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Chabahar Port: Why is it a Game Changer for India?

May 29, 2024
Business Ethics & Culture

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India has signed a historic agreement with Iran to develop the Chabahar Port. Under this agreement, India will invest $120 million in the development and operation of the Shahid Beheshti Terminal at Chabahar Port, along with $250 million to be sourced through debt financing.  On May 13, India and Iran signed this agreement through India Ports Global Limited (IPGL).

According to the agreement, India will operate Iran’s Chabahar Port for the next 10 years. The agreement is between India Ports Global Limited and the Ports and Maritime Organization of Iran.  Chabahar Port is considered Iran’s second most important port and serves as a crucial strategic route connecting India, Central Asia, and Europe. In 2016, the Indian government also signed an agreement with Iran to develop this port.

The new agreement is seen as an extension of the 2016 agreement. Under this agreement, India will operate the terminal, handle container cargo, and develop rail and road links connected to the port. This Port provides India with an alternative route to reach Europe.

This route reduces shipping time by 20 days and costs by 30% compared to traditional routes. The port will help India boost trade with Kazakhstan, Uzbekistan, and other Central Asian countries, which have vast natural resources and are significant markets for Indian companies.

Chabahar is a strong alternative to Pakistan’s Gwadar Port, part of the China-Pakistan Economic Corridor. This allows India to counterbalance China and Pakistan on both trade and strategic fronts. The development of Iran’s Chabahar Port symbolizes 20 years of co-operation between India and Iran.

After an agreement in 2003, the project gained momentum during Prime Minister Narendra Modi’s visit to Iran in 2016. In 2019, goods from Afghanistan arrived in India, bypassing Pakistan and marking the beginning of a new trade route. In 2020, there were reports of Iran removing India from a project.

American sanctions and regional politics have also impacted the project, and now in 2024, almost 20 years later, this agreement has been signed again. The US warned that any country trading with Iran could face sanctions. This project would benefit the entire region and the External Affairs Minister urged the US to adopt a broader perspective.

He noted that the US had previously exempted Chabahar from sanctions. Chabahar Port offers several opportunities for investors and develops regional trade hub, logistics and transportation companies have significant business growth potential and developing infrastructure around the port.

It will not only help India boost trade with Afghanistan and Central Asia but also promote regional co-operation. However, tensions in US-Iran relations and the uncertainty of American sanctions remain challenges for this project. This Port could prove to be a game-changer for India. It will help India play a significant role in trade and strengthen its relations with Central Asia and Europe.

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