INDIA SHOULD NOT LOSE INTEREST IN CHABAHAR on the Makran Coast.
After years of policy paralysis in India that led to desperation among Iranians about New Delhi not taking enough interest in developing the strategic Chabahar port, there is a ray of hope from the Modi Government in the context of changing regional geopolitical realities
A visit to a strategic location is often an exciting experience. But sometimes it could induce a sense of utter frustration and helplessness in you.
Our maiden trip to the port city of Chabahar in Iran led to such mixed feelings.
Import of Chabahar
Situated in the Gulf of Oman, along the Makran coast, Chabahar has been in news, off and on, in Indian media for its strategic relevance for India, especially since 2003, when then Iranian
president Khatami visited out country. India and Iran signed an MoU to develop the port and build supportive infrastructure to promote bilateral trade and provide India access to Afghanistan and Central Asia. Following this, there were reports that an Indian company owned by the Hindujas signed an MoU with Iranian authorities to develop the port infrastructure in 2004.
Chabahar is at a distance of about 480 nautical miles from the Indian port of Kandla in Gujarat and about 840 nautical miles from Mumbai. It connects Afghanistan-Iran border point at Zaranj through Iranian cities of Zahedan, Zabol and Milak.
The total distance is about 987 kms. it is on the path to the strait of Hormuz and the persian gulf .
India has already built the 219 km long Zaranj-Delaram stretch inside Afghanistan which connects the route to the Afghan ring road. India can also connect Turkmen city of Asghabat through the Iranian city of Mashhad, another about 900 kms north of Zahedan.
Given the strategic import of the port for India — which finds it difficult to access Afghanistan and Central Asia through Pakistan — one would have expected India pushing for fast-track development of such a crucial project. A decade hence, however, nothing concrete seems to have happened on the ground. It is a classic case of Indian inaction.
Iranian seriousness about Chabahar
During the visit, we noticed that despite the sense of lethargy and lassitude from the Indian side, the Iranians have started developing the port and ancillary infrastructure on their own. The road from Chabahar to Milak is complete. The first phase of the port construction is nearing completion. The two terminals at the port — Shahid Behesti and Shahid Kalantari — with five berths each (six multi-purpose and four container) are operational. The port is handling traffic of more than 2 million metric tonnes and the port authorities hope to increase it up to 82 million by the end of the third phase of the project.
In a dusty corner of the city, about 20-25 kms away from Chabahar airport, Iranians are fast developing a petrochemical industrial complex close to the port. Their aim is to turn Chabahar into the third major hub for petrochemical industries in Iran (the first two are in Bandar Imam & Assaluyeh). The complex is being built with investment by SATA (Armed Forces’ Social Welfare Investment Organization), and executed by an Iranian company called Mokran Negin Development Co, a subsidiary of Nemat Business Development Company (NEBCO), reportedly founded by Mr Mohammadreza Nematzadeh, the incumbent Industry Minister. The company has laid down roads, drawn up electricity lines and is in the process of building water connections. Eight Iranian companies have already invested there. Various companies from China, Oman and Europe have evinced their interest in the project.
A railway station is being built up to connect the zone with the port. There are efforts to connect Chabahar with Zahedan and Mashhad by rail. A new pipeline is also being considered for transferring South Pars ethane gas to Chabahar. Another pipeline is being laid from Iranshahr (220 km long) to supply Methane gas from Iranshahr to Chabahar. These pipelines will provide the feedstock for the petrochemical plants.
The information provided by the Iranians suggests that the entire industrial zone will contain 16 basic petrochemical complexes, built with an investment of about $10 billion, in three different phases. There will be plants producing urea, ammonia, Methanol, polypropylene, olefin and dimethoxyethane. They will also set up an aromatic complex and a crystal melamine unit. Iranians are looking at a total investment of about $80 billion by the end of the project. We were also told that all economic activities in the Free Zone would be exempt from taxes for 20 years.
Chabahar Free Zone
Chabahar Free Zone (CFZ) has been developed well. The township is fully operational with a shopping mall, hotels and well-paved roads. A close interaction with officials of the CFZ, Port and Maritime Organisation led us to believe that there is a lot of enthusiasm in Iran today than ever before about developing Chabahar as a port-cum-industrial zone. The managing director of CFZ, Hamed Ali Mobaraki, along with his teammates, impressed upon us the need for India to sustain its interest in Chabahar and help Iran build the infrastructure to harness the full potential of the port.
