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May 14, 2024

India Seals Decade-Long Deal to Operate Iran’s Chabahar Port

India and Iran have formalized a pivotal agreement, cementing India’s role in the operation of the strategic Chabahar Port for the next decade. The contract, inked on Monday, marks a significant milestone in India’s efforts to enhance trade routes to Central Asia and Europe. This deal, announced by India’s Ministry of Ports, Shipping, and Waterways, will be managed through a collaboration between India Port Global Limited (IPGL) and Iran’s Ports and Maritime Organization (PMO).

Located on Iran’s southwestern coast, Chabahar Port is uniquely positioned to connect India with its western coast, forming a critical juncture in the International North-South Transport Corridor (INSTC). Union Shipping Minister Sarbananda Sonowal highlighted the port’s importance on social media, emphasizing its role in bolstering global trade and commerce.

While an initial agreement for Chabahar’s operation was signed in 2016, progress was hampered by international sanctions against Iran. Consequently, India had been operating the port under short-term agreements, which were repeatedly renewed. This uncertainty deterred significant investments and long-term shipping plans due to the lack of a stable, long-term contract.

“The absence of a long-term agreement has been a major concern for investors and shippers,” noted a government official. “With the government now committing to a decade-long contract, this issue should be resolved, paving the way for streamlined operations and greater investment.”

India’s engagement with Chabahar Port extends beyond commercial interests. The port is set to become a cornerstone of India’s regional trade strategy and a vital part of the global supply chain. Sonowal emphasized that the port would also facilitate humanitarian aid shipments, underscoring India’s commitment to regional stability and development.

A 10-member delegation, including officials from the Ministry of Ports, Shipping and Waterways, and the Ministry of External Affairs, led by Sonowal, traveled to Tehran to finalize the agreement. This visit, which required a special exemption from the Election Commission due to ongoing Lok Sabha elections, underscores the strategic importance of the deal.

External Affairs Minister S. Jaishankar, speaking at an event in Mumbai, elaborated on the benefits of the long-term agreement. “The port’s development has been stalled due to the lack of a definitive agreement. With this new long-term contract, we anticipate substantial investments and enhanced connectivity,” he stated. Jaishankar also highlighted Chabahar’s role in connecting India to Russia and Central Asia via the INSTC, reducing transportation costs and time, and boosting trade between these regions.

Experts agree that the development of Chabahar Port offers strategic advantages for India. According to Raju Kumar, Tax Partner at EY India, the port will diversify India’s import routes, provide access to new markets in Central Asia, and enhance energy security by diversifying sources. The port’s strategic location will also bolster India’s geopolitical influence in the region, enabling the country to mitigate risks associated with traditional import routes.

In summary, the 10-year agreement for Chabahar Port marks a significant step forward in India’s regional trade and strategic objectives. This development not only facilitates economic growth and trade efficiency but also strengthens India’s position in global and regional geopolitics. As the port evolves under this new agreement, it promises to unlock numerous opportunities for trade, infrastructure development, and regional cooperation

Jhumpa Lahiri

Jhumpa Lahiri

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