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India and Iran Ink Deal for Chabahar Port Development

With India's exports to Iran surging by 14% year-on-year and imports witnessing a robust 45% growth in 2023, the renewed focus on Chabahar signifies a strategic shift in India's trade dynamics, aiming to carve a niche in the bustling markets of Central Asia and beyond.

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A view from Chabahar port

India and Iran have finalized a pivotal agreement granting India Ports Global (IPGL) the rights to develop and oversee operations at an Iranian port for the next decade. The deal, inked on Monday, authorizes IPGL to manage transit operations for Indian goods destined for Afghanistan and Central Asia through the port located in Chabahar, along Iran’s southeastern coast overlooking the Gulf of Oman.

Sarbananda Sonowal, India’s Minister of Ports and Shipping, graced the ceremony in Iran today, emphasizing the shared commitment to enhancing ties between the two nations. Since 2016, IPGL has infused $85 million into Chabahar, envisioning it as a formidable competitor to the Chinese-backed ports of Gwadar and Karachi in Pakistan, while simultaneously aiming to bolster trade links with Central Asia and Afghanistan.

However, the pace of investment has been hindered by financial hurdles and delays in Iran’s development of the crucial Chabahar-Zahedan railway, vital for integrating the port into Iran’s national rail network and facilitating the transit of Indian goods to target markets. Under the newly forged agreement, the investment is poised to surge to $370 million, underscoring the mutual commitment to bolstering trade infrastructure.

Indian Foreign Minister Subrahmanyam Jaishankar affirmed, “As and when a long-term arrangement is concluded, it will clear the pathway for bigger investments to be made in the port,” signaling India’s long-term strategic vision for Chabahar.

Strategic Significance of Chabahar Port

The Chabahar Port assumes paramount importance in India’s quest to amplify trade with Central Asia and Afghanistan, a region where its engagement has been historically constrained by logistical challenges and dependence on Chinese and Pakistani territories.

While India’s trade with Central Asia and Afghanistan stagnated at $2 billion last year, China recorded a staggering $90 billion trade turnover with Central Asian states in 2023, marking a 27% year-on-year surge. Furthermore, China’s trade with Afghanistan exceeded India’s by 40%, highlighting the urgent need for India to fortify its trade foothold in the region.

Despite the logistical impediments, the Chabahar Port offers a promising gateway for India to tap into the vast trade potential of Central Asia and Afghanistan. Last year, the port handled over 4.2 million tons of goods, constituting 2.2% of Iran’s total foreign trade volume. However, the transit cargoes accounted for a mere fraction, indicating substantial untapped potential for facilitating regional trade.

Outlook for Regional Trade

While the transit of Indian goods through Iran to Russia remains uncertain, the Chabahar Port emerges as a beacon of hope for fostering trade between India and its Central Asian neighbors. With India’s exports to Iran surging by 14% year-on-year and imports witnessing a robust 45% growth in 2023, the renewed focus on Chabahar signifies a strategic shift in India’s trade dynamics, aiming to carve a niche in the bustling markets of Central Asia and beyond.

Sri Lanka Guardian

The Sri Lanka Guardian is an online web portal founded in August 2007 by a group of concerned Sri Lankan citizens including journalists, activists, academics and retired civil servants. We are independent and non-profit. Email: editor@slguardian.org

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