There was a clear sense of desperation about India not taking enough interest despite the clear strategic advantages that would accrue from investing in Chabahar. While they would like India to come in as a partner, it seemed that they were fast losing their patience with Indian indecision and opening their doors to other possible investors.
During the course of the discussions, our Iranian interlocutors also informed us about the growing Chinese interest in Chabahar in recent months. After developing Gwadar in Pakistan, which has proved a bad investment, the Chinese are perhaps eying the potential of Chabahar as yet another alternate port they can develop as a strategic asset in the region.
We were shown a Chinese dredger operating at the Shahid Behesti terminal with Chinese workers. China has also started a heavy oil refinery opposite the upcoming petrochemical industrial complex. One could see the familiar squat barracks coming up at the construction site. A special market complex — a la ‘China Town’ — selling Chinese goods has already been set up in the city. Chinese interest in Iran is well-known. However, their interest in Chabahar is comparatively new.
In general, there has been a resurgence of Chinese interest, keeping the geopolitical shifts at the global level. In Tehran, in the hotel we were staying, we could see and overhear Chinese businessmen (to be read apart from tourists) engaged in animated discussions with their local contacts about how best to invest in Iran. Chinese pragmatism seems to have overtaken Indian conservatism in Iran.
Chabahar is situated in the Iranian province of Seistan-Balochistan bordering the Pakistani state of Balochistan. The local people in Chabahar, cutting across sectarian affiliations, either spoke or understood Urdu and were quite warm and friendly towards Indians. Many of them send their children for education to India. There is a big craze for imitation jewellery in the city and many Baloch businessmen are engaged in this trade.
Moreover, unlike the Balochistan province of Pakistan, Seistan-Balochistan was quiet and peaceful and as somebody noted in Iran, Chabahar was ‘much more business-worthy’ than Gwadar. Many local businessmen, both Baloch and non-Baloch, expressed their surprise at Indian reticence and held that if China was braving Chabahar despite ‘zero linguistic and cultural links’, India must not be so hesitant.
Views in Tehran
Back in Tehran, in our interaction at the track II level with think-tanks, academics and students, there were repeated references to Indian callousness about Chabahar, despite its enormous strategic salience for India. There was a pervasive feeling that the primary reason for Indian vacillation was real or artificial fear of the US. It was pointed out to us that Iran would love to work with India on Chabahar, but it cannot hold its interests hostage to Indian fear of the US. There was a mention of the decrease in the level of oil trade and the adverse effect of sanctions on India-Iran bilateral trade. Some analysts even hinted at the proactive role India could have played in mediating the difference between Iran and the US rather than getting bogged down with US sanctions. Overall, there were huge expectations from India laced with an inevitable sense of dismay. Iranians were astonished at the way India was conducting its Iran policy against its own strategic interests. Our tame arguments to the contrary could not cut much ice.
Need for a new ‘Look West’ Policy
We came back with the feeling that Iranians are fast losing their patience with us, but they would still welcome us more than any other country to invest in Chabahar. They are upbeat about the P5+1 talks on nuclear issues and clearly see in it an opportunity for them to bounce back as an economic power in the region. There is already a beeline of foreign companies to Iran trying to assess the ground situation for prospective investment and Iranians are not going to wait endlessly for India to invest in Chabahar.
Moreover, the growing interest of China and European countries in Iran in general and Chabahar in particular could displace India from Iranian strategic calculations. Therefore, it is high time for India to shun its cautious and conservative approach and enhance its participation in developing Chabahar as a strategic hub as an integral part of its — what can be called — a new ‘Look-West’ policy. The Indian foreign office has so far engaged itself in empty policy rhetoric over Chabahar; now it is time for action.
One can only hope that the new government in New Delhi will adopt proactive diplomacy in this regard. Regional geopolitical realities are changing around us. This warrants recalibration of our foreign policy priorities.
(Dr Ashok Behuria is Coordinator of South Asia Centre and a Fellow at IDSA. The views expressed here are his own)
Saturday, 31 May 2014 | Ashok Behuria |www.dailypioneer.com
India’s Opportunity in Iran Port
As the Modi government defines its foreign policy priorities, one of the issues that needs urgent attention is the finalisation of India’s investment in the development of Chabahar Port in Iran. This is particularly important because the window of opportunity available to India to have a presence in Chabahar may be closing rapidly. India and Iran had agreed to cooperate on the development of this Iranian port way back in 2003 when Iran’s president Mohammad Khatami had visited India but nothing much has been achieved in these 11 years.
