Chabahar – Strengthening Eurasian Connectivity:

Sub Title : India’s strategic investment in Chabahar Port and beyond

Issues Details : Vol 18 Issue 2 May – Jun 2024

Author : Dr Vijay Sakhuja, Former Director, National Maritime Foundation

Page No. : 42

Category : Geostrategy

: June 5, 2024

India’s strategic investment in Chabahar Port signifies a pivotal step in enhancing Eurasian connectivity, positioning India as a significant player in the regional logistics and trade network, amidst geopolitical tensions and economic opportunities.

India and Iran have announced a long-term bilateral 10-year contract to “develop and operate” the Shahid Beheshti Port Terminal in the Chabahar port in Iran which overlooks the Gulf of Oman.  The agreement also paves the way for India Ports Global Chabahar Free Zone (IPGCFZ) and the Port & Maritime Organisation (PMO) of Iran to jointly oversee the development and operations at the terminal. The US $370 million investment (US$ 120 million by IPGL and US$ 250 by the Indian Government) in the port will “not only strengthens links between two great nations but also places India’s firm footstep in the global supply chain and maritime sector” said India’s Ports and Shipping Minister Sarbananda Sonowal.

Although the Agreement “aims to enhance regional connectivity and facilitate trade, particularly between India, Iran and Afghanistan”, the US warned of “potential risk of sanctions” against “anyone considering business deals with Iran”.  The warning comes on the heels of an earlier Iran-Pakistan business agreement signed during President Raisi’s three-day visit to Pakistan in April 2024. At that time, the US has issued a similar warning that “anyone considering business deals with Iran to be aware of the potential risk of sanctions.”

The Indian foreign minister sees the US warning a volte-face: “If you look at the US’s own attitude towards the port in Chabahar, the U.S. has been appreciative of the fact that Chabahar has a larger relevance… so, we will work at it,” He counselled that the international community, particularly the US, not take a “narrow view” of the India–Iran Chabahar agreement, and “that this is actually for everyone’s benefit,”. Meanwhile Iranian Ambassador to India appears quite sanguine and believes that the US will not “put itself (against) many countries who are going to use this (Chabahar) route as the best route.” Furthermore, the US “should at least, consider the benefit and interest of its partner.”

Be that as it may, the Indian investments in the Chabahar port project can potentially give the much-needed stimulus to the languishing International North-South Transport Corridor (INSTC), a multimodal transport corridor that connects Mumbai in India to St Petersburg in Russia. Chabahar also plugs into the web of Asian-Eurasian connectivity infrastructure and opens up multiple economic opportunities and enables business communities, particularly those involved in infrastructure development. In this context at least four transport corridors in the Asia-Eurasia region merit attention.

First, the 7,200 kilometers INSTC runs between South Asia and Europe through the Middle East, Central Asia, the Caucasus and Russia. The 13 partners of the INSTC ie Russia, India, Iran, Turkey, Azerbaijan, Belarus, Bulgaria, Armenia, Kazakhstan, Kyrgyz Republic, Oman, Tajikistan, and Ukraine have ratified the INSTC agreement. The issue of urgency to complete the INSTC features during their bilateral, trilateral and multilateral discussions, however, the  commitment of various partners has been weak resulting in its slow operationalization due to various reasons such as financial support for INSTC, cost of transportation vis a viz the sea route, throughput of the Chabahar Port, competition from the Chinese Belt Road Initiative (BRI), and the ongoing Ukraine-Russia war which precludes Russia to invest into the project.

Second, the Eurasian North Corridor (ENC). It connects Northeast Asia (Russia’s Far East and China’s North East) to Europe through Mongolia, Kazakhstan, Ukraine, Belarus and then to Europe. The ENC mostly comprise both rail and road options and the different arteries along the route link up seaports, industrial cities, economic and industrial centers which can be leveraged for the full potential of the route.

