A trilateral transport corridor project, inked in Tehran during Prime Minister Narendra Modi’s visit to Iran on 23-24 May with the leaders of Iran and Afghanistan, altered the geopolitical map of South and Central Asia. Additionally, India, Iran and Afghanistan signed a trade and transit agreement including development of Chabahar port that will provide Indian goods with overland access to Afghanistan and Central Asia and vice versa. Hitherto, India’s role in Afghanistan and Central Asia has been limited, as Pakistan had denied it with overland access. The 12 agreements signed during Modi’s visit to Iran will change the scenario.
India’s role in Afghanistan and Central Asia has been limited, as Pakistan had denied it with overland access. The 12 agreements signed during Modi’s visit to Iran will change the scenario.
Strange as it might seem, the deal has now been made possible by tacit support from the same US which is keen on counterbalancing growing Chinese influence in the Central Asian region. For India, the Chabahar port, which is just 940 km from Mundra, Gujarat, is not just about facilitating trade with Afghanistan which has been affected by Pakistan’s refusal to allow transit of goods through its territory. Rather, the development of Chabahar is an important part of the country’s grand strategy to connect with Central Asia for trade circumventing Pakistan, and for tapping into the energy opportunities that are opening up in Iran.
Modi’s Visit to Tehran
When Modi landed in Tehran, his hosts knew that Afghanistan had swung back towards India after a brief ill-advised romance with Pakistan and that India had struck favourable deals with Iran’s energy market competitors. Modi visited a Gurudwara in Tehran, met with Iran’s Supreme Leader Ayatollah Khamenei and President Rouhani and presented them with reproductions of rare Islamic and Persian manuscripts, released a rare manuscript of Kalileh-wa-Dimneh – the Persian avatar of Panchatantra – and witnessed the signing of12 bilateral agreements.
The signing of the bilateral agreement with Iran on the development of Chabahar port and the construction of the Cha-bahar-Zahedan railway line and the trilateral transport and transit agreement including Afghanistan was the most important achievement of the visit. The Chabahar port can reduce the dependence of Central Asian Republics upon China and Russia and Afghanistan’s dependence upon Pakistan by providing these landlocked countries with an alternative access to sea.
Chabahar will also help Iran decongest Bandar Abbas port and develop the economically backward Sistan-Baluchestan province while helping India secure access to Central Asian and Iranian markets as well as energy supplies. The economic and strategic interests of India and Iran converge in Chabahar and it could provide a stable foundation for their relationship.
While the potential clearly exists, the challenge will be in attracting investment in a volatile region especially given the unhappy experience of Indian companies in the past.
Chabahar Port Agreement
Modi’s visit also puts an end to years of ambivalence on the development of Iran’s Chabahar port on the Gulf of Oman, the focal point of the corridor project. New Delhi and Tehran had agreed in 2003 to develop the port, near the Iran-Pakistan border. But the project did not take off, mainly owing to international sanctions against Iran over its nuclear programme, but also on account of inertia in Delhi. It is heartening that after much delay and dithering India, Iran and Afghanistan have decided to cooperate in making this dream come true. However, Iran’s international isolation, the armed conflict in Afghanistan, delays in India’s decision-making and differences over pricing prevented the clinching of the deal. India will be investing $500 million in Iran’s Chabahar port to develop, operate and use this strategic port.
The port will play a crucial role for India’s trade with the land-locked countries of Central Asia via the to-be-developed International North-South Transport Corridor that will run through Iran. This project is part of the Great Power Game that is on in the region; the US has the New Silk Road Initiative while China is forging ahead with its One Belt One Road (OBOR) plan. Clearly, for India, geo-political and strategic stakes are as important as the economic opportunity that will open up from development of the port. There is also an ambitious plan to develop a free trade zone area surrounding the port where Indian companies can invest in plants to produce fertilisers and petrochemicals. While the potential clearly exists, the challenge will be in attracting investment in a volatile region especially given the unhappy experience of Indian companies in the past.
India, Iran and Afghanistan cannot afford to lose more time and must get down now to delivering on the promises. India’s record on timely completion of infrastructure projects abroad is poor. It must ensure that its work on Chabahar meets the deadline. With the project completed, India can ship goods in bulk to the Chabahar port from where they can be uploaded on to trains and trucks to markets in Iran, Afghanistan and Central Asian countries. Traders are also eyeing markets in Europe. Indian goods can be transported now in a shorter time frame via overland routes.