It appears the previous government was close to approving US $100 million investment in the development of the port but could not take the decision. The new government could pick up the threads and quickly seal the deal.
The strategic importance of Chabahar Port for India cannot be overstated. Located in the Sistan-Baluchistan province of Iran on the Makram coast and just outside the Persian Gulf, Chabahar is a natural gateway for India to Afghanistan and Central Asia. In the last 10 years, the Iranians have invested considerable sums of money in the development of Chabahar city. A 600km-long highway linking Chabahar to Zahidan in the north is operational. Zahidan is only about 240km from Milak on the Iran-Afghanistan border. Across Milak is Zaranj in Afghanistan where India has built the Zaranj-Delaram highway. Thus, there is already an excellent road connectivity between Chabahar and Afghanistan via Zahidan. The Iranians have also started the construction of a railway line from Chabahar to Zahidan where it will connect with the Iranian rail network and to Central Asia and CIS.
The Iranians are constructing a vast petro-chemical complex at Chabahar which will receive its gas feedstock through a pipeline from Iranshahr which is only about 200km from Chabahar and is an important point on the proposed Iran-Pakistan gas pipeline. A gas pipeline from South Pars gas field to Iranshahr has already been built.
The Iranian government has set up a Free Trade Zone at Chabahar to attract investors. It is understood that some CIS countries and Afghanistan have already been given land in the Free Trade Zone. The Iranians are keen to attract Indian investors in the Free Trade Zone.
Chabahar Port has good growth potential. It is functional and is already handling 2 million tonnes (MT) of cargo every year. On completion of the three proposed phases of development, the port will have the capacity to handle 82MT of cargo per year by 2020. The port traffic will be generated through imports, exports and transit of goods. Chabahar Port is much safer than Gwadar Port in Pakistan’s troubled Baluchistan province, 76km from Chabahar. It will certainly take away Afghanistan’s transit trade through Pakistan. A recent report in the Pakistani newspaper Dawn highlighted that Afghan transit trade dropped by 54 per cent in the financial year 2012-13 partly due to development of Chabahar Port. The Iranians are counting on the rejuvenation of economic activities in Afghanistan after the withdrawal of US and foreign troops from the land-locked nation for further development of Chabahar.
The Chinese are entering Chabahar in a big way. They have begun work on a heavy oil refinery there. A Chinese dredger is functional at Chabahar Port for land reclamation activities. A market selling Chinese goods has also been opened in Chabahar. It is reported that a Chinese company has interest in the development of the Chabahar petro-chemical complex.
Chabahar offers great strategic opportunity for India not only to enter Iran but also to reach Afghanistan and Central Asia. Apprehensions about the commercial potential of Chabahar are overstated because the Iranians are already investing in Chabahar and many other nations are also showing interest. In fact, the US $100 million investment that India is planning appears to be on the conservative side and should be increased. Indian companies will have good opportunity to supply equipment for the construction of the railway line to Zahidan. Since Chabahar lies only about 1,000km from Kandla port in Gujarat, a direct shipping line should be considered to bypass Dubai, give boost to direct India-Iran trade and enhance transit trade to Afghanistan and CIS.
A number of Indian official delegations and private companies have visited Chabahar but no worthwhile investment has been made or business deal concluded. This has disappointed the Iranian officials and businessmen. They think India is not serious. The local Baluchi population is friendly towards India and many speak fluent Urdu. Some traders regularly visit India to source Indian goods but they face problems transferring money and also in the absence of a direct shipping link. Indian Basmati rice, imitation jewellery and foodstuff, etc. are in good demand in that part of the world.
India will continue to face problems with regard to transit of goods to Afghanistan through Pakistan. The use of the Chabahar route can resolve access problems.
India’s involvement in Chabahar Port will also strengthen India-Iran ties which are increasingly becoming strategic in content. The lingering bitterness in Iran about India’s vote against Iran at the IAEA on the nuclear issue in 2005 will also lessen. India has stood by Iran through difficult times as it continued to import Iranian oil even at the time of sanctions and despite the closing down of payment channels. This is often not appreciated either in Iran or in India. Indian oil import from Iran averaged over 200,000 barrels per day in 2013. Two-way trade was over US $16 billion. India needs to build an independent relation with Iran without affecting ties with Saudi Arabia, GCC or the US. Our diplomacy should be aimed at deepening strategic partnerships with GCC as well as Iran considering that relations with one do not contradict ties with the other.
