when Iran hiked import duty on Indian rice from 10 per cent to 45 per cent.

While eyeing a larger role in Western Asia, Delhi’s regional status will see a huge surge with the development of the port. Iran wants India to help create a free trade zone near Chabahar, some 70 km from Gwadar where the Chinese Overseas Ports Holding Com-pany has agreed to help Pakistan establish a free economic zone. Islamabad’s constant refusal to provide a land route for Indian shipments to Afghanistan has frustrated Delhi’s efforts to engage with Kabul economically. India has ple-dged $100 million for laying railway lines connecting Afghanistan with Central Asia.

In order to ensure the launch of trade activities at Chabahar, India may enter into discussions with the US for seeking a sanctions waiver. Once the nuclear deal is sealed, New Delhi will invest $85 million in the purchase of equipment to run a container terminal and a multi-purpose berth at the port, whose operation is estimated to cost India $22.95 million annually.

Officially designated as a free trade and industrial zone by the Iranian government, Chabahar has acquired increased significance as a trade hub. Poised to connect business growth centres in South Asia, West Asia and Afghanistan, the free trade area is being connected to Iran’s main rail network.

The writer is a Kabul-based Pakistani journalist

By arrangement with Dawn