Why developing the Chabahar port in Iran is important for India

HIGHLIGHTS

• The Iranian President's visit to India could see India and Iran seal details of the final take over of operations of the strategically important port by New Delhi.

• The Chabahar port will bypass Pakistan.

• It will set up India's road access to four cities in Afghanistan.

The first phase of the Chabahar port in south-east Iran, which India is developing, was inaugurated in December last year. The port opened a new strategic transit route between India, Iran and Afghanistan that bypassed Pakistan. Iranian President Hassan Rouhani’s visit to India, which began on Thursday, could see the two sides seal details of the final take over of operations of the strategically important port by India. Here's why the port is crucial to regional trade and India's economic ties to its partners in this tripartite project:

1.Chabahar is turning out to be a success story in the India-Iran relationship. With the operationalisation of the port, it is witnessing high activity, and there are unconfirmed reports of traffic being diverted from Karachi to Chabahar. In an attempt to circumvent the banking problems caused by western sanctions on Iran , India will, for the first time, allow investment in rupees in Iran. This is a special arrangement, sources said, which is only allowed for Nepal and Bhutan.This was a request from the Iranian side, acceded to by the Indian government, sources said.

2.India is one of a handful of countries that continued trade links with Iran despite it being isolated by Western countries against its disputed nuclear programme. New Delhi is Tehran's second-biggest oil client after Beijing.

3.The project moved slowly because of western sanctions against Iran. The sanctions were lifted in January last year, and since then, India has been pushing for conclusion of an agreement.

4.The Chabahar port will cut transport costs/time for Indian goods by a third. The port is likely to ramp up trade among India, Afghanistan and Iran in the wake of Pakistan denying transit access to New Delhi for trade with the two countries.

5.Iran plans to turn the Chabahar port into a transit hub for immediate access to markets in the northern part of the Indian Ocean and in Central Asia.

6.About a fifth of the oil consumed worldwide each day passes through the Strait, a shipping choke point that separates the Persian Gulf from the Gulf of Oman and Indian Ocean.

7.The Chabahar port, located in the Sistan-Baluchistan Province on Iran's southern coast, will also set up India's road access to four cities in Afghanistan.

8.From Chabahar, the existing Iranian road network can link up to Zaranj in Afghanistan, about 883 kms from the port. The Zaranj-Delaram road constructed by India in 2009 can give access to Afghanistan's Garland Highway, setting up road access to four major cities in Afghanistan -- Herat, Kandahar, Kabul and Mazar-e-Sharif.

9.The port project will be the first overseas venture for an Indian state-owned port. India and Iran had in 2003 agreed to develop Chabahar on the Gulf of Oman outside the Strait of Hormuz, near Iran's border with Pakistan.

10.Indian investment in phase-1 will be more than $200 million, including $150 million line of credit from Exim Bank. Iran is believed to have asked the Indian government to "manage" or operate the first phase of the port, until work for the second phase is finalised.