Context:
A day after U.S. President Donald Trump signed an order that could impose sanctions on India for its investment in Iran’s Chabahar port, the Union government remained silent regarding the order and its implications.
Why Chabahar Port is Important for India?
- Located in Iran’s Sistan and Baluchistan Province, Chabahar Port is India’s closest oceanic port in Iran.
- It has been developing as part of a long term agreement by India for building greater trade and connectivity there. The port is an alternate route that bypasses Pakistan, strengthens the strategic presence of India, and advances its economic and humanitarian outreach.
- Challenges such as U.S. sanctions, regional instability, and competition with China have prevented its full realization.
Important Takeaways
Introduction of Chabahar Port & Indian Engagement
- Chabahar is the Iranian nation’s sole oceanic port, situated in the Gulf of Oman.
- This port comprises two key terminals, which are known as Shahid Kalantari and Shahid Beheshti.
- India signed an MoU in 2015 to develop it, and a trilateral agreement was inked between Iran and Afghanistan in 2016 to create the Chabahar International Transport and Transit Corridor.
- A new 10 year contract is agreed, which automatically renews, following resolution of disputes concerning arbitration terms.
Strategic & Economic Significance
- Increases India’s trade with Afghanistan and other countries in Central Asia without being dependent on Pakistan.
- Enhances greater accessibility of the International North South Transport Corridor, which will link India, Iran, Russia, Central Asia, and Europe.
- Economic Advantages
- Diversifies India’s trade routes, resulting in an enhancement of bonds with Central Asian countries.
- 30% cargo movement cost reduction and 40% in time through INSTC. The landlocked Central Asian nations are eyeing Chabahar as a passage to the Indian Ocean for Kazakhstan and Uzbekistan.
- Humanitarian & Diplomatic Significance
- Important Corridor for Afghanistan aid, such as example for wheat 2.5 million tonnes and pulses 2,000 tonnes.
- India shipped pesticides to Iran through Chabahar in the 2021 locust invasion.
Geopolitical & Security Benefits
- Checks China’s Gwadar Port in Pakistan and constrains Beijing’s access to the Indian Ocean.
- Facilitates Indian surveillance of sea piracy and enhances regional maritime security.
Challenges Obstructing Chabahar’s Potential
- US Sanctions & Iran Relations: The U.S. has warned India that there is a “possible risk of sanctions” that will be imposed if India continues its engagement with Iran.
- In 2018, India was granted a waiver, but the consequences of future waivers are uncertain.
Houthi Red Sea Crisis & Regional Instability
- The Houthi rebels pose a threat to the maritime trade routes, which indirectly taints the profitability of Chabahar.
- Instability in Afghanistan since the return of the Taliban.
- Rivalry between Iran and Israel.
Infrastructure Building & Competition
- It entails a huge amount of investment in roads, ports, and rail connectivities. It will face the new competition of India Middle East Europe Economic Corridor (IMEC).
- Investment by Chinese in Iranian Ports may dampen the prospects of India at Chabahar.
India Iran Economic Ties
- Two way Trade (FY 2022-23)
- Total trade: $2.33 billion (21.76% growth YoY).
- Exports from India: $1.66 billion (agricultural products, milk, onions, and canned vegetables).
- Imports into India: $672 million (methanol, bitumen, apples, propane, dates, and almonds).
- Trade has declined: 23.32% year on year drop from last year.
- FDI inflow from Iran: Only $1 million (April 2000 Dec 2023).
- India has suspended importing Iranian oil due to US sanctions.
UPSC Civil Services Examination, Previous Year Question (PYQ)
Prelims
Q. What is the importance of developing Chabahar Port by India? (2017)
(a) India’s trade with African countries will enormously increase.
(b) India’s relations with oil-producing Arab countries will be strengthened.
(c) India will not depend on Pakistan for access to Afghanistan and Central Asia.
(d) Pakistan will facilitate and protect the installation of a gas pipeline between Iraq and India.
Ans: (c)
Mains
Q. In what ways would the ongoing U.S-Iran Nuclear Pact Controversy affect the national interest of India? How should India respond to this situation? (2018)
Q. The question of India’s Energy Security constitutes the most important part of India’s economic progress. Analyse India’s energy policy cooperation with West Asian countries. (2017)
