Inter-governmental panel on the cards to resolve Chabahar Port row

Iran wants domestic resolution; India for international arbitration framework

Ahead of Prime Minister Narendra Modi’s Uzbekistan visit for the Shanghai Cooperation Organisation (SCO) summit this week, talks between India and Iran for a long-term agreement for the usage of Chabahar Port have hit a roadblock because of differences on a ‘dispute resolution mechanism’.

India is yet to approve a proposal sent by Iran recently for a 10-year agreement for Chabahar Port. Senior officials in the know said, a key issue requiring consensus is an arbitration clause. While Iran is pitching for their own agency to act as an arbitrator for the port, India has proposed international arbitration.

“There are legislative concerns from the Iranian delegation, which are obstructing a provision to allow international arbitration in cases of disputes. We are looking at the possibility of forming an inter-governmental committee to resolve disputes, as such a framework may be conducive for both sides,” one of the officials said. 

He added that this is one of the options and continued deliberations will determine the final outcome.

The Ministry of Ports, Shipping, and Waterways has been holding regular meetings with industry and transporters to encourage them to use the port, a gateway to the International North South Transport Corridor (INSTC). 

Ministry officials said that some of the concerns raised by them are also part of the bilateral deliberations — hesitation among banks to provide letters of credit (LoC) due to international sanctions on Iran and issues related to custom clearances, as goods are transported via multiple land borders and sea routes.

Industry continues to face issues in transportation through the route, despite Chabahar Port being exempt from the international sanctions to facilitate Afghanistan's development and India’s investment in the port.

Many of these issues are being ironed out, another official said. This paper previously reported, the ministry is in the works to on-board banks in the consultations and encourage them to facilitate smooth business through Chabahar. One of the key talking points between India and Iran has been the underutilisation of the port since the first agreement was signed in 2015.

Sensing the opportunity, India now looks to change the status quo. The Shahid Behesti Terminal, located in Chabahar and operated by India’s state-owned India Ports Global has come into the spotlight after the Russia-Ukraine war, as many commonwealth of independent states and south-east Asian countries look at INSTC for trade with Russia, India, and Europe.

According to industry estimates, the INSTC route takes 15 days less than the Suez Canal route for shipments to be transported.

The PM is expected to hold his first ever bilateral meeting with Iranian President Ebrahim Raisi at the SCO summit. 

The discussion could focus on the Chabahar port and INSTC, and the series of associated logistical and financial challenges that have cropped up. 

Recently, Union Minister for Ports, Shipping, and Waterways Sarbanada Sonowal also visited the port to review progress on the terminal’s development.