The likelihood of a rapprochement between Iran and the West will increase Iran’s importance. Chabahar will certainly gain from this rapprochement. If India does not enter Chabahar now, it may be too late and more expensive to do so later. Increased Indian presence in Chabahar now will pay rich dividends later. India should adopt a long-term strategic vision and not a narrow commercial approach towards the development of Chabahar Port and investment in Chabahar Free Zone.
The author is director general, Institute for Defence Studies and Analyses.
The great Game Folio: Iran Transit
C. Raja Mohan | Twitter@@MohanCRaja
To develop Chabahar’s hinterland, Iran laid out a road link to its frontier with western Afghanistan.
India’s dream of connecting to Afghanistan via Iran could soon move a step closer to reality if New Delhi, Tehran and Kabul sign off on a draft memorandum of understanding on transit trade that has been finalised recently. Since Pakistan denies India overland access to Afghanistan, Delhi has long sought an alternative through Iran. The idea first came up when Iranian President Mohammad Khatami came to Delhi in January 2003 to participate in the Republic Day celebrations. India then agreed to participate in the development of Chabahar on Iran’s Makran coast as the future entrepôt for trade with Afghanistan and Central Asia.
To develop Chabahar’s hinterland, Iran laid out a road link to its frontier with western Afghanistan. India, in turn, built Route 606 from the Iran-Afghan border to the circular highway that connects all the major cities in the country. The Chabahar project is a winner for the three countries. It would reduce landlocked Afghanistan’s total dependence on Pakistan to access the Arabian Sea. The port will help India skirt Pakistan into Afghanistan and establish Iran’s position as a gateway to Central Asia.
A variety of political and economic factors delayed the implementation of this vital project through the last decade. In a renewed political commitment to the project, senior officials of India, Iran and Afghanistan met in Tehran on the margins of the non-aligned summit in August 2012 and agreed to accelerate the development of Chabahar. The three sides have just wrapped up talks on the terms of transit trade through Iran. India must now fast-track its investments in Chabahar and develop dedicated shipping links between Iran and India. This should be one of the top foreign policy priorities for the next government in Delhi that takes charge at the end of May.
The BJP, which hopes to run the next government, has already talked about building modern ports all along the Indian coastline under what it calls “Project Sagar Mala”. If the BJP is serious about expanding India’s sea connectivity, it must promote India’s active participation in the development of maritime infrastructure beyond borders. In other words, Delhi must imagine an “Indian Ocean Sagar Mala”.
Over the last decade and more, the Indian government and corporate sector have struggled to grasp opportunities for building sea ports in other countries. The difficulties in developing the Chabahar port is symptomatic of the broader challenges that India faces in implementing large-scale infrastructure projects in the neighbourhood and beyond.
After much effort that began more than a decade ago, India is yet to complete the Kaladan transport corridor to Mizoram via Myanmar. This involved building a port at the ancient town of Sittwe
on Myanmar’s Rakhine coast, developing the part-riverine corridor to the Mizoram border and expanding the road network from Mizoram to the rest of the Northeast. In Sri Lanka, India was surprised a few years ago when Colombo asked China to build a new port at Hambantota that Beijing completed in quick time. India is yet to get its act together in getting its companies participate in the second phase of development at Hambantota.
The managers of a potential Indian Ocean Sagar Mala project in the coming years could learn much from the problems encountered in the last few years and develop an effective policy framework for the participation of Indian companies in emerging port projects in east Africa, Oman and Myanmar.
Both ports will come together to form a Special Purpose Vehicle under a revenue-sharing agreement with the Port and Maritime Organization of Iran. The agreement would be for a minimum of 20 years. Analysts hope that with a new government in power in New Delhi, this project will be given the final go-ahead as India has been very keen to develop the port for over a decade. Sources say India’s External Affairs ministry which has the final say since it has been piloting the project for years, is expected to make a onetime financial grant along with an annual grant. This investment will make the project financially viable .The estimated project cost is around $100 million. Trade analysts anticipate the initial business to be slow. However, it is expected to pick up and become highly profitable in the coming years once the project gets underway.