Chabahar port, Iran’s unique oceanic harbor located in the Sistan and Baluchistan Province on the Makran coast, has been the focal point of a 10-year agreement between India and Iran. The port comprises two main divisions – Shahid Kalantari and Shahid Beheshti. In the 1980s, Shahid Kalantari was developed and later, Iran offered India the opportunity to further develop Shahid Beheshti, an offer well received by India.
This proposed agreement, which began making headway in 2016 with India set to manage Shahid Beheshti terminal, has faced delay due to various factors such as arbitration clauses in the contract and questions about tariffs, customs clearance, and security arrangements. The current status suggests that the countries are inching closer to finalizing the deal, focusing on neutral arbitration zones like Dubai.
The Importance of Chabahar Port for India
Chabahar Port is of paramount importance for India on numerous fronts:
1. Alternative Trade Route: Chabahar Port offers an alternative route to Afghanistan and Central Asia, bypassing Pakistan. Given the tumultuous relationship between India and Pakistan, this port could facilitate smoother trade with these regions. In addition, the port will enhance India’s access to Iran, the primary gateway to the International North-South Transport Corridor, encompassing sea, rail, and road routes to Russia, Central Asia, and Europe.
2. Economic Benefits: The port connects India to the resource-rich region of Central Asia, potentially improving trade and investment opportunities, consequently driving economic growth and job creation in India.
3. Humanitarian Assistance: It serves as an essential entry point for humanitarian aid and infrastructure development support to Afghanistan, contributing to regional stability.
4. Strategic Influence: By developing and operating Chabahar Port, India can bolster its strategic influence in the Indian Ocean region, strengthening its geopolitical stance.
The Status of India-Iran Economic Relations
India’s trade with Iran has seen significant highs and lows throughout the years. In 2019-20, India’s imports from Iran fell drastically by about 90%. In turn, Iran’s rupee reserves in the vostro account depleted, affecting its ability to import essential Indian commodities.
To restore their trade relationships, India and Iran are considering the option of rupee-rial trade, aligning with the Reserve Bank of India’s decision to allow invoicing and payments for international trade in Indian rupees in July 2022. The Rupee-Rial trade means that India and Iran use their respective currencies, instead of globally accepted ones like the US Dollar. This method is often employed when global economic sanctions make it challenging to use international currencies for trade, as has been the case with Iran due to US sanctions.