Third, the Chinese Silk Road Economic Belt (SREB) also referred to as the ‘Belt’ under the Belt Road Initiative (BRI) envisages revival of the ancient land trading route which enabled China to connect with Europe. The Belt is meant to “promote infrastructural development and connectivity, and stimulate economic integration across the Eurasian continent”. The Russia Ukraine War and the anti-Russia sanctions announced by the US led West, and US–China trade tensions, have forced Beijing to announce new connectivity initiatives. At the 3rd Belt and Road Forum in 2023, President Xi Jinping stated that his country’s future programs involved “building a multidimensional Belt and Road connectivity network” i.e. “China will speed up the high-quality development of the China-Europe Railway Express, participate in the trans-Caspian international transportation corridor, host the China-Europe Railway Express Cooperation Forum, and make joint efforts to build a new logistics corridor across the Eurasian continent linked by direct railway and road transportation.”  The BRI is perhaps the largest project undertaken by China and according to Belt and Road Initiative (BRI) Investment Report 2023, the cumulative investments were US$ 1.053 trillion (US$ 634 billion in construction contracts, and US$ 419 billion in non-financial investments).

Fourth, the Middle Corridor involves the littoral countries of the Caspian Sea; but excludes Russia and Iran.  It is also referred to as the Trans-Caspian International Trade Route (TITR) and runs across Central Asia and the South Caucasus through the Caspian Sea (ports in Kazakhstan and Turkmenistan) into Azerbaijan through the Georgian ports/across Turkey and links the Chinese and European markets. The TITR is multimodal network and is considered as the “safest and least complicated” option for conducting trade between Europe and Asia.

The TITR has the backing of several European and international financial institutions and nearly US$10.8 billion has been pledged for developing infrastructure along the route. The EU’s interest in the route are quite obvious and is triggered by the Russia-Ukraine war and sanctions which has reduced dependence on the Northern Corridor route.

It should be noted that the TITR is a shorter route and it takes 14 to 18 days though this route as compared to 19 days through Russia and 22 to 37 days through the sea routes. However, it is important to keep in mind that in terms of the numbers-volume of cargo, the sea route is the most economical albeit with several risks that commercial shipping must take into consideration.

The volume of cargo on the TITR was nearly 2 million tons (in the first nine months of 2023), an increase of 88% as against 1.1 million tons for the same period in 2022. The annual throughput capacity of the TITR is estimated to be 5.8 million tons and trade volume could be increase to 11 million tons by 2030 and travel time could shrink to nearly a half.

Sabang, Indonesia: The Next Destination

In 2018, Indian and Indonesian leaders, in their joint statement had emphasised the need for “connectivity, particularly on sea links, to facilitate economic cooperation and people-to-people contact” and “welcomed the plan to build connectivity between Andaman Nicobar-Aceh to unleash the economic potentials of both areas”. A Joint Task Force was set up to identify port related projects in and around Sabang and link it with Port Blair in the Andaman Islands giving a “boost the economy of Andaman Islands with that of western Sumatra (Aceh province)”.

The announcement was followed by Indonesian merchant vessel KM Aceh Mileniumas making a port call to Port Blair and the Indonesian envoy at New Delhi had labelled it as a “first step in forging business connectivity”. He was hopeful that Port Blair could emerge as the hub for trade and boost the tourism sector. Voyages i.e. between Malahayati Port, Aceh and Port Blair were expected to gather momentum, however it did not get the desired attention.

Both countries also set up the India-Indonesia Infrastructure Forum (IIIF) and in 2019 the second edition of the forum was held. Early this year in January 2024, India – Indonesia Business Forum 2024 discussed issues aimed at “promoting economic relations” focused on transportation infrastructure among other issues.

Green and Smart: Port Model for Amritkaal

In November 2023, the Indian Ports and Shipping Minister Sarbananda Sonowal had announced that the country was at an important stage to emerge as a “global leader” in the maritime sector and under the Maritime Amritkaal Vision, 2047, Indian ports would “break into the top 25 ports of the world”. While that is a laudable vision, it merits emphasis that ports across the globe are transforming and are fast emerging as smart-green ports.

The Indian government has put out “Green Port” benchmarks to uphold the sustainability part of the Port ecosystem by introducing “environment friendly technologies and adopting resilient designs to achieve the global benchmarks for development of sustainable Green Port”. The Harit Sagar guidelines 2023 focus on “inducting Green Technologies, reducing wastages, taking steps for reducing the Carbon Intensity per unit of cargo handled and initiatives for achieving the de-carbonization benchmarks set out in the Government’s Panchamrit Commitments”. Similarly, the thrust is on ensuring the Indian ports emerge as ‘Smart Ports’. In this context, the Maritime Vision India 2030 notes that “most Indian Major Ports need to enhance adoption of digital solutions to improve operations efficiency and stay ahead of competition”.