Statsguru: Several challenges remain for India-Iran Chabahar port deal

Several challenges remain for the India-Iran Chabahar port deal which was inked last week. The 10-year deal, which focuses on the development of the Shahid Beheshti terminal at Chabahar port, is strategically important for India because it provides an alternative trade route to Afghanistan, Russia, and Central Asian countries by completely by-passing the land route through Pakistan. The port is not yet very well integrated with global shipping lines. UN data on port connectivity, measured by the port liner shipping connectivity index, shows that the connectivity for the Chabahar port lags behind some of West India’s busiest ports and its strategic rival Gwadar Port in Pakistan (chart 1). 

Iran has fewer maritime trade partners compared to India. Iran’s share in global container traffic has not managed to breach even 1 per cent in the years since 2010, partly because of international sanctions, while India’s share has gradually risen to above 2 per cent (chart 2,3).





To improve the port’s commercial viability, India plans to invest $120 million in port development besides a $250 million line of credit. Investments may be crucial with Iranian ports typically having relatively long turnaround times (chart 4).



 

The port is said to be a crucial part of the International North–South Transport Corridor (INSTC) planned between Russia, Iran and India. The multi-modal route seeks to link the Indian Ocean and the Persian Gulf to the Caspian Sea via Iran and onward to northern Europe via St Petersburg in Russia. This is expected to help better connect India to Central Asian countries, besides Russia, Afghanistan and Iran. An analysis of data for key markets shows that India exports around $7 billion worth of goods to key countries in the region, lower than in 2019-20. Imports too have fallen in the same period from these markets, barring Russia which has seen a significant rise (chart 5,6).