Dubai: Iran moved closer to realising its ambitions of becoming a regional trading hub this week with India committing to developing the country’s only port with direct ocean access.
Iran, India and Afghanistan agreed on Monday to revive a 2003 project to build a trading corridor that would connect Afghanistan to the Indian Ocean via Iran. India is committing $500 million (Dh1.83 billion) to develop Chabahar port on the Gulf of Oman and for rail links that will give landlocked Afghanistan an alternative to Pakistani seaports.
The announcement ties in with a series of agreements between Iran and regional countries to develop north-south trading corridors linking the Indian Ocean through Iran to energy-rich former Soviet states, Russia and Eastern Europe.
Iran has “grand ambitions to serve as a trade hub not just for the Middle East but into the Caspian and Central Asia,” Henry Smith, associate director at Control Risks, told Gulf News by phone on Thursday.
Chabahar port, undeveloped and in Iran’s southeast, is the country’s only seaport outside the Arabian Gulf and Caspian Sea, which is close to the capital Tehran. The Indian investment to expand infrastructure will make the port capable of handling container vessels. Today, it mainly handles bulk cargo.
The agreement is a “validation of Iran’s policy to build its position as a regional hub for manufacturing, distribution and export,” former UK ambassador to Iran Richard Dalton told Gulf News by email.
Chabahar is outside the Strait of Hormuz, a shipping choking point that separates Iran and the Arabian Peninsula and where nearly a fifth of the world’s daily oil consumption passes through.
The Indian investment will give Iran a “major port facility” that “allows them to circumvent some of the potential problems that would arrive if there is an issue in the Gulf,” Smith said.
Shiite-majority Iran’s relations with its mostly Sunni-majority Arab Gulf neighbours have deteriorated this year following a series of events that started when Sunni-majority Saudi Arabia executed a prominent Shiite cleric in January. Protesters mobbed Saudi Arabia’s embassy in Tehran after the execution, leading to Saudi Arabia and Bahrain to cut diplomatic ties and the United Arab Emirates to downgrade ties to charge d’affairs.
Chabahar may provide Iran with additional assurance of guaranteeing its import and export trade but the port’s development is unlikely to rival the region’s larger terminals, including Dubai’s Jebel Ali.
“It’s not going to be any competitor to the existing ports in the region. This primarily serves an Indian purpose, whereas Iran gets some investments and developments,” said Peter Sand, Chief Shipping Analyst at BIMCO, the world’s largest shipping association.
China is developing a regional port 100 kilometres away in Pakistan’s southwest. China has plans to transform Gwadar into a regional shipping gateway linking the Indian Ocean with Central Asia, similar to India’s plans for Chabahar.
“Neither [Gwadar or Chabahar] ... are going to be on a scale anytime soon to threaten the role Jebel Ali plays in trade between Asia, the Middle East and Africa,” Smith said,
Iran also sits along the ‘One Belt, One Road’ trade route and both Tehran and Beijing see the country as an integral part of the strategy, whilst it is widely accepted that at least of part of India’s motivation to invest in Chabahar was to counter the China-Pakistan influence in the region.
Iran’s President Hassan Rouhani announced the Chabahar deal in Tehran during a visit by India’s Prime Minister Narendra Modi. Afghanistan’s President Ashraf Ghani flew in for the announcement.
This is “confirmation of its policy of dealing even-handedly with its neighbours to seek mutual advantage,” Dalton said.
The deal comes four months after the lifting of nuclear related sanctions against Iran, who has since taken steps to form closer economic and diplomatic ties with western and Asian countries.
China’s President Xi Jinping and South Korea’s President Park Geun-hye have both been to Tehran this year and Japanese Prime Minister Shinzo Abe is expected to be the next major Asian leader after Prime Minster Modi’s visit this week.
“All these big Asian economies … are important buyers of Iranian oil and gas and will remain,” Smith said. “Iran is not interested in doing anything to antagonise relationships with those countries.”
