Door now open to India's "extended neighbours" Central Asia

Business Friday 14/June/2024 11:18 AM
Door now open to India's "extended neighbours" Central Asia

New Delhi: In a landmark move to bolster its strategic and economic foothold in Central Asia, India has signed a 10-year agreement with Iran for the operation of the Chabahar Port. This long-term deal, signed between Indian Ports Global Ltd. (IPGL) and Iran's Port and Maritime Organisation (PMO), grants India operational control over the Shahid Beheshti terminal, a key component of Chabahar's port infrastructure.

This agreement is more than just a bilateral trade enhancement; it is a gateway for India into the heart of Central Asia, redefining trade dynamics and geopolitical relations in the region.

We can find evidence of India's connection to Central Asia and Europe even before opening of the Silk Routes in the 3rd century BCE.

In India's ancient trade relations with Europe, as the oldest scripture of the world, the Rigveda mentions trade routes and interactions with regions west of the Indian subcontinent, which would include parts of ancient Persia. The Arthashastra, an ancient Indian treatise on statecraft and economics by Chanakya, mentions trade with western lands, which implicitly includes the region of Chabahar, known as Tis.

Why is Chabahar Port important for India?
Chabahar Port, located in southeastern Iran near the China-controlled Gwadar Port, stands out due to its strategic and logistical advantages. It includes two main terminals, Shahid Kalantari and Shahid Beheshti, each equipped with five berths, facilitating significant cargo handling capabilities.

As Iran's busiest port, Bandar Abbas and Chabahar port is a deep-water port with direct access to the Indian Ocean, bypassing the Strait of Hormuz. Noted that the port operators of the Bandar Abbas port are currently under US sanctions. This geographical advantage allows for the accommodation of larger cargo ships, ensuring faster and safer entry, and making it the closest Iranian port to India.

For instance, Chabahar is only 550 nautical miles from Gujarat's port of Kandla and 786 nautical miles from Mumbai.

Strategically positioned at the nexus of South Asia, Central Asia, and the Middle East, Chabahar Port serves as an ideal transit hub for trade between India and Central Asian countries. This port offers India a crucial strategic edge in regional trade and logistics, especially in circumventing the often-strained routes through Pakistan.

Strategic Importance, Alternative Trade Route
India's traditional trade routes to Afghanistan and Central Asia have been heavily dependent on transit through different routes. However, the Chabahar Port provides an alternative route that bypasses Pakistan, thereby reducing India's dependency on its others. This independence is crucial for uninterrupted trade and geopolitical strategy.

Access to Afghanistan and Central Asia, Chabahar offers India an alternative trade route to Afghanistan and Central Asia, bypassing Pakistan. This is crucial for India's strategic interests, especially given the tense India-Pakistan relations.

The port is part of the International North-South Transport Corridor (INSTC), a multimodal network that links India, Iran, Russia, and Europe, reducing transit time and cost for goods traveling between these regions. By developing Chabahar, India aims to establish it as a trade hub to enhance its commercial ties with Iran and other Central Asian countries. The port facilitates access to the rich natural resources of Central Asia, including oil, natural gas, and minerals.

Although primarily a commercial project, Chabahar also offers strategic military advantages. India can potentially use the port to enhance its naval footprint in the Indian Ocean, monitoring maritime activities and ensuring the security of sea lines of communication.

Economic Benefits
The economic implications of Chabahar are profound. By enabling a direct trade route, Chabahar enhances India's access to the resource-rich markets of Central Asia, Afghanistan, Russia, and Europe. It allows India to diversify its trading partners and routes, mitigating risks associated with over-reliance on any single transit path.

Estimates suggest that the INSTC route could save up to 30 per cent in costs and 40 per cent in transportation time, ensuring quicker turnaround at competitive prices. This efficiency is particularly beneficial for Central Asian nations like Kazakhstan and Uzbekistan, which are landlocked and lack direct access to the sea. These countries have expressed keen interest in leveraging Chabahar to access the Indian Ocean and expand their market reach into India.

India's commitment to the Chabahar Port project dates back to May 2015, when a memorandum of understanding (MoU) was signed for its development. In May 2016, India, Iran, and Afghanistan signed a trilateral agreement to establish the International Transport and Transit Corridor, also known as the Chabahar Agreement. This agreement aimed to enhance transportation and trade connectivity among the three nations, positioning Chabahar as a pivotal transit point.

The recent 10-year contract solidifies India's long-term strategic vision. The operational control over the Shahid Beheshti terminal enables India to directly influence trade logistics and efficiency at the port. This development is expected to attract significant investments and foster regional trade partnerships, further cementing Chabahar's role as a critical logistics hub.

Enhanced relationships with "extended neighbours" Central Asian Republics
India's operational control of Chabahar Port extends its active role into Central Asia, a region of significant strategic and economic interest. This move allows India to play a more prominent role in regional trade networks, potentially countering the influence of other regional powers like China and Pakistan. The Chabahar Port is a critical node in India's broader strategy to connect with Central Asian markets and resources, providing a ground for a multidimensional development platform.

Regional Stability and Economic Growth

The operationalisation of Chabahar Port is expected to contribute to regional stability by fostering economic growth and interdependence. Enhanced trade routes and economic activities can promote stability in Afghanistan and other neighboring countries by creating jobs and economic opportunities.

This development aligns with India's broader goal of promoting peace and stability through economic development in the region.

The Chabahar Port deal marks a significant milestone in India's strategic and economic policy towards Central Asia. By securing a long-term operational agreement, India has not only established a crucial trade route that bypasses traditional barriers but also positioned itself as a key player in regional trade dynamics. The port's strategic location and logistical advantages make it a linchpin in the International North-South Transport Corridor, promising substantial economic benefits for India and its partners.

As India continues to develop and operationalize the Chabahar Port, the prospects for enhanced trade, regional stability, and economic growth become increasingly tangible. This deal opens new doors for India to Central Asia, fostering a future of interconnectedness and shared prosperity.