Chabahar pact: A potential game changer

Prime Minister Modi’s visit to Iran imparted momentum to India-Iran relations, taking them to a newer height. The Chabahar port of Iran can now offer India a gateway to Central Asia and Europe, which otherwise has been blocked by Pakistan, thereby also reinvigorating India’s ‘Connect Central Asia’ policy. This visit has also helped India come out of 15 long years of hibernation since 2001 when then PM Atal Bihari Vajpayee visited Iran and laid the foundation of a new relationship between the two countries. 

However, the test of their relationship would be to turn a dozen of signed pacts into contracts. To meet this goal, both countries need to work closely with each other so as to reap the potential of bilateral ties through complementary relationship, regional connectivity and cooperative dynamism. It is only then their invigorated efforts could take the relationship to a newer height, in a more sustainable manner. But, keeping in mind Iran’s tough negotiating instinct and the fact that its isolation during sanctions has led to a research gap, in the academia and in the country’s corporate plans, particularly in oil and gas sector, it warrants a careful re-engagement with Iran. This will help Iran in reconnecting with the global market and concurrently benefit India, making it a two-way process, thus maintaining the core national interests of the respective partners. This includes India’s appreciation of the fact that Iran sees Chabahar port as open to all — and not a rival to Gwadar port of Pakistan, as mentioned clearly by Iran’s ambassador to Pakistan, Mehdi Honerdoost. To bolster this process, India has so far started well and, as pointed out by former ambassador, MK Bhadrakumar, Modi’s visit to Iran, backed well by Nitin Gadkari and Sushma Swaraj’s trips to Iran, has been the most productive one. 

Among several agreements signed, Chabahar port pact was the centrepiece of India-Iran talks, and was described as ‘strategic’ by Iranian President Rouhani  as this port has connecting points between India and Afghanistan, Central Asia, Caucasus and Eastern Europe. Chabahar’s free trade zone (SEZ) can provide direct access to these countries. 

The Chabahar port pact included development and operation of the port itself under Phase-I; India’s initial investment support of $200 million to develop two terminals and five berths with multi-cargo capacity; credit line worth $150 million by the EXIM bank; confirmation agreement by EXIM bank and Central Bank of Iran to ensure credit availability up to Rs3,000 crores for import of steel rails and implementation of India’s Chabahar port commitment and setting up of 500-km rail link by the IRCON International to link Chabahar and Zahedan, to be later connected to Delhi, which shall be supported by a supply of $400 million worth of steel towards its construction. Thus, the Chabahar port, being established in a strategic location, can become a potential game-changer for India-Iran ties and a great enabler for the next stage of energy cooperation between the two. If the trade is routed through this port, the cost of importing urea and dry fruits can come down significantly, along with the cost of oil imports. 

Earlier, during the visit of Oil Minister Dharmendra Pradhan to Iran, he requested Iran to allocate appropriate and adequate land in the SEZ. He also emphasised on getting favourable treatment from Iran in the pricing of gas for India as well as Iran’s assurance to supply gas at competitive prices. Besides, India has also expressed its interest in setting up LNG plant, gas cracker and LPG extraction unit in Chabahar. The traditional mainstay of India-Iran relationship has been energy trade, which could now become more complementary if above investment energy propositions in Chabahar, as already discussed between the two countries, are accelerated. Thus the Chabahar pact and extending it further to energy investments will certainly turnaround Iran’s oil and gas revenues. It could also support India’s own efforts of moving towards a gas-based economy. 

The author is Junior Fellow with the Observer Research Foundation