Though the Indian investment in Chabahar, at $500 million, does not match the scale of the Chinese project, the Chabahar port will act as a gateway for India to Central Asia bypassing the China-Pakistan arc.
Once the Chabahar port is developed, Indian ships will get direct access to the Iranian coast; a rail line to the Afghan border town of Zaranj will allow India a route around Pakistan. This will surely boost trade with Iran and Afghanistan. Besides, the proposed free trade zone in the Chabahar area offers Indian companies a new investment destination at a well-connected port city. India has already said its companies will set up “plants in sectors such as fertilizers, petrochemicals and metallurgy” in the zone. It will also supply $400 million worth of steel rails to Tehran to build the railway link.
From a strategic point of view, Chabahar is situated just 100 km from Pakistan’s Gwadar port, the centrepiece of a $46 billion economic corridor that China is building. Though the Indian investment in Chabahar, at $500 million, does not match the scale of the Chinese project, the Chabahar port will act as a gateway for India to Central Asia bypassing the China-Pakistan arc. The long-term potential of this connectivity is immense.
Analysts Point of View
Analysts have tended to view Chabahar and Gwadar ports as competitive projects; development of one is seen as weakening the prospects of the other. However, the projects need not collide; India and China should not be pitting themselves against each other as they have much to gain through cooperation. China’s OBOR initiative will link it with markets in Iran and Europe. Indian goods could benefit by hooking on to this vast road and rail network in the Eurasian region. To propel Chabahar into a global transshipment hub will require India and Iran to think big and involve more partners. Insecurity and conflict will only undermine the potential benefits of this massive project.
The message for India is clear: it is no longer possible to see Afghanistan in terms of a line from Delhi to Kabul, but as a centre-point of many strands of connectivity and energy, with each strand held by a different world power or regional leader.
But in the years the arc has taken to complete, Afghanistan has gone from being a landlocked country with limited options to a country at the centre of many plans. Iran itself is involved with India and a number of other countries to develop the INSTC, while the U.S. is supporting the ‘New Silk Road Initiative’ linking Afghanistan to Central Asia; Turkey is planning the ‘Modern Silk Road’ with Georgia and Azerbaijan, not to mention the ‘Silk Wind initiative’. There are ancillary projects like the Turkmenistan-Afghanistan-Pakistan-India gas pipeline, and the CASA-1000 electricity project, not to mention the SAARC dream of seamless connectivity to the east.
A 2007 study by the Ministry of Commerce estimated that bringing Afghanistan into a possible South Asian Free Trade Agreement would alone yield benefits of $2 billion, of which $606 million would go to Afghanistan. And then there is the biggest plan yet, that of the Chinese ‘One Belt One Road’, combined with its China-Pakistan Economic Corridor that Afghanistan recently joined amongst six agreements signed by Chief Executive Abdullah Abdullah on a visit to China.
The message for India is clear: it is no longer possible to see Afghanistan in terms of a line from Delhi to Kabul, but as a centre-point of many strands of connectivity and energy, with each strand held by a different world power or regional leader. This is also true of security in Afghanistan, and India needs to find its own voice and speak clearly to be heard above the din if it is to build on the potential of the Chabahar gambit.
With all the focus on Chabahar, what’s gone almost unnoticed is the lack of forward movement on India’s plans to develop the Farzad-B gas field, estimated to hold as much as 21 trillion cubic feet of gas. India has been pushing Iran for ONGC Videsh to develop the field and transport gas back into India. For its part, Iran is seeking to revive the on-land pipeline project through Pakistan — the Iran-Pakistan-India (IPI) pipeline — that has been in the works for a decade now and which failed to take off due to the political tensions in the region. India would prefer to take the liquefied natural gas (LNG) route or a sub-sea pipeline that will bypass Pakistan. The LNG project was discussed many years ago but the sanctions ensured that Iran would not be able to build the liquefaction plants since the technology was available only with the West. The challenge for Indian diplomacy now is to persuade Iran to give up the IPI pipeline idea and agree for one of the other two options.