India Wants Chabahar Port to be a Conduit for Trade to Central Asia, Russia

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India supports linking the Chabahar Port with the INSTC so it can become a transit hub for trade with countries in the Commonwealth of Independent States. This was recently highlighted by government representatives on Chabahar Day, observed July 31. The INSTC is also receiving renewed interest from New Delhi as it will enable an increase in India-Russia overland trade. Western-led sanctions on Russia followed by the retreat of several MNCs from the country have created an economic vacuum that India is competing to fill.

What’s at stake

India considers the Chabahar Port to be a strategically located facility that can improve trade connectivity between Central and South Asia and rationalize logistics costs. New Delhi is thus keen to include the port within the International North-South Transport Corridor (INSTC) although the proposal has not received much support.

The INSTC is an ambitious regional connectivity undertaking and will speed up the time taken for trade shipments headed to markets in Russia, Europe, and Central Asia.

For India, the INSTC offers shorter trade routes with Iran, Russia, and beyond to Europe. It also creates newfound opportunities for economic engagement and direct trade with untapped markets in the Commonwealth of Independent States (CIS). The CIS countries include erstwhile members of the Soviet Union and are Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, and Uzbekistan.

Eight out of nine CIS countries are part of the INSTC, along with Oman, Syria, and Bulgaria, noted a senior Commerce Department official speaking to Indian media. India’s exports to Central Asia amount to about US$678 million but there are huge prospects for growth. India mostly exports pharmaceuticals, machinery, coffee, tea, and spices. Moreover, India could diversify its sourcing networks for energy and minerals if it had better access to the region.

Most recently, on July 28, India and Uzbekistan agreed to a pilot container cargo shipment from Tashkent to India through a hybrid land-sea route via the Chabahar Port – to be executed in the following 15-20 days. The shipment would dock at the Jawaharlal Nehru Port (JNPT) at Navi Mumbai. India and Uzbekistan are currently working to increase bilateral trade by two times – to over US$1 billion and have arranged frequent high-level visits. In 2021-22, India-Uzbekistan bilateral trade stood at US$342 million. The INSTC would create a multimodal transport corridor to facilitate this trade push. 

INSTC corridors make use of several thousand kilometers of “all-weather highways” from the city of Chabahar in the south through to Azerbaijan in the north and onwards to Russia and Europe.

Both Iran and India are now interested in using the INSTC to increase their overland trade with Russia, which was discussed during a recent visit to Delhi by Iranian Foreign Minister Hossein Amir-Abdollahian. India’s exports to Russia in 2021-22 amounted to US$3.24 billion while imports rose to US$9.86 billion, including US$5.25 billion worth imports of crude oil, processed petroleum, and coal. India’s imports pre-pandemic stood at US$7 billion (2019-20) and exports US$3 billion.

It is reported that about 40 countries have imposed different types of sanctions on Russia, representing more than half the global economy, followed by the retreat of more than 1000 companies from the country. The subsequent economic vacuum has opened up robust opportunities for Indian businesses in multiple sectors, especially in retail and export trade. Both India and Russia are clearing up bottlenecks to smoothen supply chain movement from the regions. The Economic Times reports that the Russian government is making changes to improve the country’s ease of doing business, such as streamlining regulatory compliance and waiving various fees. 

India’s role in Chabahar

India has heavily invested in the Chabahar Port, which will provide it with sea-land access to Afghanistan and Central Asia through Iran, bypassing Pakistan. This investment is key to India’s strategic ambitions in the region as well as to bolster trade and economic linkages. The Iranian port, once completed, will rival the Gwadar Port, about 80km away, in the Balochistan province of Pakistan.

India has helped develop two terminals at the Chabahar port, which is Iran’s only ocean port, including the Shahid Beheshti complex. Under an agreement with Iran, India will run the terminal for 10 years. Since December 2018, an Indian company, Indian Ports Global Limited (IPGL), has been managing the port’s operations. IPGL acquired Chabahar Port through its subsidiary India Ports Global Chabahar Free Zone (IPGCFZ).

