By GMM News | 2024-05-15 | International Shipping News |

India has signed a 10-year contract with Iran to develop and manage the strategically located Chabahar port.

The Indian government announced this deal to demonstrate the nation’s dedication to improving connectivity with vital industries in Iran, Afghanistan, and Central Asia, bypassing traditional routes through Pakistan.

The Chabahar port on Iran’s southern coast along the Gulf of Oman has long been envisioned as an essential gateway for India’s regional trade ambitions.

India intends to establish a direct route for cargo shipping by bypassing Pakistan’s Karachi and Gwadar ports.

However, progress on the port’s development had been delayed by US sanctions against Iran, which slowed its completion.

Sarbananda Sonowal, India’s Shipping Minister, highlighted the port’s greater significance beyond bilateral trade, citing its function as an essential route connecting India to Afghanistan and Central Asian countries.

Sonowal, speaking in Tehran after the agreement was signed, praised the pact as a catalyst for opening up new trade opportunities and increasing regional supply chain resilience.

The long-term agreement between Indian Ports Global Limited (IPGL) and Iran’s Port & Maritime Organisation includes significant investments.

According to Mehrdad Bazrpash, Iranian Minister of Roads and Urban Development, IPGL plans to invest roughly $120 million, supported by an additional $250 million in finance, bringing the entire agreement value to $370 million.

According to the deal, IPGL will take over operational responsibility for the Shahid-Behesti terminal, moving away from prior short-term contracts and toward a more stable, multi-year arrangement.

This measure will likely increase certainty for shippers and investors, providing a favourable atmosphere for trade activities.

Despite the enthusiasm surrounding the deal, US State Department deputy spokesperson Vedant Patel warned against forgetting Iran’s current sanctions.

Patel emphasised Washington’s resolve to implement sanctions, advising potential investors and entities doing business with Iran to be aware of the consequences.

The expansion of Chabahar port coincides with the construction of the Chabahar-Zahedan railway, which is critical for connecting the port to Iran’s national rail network and providing additional access to neighbouring Turkmenistan.

However, progress on this front has slowed, with completion now expected in 2024, according to Iranian state media.

India’s pursuit of increased trade with Central Asia, currently valued at $2 billion per year, attempts to close the trade deficit with China, which conducts around $90 billion with the region.

Developing an adequate port infrastructure in Chabahar is critical to unleashing India’s trade potential and streamlining logistics for increased economic engagement.

Reference: Reuters