Turn Chabahar Port into a game-changer

India needs to rope in Central Asian states

Once again there has been a lot of hype about Chabahar becoming a strategic ‘game changer’ for India. Media reports had earlier highlighted the shipment of 1.1 million tonnes of wheat to Afghanistan through Chabahar port as India sending subtle messages to its friends and foes across the region.

Highlights:

• New trade vistas :
• Chabahar in Iran to make Afghanistan most important regional hub
• It can act as a bridge connecting Indian Ocean and Central Asia
• India gets easy access to Eurasia via Iran
• Can start using 7,200-km North-South Corridor
• Landlocked Central Asia can use as Chabahar shortest route to maritime trade
• India should explore an FTA to spur trade with Eurasian Economic Union
• Trade with Central Asia is minimal at around $1 billion
• Trade with Eurasia has potential to touch $170 billion

A fresh sense of excitement followed Iran’s commissioning of the first phase of the Shahid Beheshti terminal at Chabahar port on December 3. Indian strategic commentators have been quick to characterise Chabahar as India’s counterweight to Pakistan’s Gwadar Port, China's Belt & Road Initiative and finally gaining easy access to Eurasian markets.

More interesting news followed with the Commissioner of the Central Board of Excise and Customs (CBEC) stating that the much-touted International North-South Transport Corridor (INSTC), after languishing for nearly 15 years, would be operationalized next month. This will enable India to send its first consignment through the 7,200 km INSTC to Russia or Turkey via Iran on January 15, 2018.

The corridor is expected to cut the time and cost for transportation by half – thus helping India-Russia trade to grow from the current US $6 billion to 30 billion over the next 10 years.

Iran is undoubtedly the ideal transit country for India to be the gateway to Central Asia and Russia as it gives ready access to a number of trade corridors (existing and planned). Chabahar in particular offers an attractive opportunity for India given the Iranian interest in building the port as a commercial hub. It is the only Iranian port on the Indian Ocean and has deeper draft compared to Bandar Abbas.

Chabahar has two terminals - Shahid Kalantari and Shahid Beheshti. The first terminal is handling about 2.1 million tonnes of cargo per year and, with the operationalization of the Shahid Behestiterminal, the capacity will increase to about 10 million tonnes.

Iran has recently imported cranes from Germany for the first terminal jetty at Shahid Behesti where shipments of wheat from India had been recently offloaded and were trucked to Afghanistan.

The cost of German-made cranes and equipment worth $85 million for the terminal was made through the Indian investment. India had earlier committed a $500 million line of credit to develop the port soon after the Iran nuclear deal went into effect in January 2016 and sanctions were lifted.

The 2016 Trilateral Transit Agreement makes it incumbent on India to build and operate Chabahar Port (two terminals and five berths with cargo handling for 10 years). The MoU provides the necessary legal framework for trans-shipment of goods to Afghanistan.
According to some estimates, with the operationalisation of the Chabahar port and INSTC, India’s trade with Eurasia could grow rapidly up to $170 billion (60.6 billion export and 107.4 billion import).

With the commissioning of the Shahid Behesti terminal, a greater prospect now opens up for enlarging both the operational and practical scope of Chabahar to become a vital gateway and the shortest land route to access Central Asia.

However, the further construction of a multi-purpose terminal at Chabahar including India’s plan to build a 610 km north-south railway (Chabahar to Zahedan) cannot be realised unless a Central Asian state, apart from Afghanistan, becomes a direct stakeholder in the port.

So far, connecting to Afghanistan has been essential for India to fulfil its strategic commitment. But for the route to be economically viable, reaching out to Central Asia becomes more imperative,

for it is this region which houses the most strategic and high-value minerals including uranium, copper, titanium, ferroalloys, yellow phosphorus, iron ore, rolled metal, propane, butane, zinc, coking coal, etc. For example, Kazakhstan alone wants to increase its non-oil exports by 50 per cent by 2025. And, without a direct transport access, India cannot procure the Central Asian riches needed for its manufacturing economy.

India’s current trade with Central Asia is minimal at a little over $1 billion and is not growing much. The volume of trade with the region accounts for merely 0.11 per cent of India’s total trade. Similarly, India’s share in Central Asian total trade is only about one per cent. Only by improving transport connectivity can the prospect of commercial ties with the region be enhanced.

For the landlocked countries of Central Asia, Chabahar now becomes the shortest land route option to conduct their maritime trade. So far, they have been relying on seaport facilities in Turkey, Russia, Baltic States, Iran (Bandar Abbas) and China.

Until recently, only the Kazakh operator, has expressed interest in constructing a terminal in Mundra (Gujarat). But, with the opening of Chabahar port, Uzbekistan sought access to the Indian Ocean through a deal with Afghan railways just two days after the Shahid Behesti terminal was inaugurated on December 3.

Herat is a gateway to Iran and once this trans-Afghan transport corridor project is completed, it will eventually enable both Afghanistan and Uzbekistan to get a direct link to sea ports and send cargoes to and from Chabahar.

In the backdrop of these developments, India now needs to look at the strategic role of Chabahar port for evolving an integrated transportation network involving both the INSTC and the proposed transit corridor to Central Asia from Chabahar. In fact, the Chabahar-Iranshahr-Zahedan-Mashad corridor is the most ideal route to connect to Sarakhs (Turkmen border). India has already committed to lay a railway track from Chabahar to Zahedan.

Chabahar port can be connected with INSTC if the line is further extended till Mashad. In fact, Chabahar-Iranshahr-Zahedan-Mashad can be linked to the existing Eurasian railway line which connects other parts of Central Asia.

Similarly, this route can hook onto ongoing corridor plans and programmes like Transport Corridor Europe-Caucasus-Asia (TRACECA), Central Asia Regional Economic Cooperation (CAREC) and other multilateral transport initiatives in the region.

India could tie up the loose ends of connectivity projects with Central Asia through both bilateral and multilateral mechanisms. So far, India has completed the 218-km road from Delaram in Afghanistan to Zaranj at the Iran-Afghanistan border.

When it comes to Eurasia, container transport plays a significant role, and for India to join the competitive situation in the Euro-Asian transit system, active participation in transportation projects becomes essential.

India’s connectivity approach need not be limited to increasing trade and commerce but should aim to enhance investment and services, interlinking sources of raw-material, centres of productions and markets between India and Eurasia.

For example, a Free Trade Agreement (FTA) between India and Eurasian Economic Union (EAEU) could spur the unhindered flow of raw-materials as well as inflow of capital and technology through new industrial infrastructure along Chabahar and INSTC routes.

India’s decision to accede to the Ashgabat Agreement that aims to build an international multimodal transport and transit corridor facilitating transportation of goods between Central Asia and the Persian Gulf is a step in the right direction.

All of these initiatives along with the Chabahar operation should stir enthusiasm among Indian companies to join various international transport corridors in Eurasia. But more significantly, the Chabahar link would singularly make Afghanistan as the most important regional transportation hub and a bridge connecting the Indian Ocean and Central Asia.

Afghanistan shares borders of 137, 744 and 1,206-kilometres with Uzbekistan, Turkmenistan and Tajikistan, respectively. However, trade among the three countries has remained very low due to poor transport infrastructure.

The construction of railway tracks would enable Afghanistan to play the bridging role for integrating the Central Asian region with global markets. The Asian Development Bank (ADB) had earlier estimated that an improved transportation link between Central Asia and Afghanistan will boost regional trade by up to $12 billion.

(Writer served as Ambassador in Central Asia and is currently a Senior
Fellow at IDSA, New Delhi; Courtesy: https://idsa.in; Excerpts from an article)

By P Stobdan