The current loading and unloading capacity of Shahid Beheshti terminal at the Chabhar Port is 8.5 million tons and will be enhanced to 15 million tons on completion of Phase I of the project, as per the Indian government. According to reporting by the Financial Tribune, an Iranian English economic daily, the Chabahar Port handled 1.55 million tons of goods in the initial four months of the 2022-23 Iranian fiscal year, March 21 to July 22, which was a 33.8 percent rise when compared to the same period last year. Essential goods imported via Chabahar port during this period included sugar, rice, wheat, and animal feed – amounting to more than 580,000 tons and showing a 7.7 percent year-on-year rise. The jump in port business, however, can likely be attributed to normalization of operations after the pandemic.

Meanwhile, according to Indian media, Iran and India are expected to take administrative steps to resolve certain issues affecting the Shahid Beheshti terminal of the Chahbahar Port.

India and Iran have improved their relations in recent years. At the Shanghai Cooperation Organisation (SCO) meeting of foreign ministers on July 29, India’s External Affairs Minister S. Jaishankar welcomed the expansion of the body to include Iran next year.

Diplomatic overtures

The Indian government introduced a “Chabahar Day”, observed July 31, to mark the beginning of INSTC – an Indian vision to economize movement of cargo between India and Central Asia.

Speaking at an event organized in association with the IPGL, the Indian Union Ports, Shipping and Waterways Minister Sarbananda Sonowal said: “Chabahar Port links the rich Central Asian region with the South Asian markets. It has emerged as significant for trade, economic collaborations and connecting people between the two geographies. Owing to the potential of the Central Asian markets, the India-led connectivity has provided a secure and commercially viable access to the Indian Ocean region for Central Asian countries. This link will not only provide connectivity, but also drive investments further supporting our cultural and political ties, he added.  It will additionally develop the transit and transport potential of the Central Asian Region and improve their logistic network, he added.  Chabahar Port will lead to promoting a joint initiative to create a regional and international transport corridor over there.”

Sonowal urged Central Asian countries to use the Chabahar Port for trade logistics as it provides a shorter, faster, and more reliable route between India and the region.

Another government representative at the event, the Minister of State for Ports, Shipping and Waterways and Tourism Shri Shripad Yesso Naik, said that developments in the Shahid Beheshti Port would support the faster growth of business and raise standards of living in the region. This infrastructural linkage would lead to expansion of trade and investment prospects in the region and growth in the maritime sector.

Back in 2016, India had agreed to make US$8 billion investments in the port and industries in the Chabahar Special Economic Zone. However, the natural economic growth potential of the port has been frustrated due to ongoing US government sanctions.

Trade routes under the International North South Transport Corridor

Launched in 2000 with India, Russia, and Iran as its founding members, work on actualizing the International North South Transport Corridor began in 2002. The INSTC is a 7,200 km-long multimodal transportation network encompassing sea, road, and rail. Its routes link the Indian Ocean to the Caspian Sea via the Persian Gulf and onwards into Russia and Northern Europe. Plans have been proposed to extend INSTC corridors to reach the Baltic, Nordic, and Arctic regions.

The INSTC can lower the carriage cost between India and Russia by about 30 percent and bring down transit time by more than half.

The infrastructure incorporated by the INSTC spirals across the following geographical corridors:

  • Central corridor: It begins from the Jawaharlal Nehru Port in India’s western state of Maharashtra (in the Indian Ocean Region) and connects to the Bandar Abbas port on the Strait of Hormuz. It then passes through the Iranian territory via Nowshahr, Amirabad, and Bandar-e-Anzali, runs along the Caspian Sea to reach the Olya and Astrakhan Ports in Russia.
  • Western corridor: It connects the railway network of Azerbaijan to that of Iran via the cross-border nodal points of Astara (Azerbaijan) and Astara (Iran) and further to Jawaharlal Nehru port in India via sea route.
  • Eastern corridor: It connects Russia to India through the Central Asian countries of Kazakhstan, Uzbekistan, and Turkmenistan. India wants the Chabahar port to be included in this eastern corridor.

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