India developing Chabahar Port in Iran to create new Eurasian trade routes and de-risk commerce

Jaishankar at SCO Summit
Indian External Affairs Minister S Jaishankar speaks about the Chabahar Port at the SCO Plus format meeting in Astana on July 4. Photo courtesy: X/@DrSJaishankar

In a world where global political and military conflicts often create barriers for trade and commerce, thereby disrupting economic goals, new trade routes can become avenues for reaching diverse markets and de-risking business.

India’s 2024 agreement with Iran to develop and operate the Chabahar Port, on the Gulf of Oman, for 10 years is a landmark that promises to open up many such new routes to the landlocked nations of Central Asia and also Afghanistan.

This week, speaking in Astana, the capital of Kazakhstan, while attending the SCO Summit, Indian External Affairs Minister (EAM) S Jaishankar said, “For the SCO extended family, we flag the progress made on Chabahar port recently through a long-term agreement between India and Iran. This not only holds great value to landlocked Central Asian states but also de-risks commerce between India and Eurasia.”

The SCO, or the Shanghai Co-operation Organisation, is a Eurasian political, economic, international security and defence organisation. Now in its 24th year, the entity was established by China and Russia in 2001.

The Central Asian nations of Kazakhstan, Kyrgyzstan, and Tajikistan are SCO member states. Observer states include Afghanistan, Belarus, and Mongolia. Dialogue partners include India, Iran, and Pakistan.

EAM Jaishankar delivered the remarks of Indian Prime Minister Narendra Modi at a meeting of the SCO Council of Heads of State. He said, “While standing resolute on challenges, it is equally important to actively and collaboratively explore avenues of progress. The current global debate is focused on creating new connectivity linkages that would better serve a rebalanced world.

“If this is to gather serious momentum, it requires the joint efforts of many. It must also be respectful of the sovereignty and territorial integrity of states and be built on the foundation of non-discriminatory trade and transit rights to neighbours.”

Stating this, Jaishankar spoke of the “great value” of the Chabahar Port development.

The 10-year contract between India and Iran was signed on May 13. The news agency Reuters reported: “India has been developing the port in Chabahar on Iran’s south-eastern coast along the Gulf of Oman as a way to transport goods to Iran, Afghanistan, and central Asian countries, bypassing the port of Karachi and Gwadar in its rival Pakistan.”

Reuters quoted Indian Shipping Minister Sarbananda Sonowal as saying in Tehran, after the signing of the agreement, that “Chabahar Port’s significance transcends its role as a mere conduit between India and Iran; it serves as a vital trade artery connecting India with Afghanistan and Central Asian Countries”.

The minister said, “This linkage has unlocked new avenues for trade and fortified supply chain resilience across the region.”

Development of the Chabahar Port has been hindered by US sanctions on Iran, which remain in place, but India has gone ahead with the deal.

The 10-year agreement on the Chabahar Port was signed between Indian Ports Global Limited (IPGL) and the Port & Maritime Organisation of Iran.

Under this deal, the IPGL would invest about USD 120 million, and there would be an additional USD 250 million in financing, said Mehrdad Bazrpash, Iranian Minister of Roads and Urban Development.

The Indian entity has been handling the operations of the Iranian port since the end of 2018.

India and Iran are also working on a railway project between the Chabahar Port and Zahedan City. The new 2024 agreement is likely to fast-track this project.

Press Trust of India reported that the Chabahar Port was used by India in 2023 to send 20,000 tonnes of wheat aid to Afghanistan. In 2021, the port was used to supply eco-friendly pesticides to Iran.

The PTI report said: “India has been developing a part of the Chabahar Port and discussions on the development of the port date back to 2003 during Iranian President Muhammad Khatami’s visit to India.”

About the proximity of the Chabahar Port to Indian ports, PTI reported: “Kandla port in Gujarat is the closest to the Chabahar Port at 550 nautical miles while the distance between Chabahar and Mumbai is 786 nautical miles.”

In the Middle East, the Chabahar Port is directly across the gulf in a straight line from the Omani capital of Muscat.