India to develop Iran’s Chabahar port; expand international trade

MUMBAI (ICIS)–India and Iran are currently charting plans to acquire equipment and machinery to enhance the capacity and increase vehicular movement at Chabahar port, after the two countries signed a 10-year deal to develop part of the Iranian port.

State-owned Indian Ports Global Ltd (IPGL) and the Ports & Maritime Organisation (PMO) of Iran signed the agreement to develop and manage the Shahid-Behesti terminal at the Chabahar Port in southeastern Iran.

“These efforts had been hampered in the past due to the US sanctions on Iran,” a source from India’s Ministry of Ports, Shipping and Waterways said, citing international sanctions imposed on the Middle Eastern country, which is suspected to be developing nuclear weapons.

IPGL will invest around $120m in equipping the port, with India offering additional financing worth $250m for the development of mutually identified projects aimed at improving port infrastructure, the source said.

Iran’s Chabahar Port on the Gulf of Oman consists of the Shahid Beheshti port, which will be developed by India, and the Shahid Kalantri port.

“The long-term contract will further strengthen ties between the two nations and highlights the importance of Chabahar as a gateway for trade with Afghanistan and Central Asian countries,” the shipping ministry said in an official announcement on 13 May.

“The Chabahar Port has easy access to India’s west coast. The long-term contract will give a significant boost to economic activities and establish our growing role in developing global trade & commerce,” Indian shipping minister Sarbananda Sonowal posted on social media platform X on 14 May.

India imports methanol, bitumen, liquefied propane, inorganic/organic chemicals, among others from Iran; while it exports pharmaceuticals, rice, tea, sugar and fruits to the Middle Eastern country.

The Chabahar project is part of the proposed International North-South Transport Corridor (INSTC), a multi-modal transportation network of ship, rail and road route for moving goods between India, Iran, Azerbaijan, Russia, Central Asia and Europe.

India and Iran had initially signed an agreement for the development of the port in 2003, but the project was stalled due to opposition from the US.

The current deal replaces a 2016 agreement between the two countries that was being renewed periodically.

IPGL, which took over operations at the Shahid Beheshti port in 2018, has handled more than 90,000 20-foot-equivalent units of container traffic and more than 8.4m tonnes of bulk and general cargo since then, the source from the shipping ministry said.

The lack of a long-term agreement was, however, impacting investment by shippers and investors in the region.

“The industry was initially uncomfortable about allowing its long-term supply chains to pass through Chabahar port as the Indian government did not have a long-term agreement with Iran for the port,” the official said.

Negotiations for a long-term deal between the two countries had been stalled due to differences on several issues, including a disagreement on an international arbitration framework in case of disputes, he added.

The Shahid Beheshti port is being developed in four phases; and on completion of all four phases, port capacity will be 82m tonnes/year, as per IPGL’s website. The first phase of the development was inaugurated in December 2017.

Despite its potential, the Chabahar project could face hurdles due to the re-imposition of US sanctions on Iran, the government source said.

US state department spokesman Vedant Patel on 14 May warned of possible sanctions against those engaging with the Iranian government.

Focus article by Priya Jestin