During his recent visit to Japan, Prime Ministers Narendra Modi and Shinzo Abe welcomed the prospects of cooperation between the two countries for promoting peace and prosperity in South Asia and neighbouring region such as Iran and Afghanistan.
This, as agreed upon by both the countries, would be done through bilateral and trilateral cooperation, inter-alia, in the development of infrastructure and connectivity for Chabahar, the port in southeastern Iran, directing their officials to expeditiously work out details for such a cooperation.
The trilateral engagement between India, Iran and Afghanistan during the visit of PM Modi’s visit to Iran in May 2016 was historic, expanding avenues of trade for India with Iran, Afghanistan, Central Asia and Russia through the International North-South Transportation Corridor (INSTC). Chabahar is Iran’s only oceanic port and consists of two separate ports named ‘Shahid Kalantari’ and ‘Shahid Beheshti’, each of which has five berths – overall 10 berths. India and Iran first agreed upon plans to further develop ‘Shahid Beheshti’ port in 2003, but India was deterred by sanctions against Iran. Under the Indo-Iranian agreement of May 2016, India would refurbish one of the berths at ‘Shahid Beheshti’, and reconstruct a 600-meter long container handling facility at the port. The bilateral agreement between India and Iran gives India the right to develop two berths of the Chabahar port as agreed in 2015, allowing them to be operated for 10 years by India Ports Global, which is a joint venture between Jawaharlal Nehru Port Trust and Kandla Port Trust, in partnership with Iran's Aria Banader.
Along with the development of Chahabar port, India is also to construct a railway line linking Chahabar with Zahedan on the Iran-Afghanistan border, which beyond Zahedan will be linked to the Iranian Railway running west and then north close to the Iran-Afghanistan border, avoiding the volatile Helmand Province of Afghanistan.
India’s development of Chabahar will be at a cost of $85 million over the course of 18 months. Upon completion of upgrade works as agreed to in May 2016, Chabahar's capacity will be increased to 8 million tonnes from the current 2.5 million tonnes capacity. India’s investment is supplemented with a $150 million credit line to Iran through Exim Bank of India. India has also offered to supply $400 million worth of steel towards the construction of the rail link Chabahar-Zahedan.
Chabahar port and the INSTC give India the strategic access for trade with Afghanistan and Eurasia, faced with denial of the land route by Pakistan. Recent operationalising of Gwadar port, as also the CPEC, makes this even more significant. Gwadar port has been leased for operations to a Chinese company (read China) for 49 years. In December 2011, regional Pakistani newspapers reported Chinese military taking over Gilgit-Baltistan and Pakistan considering leasing Gilgit-Baltistan to China for 50 years. In all probability, this would have happened secretly, what with Chinese digging 22 tunnels in this area capable of housing strategic weapons.
Though China wants India to join CPEC, it gives advantage India without opening the land access to Afghanistan. Conversely, such a move would raise the enormous India-China bilateral trade balance even more in China’s favour. Recent reservations shown by Pakistani senators against India joining CPEC could well be ruse to lure India joining the CPEC, thereby legitimising Chinese presence and projects in Gilgit-Baltistan, which is Indian territory.
It is not just blockading India’s NSG membership, protecting Masood Azhar at UN or denying visa to India’s badminton team manager on grounds he hails from Arunachal Pradesh, the Chinese stance indicates constraining India at every opportunity. India may feel there is enough space for both India and China to grow economically but China doesn’t feel that way at all, as demonstrated time and again by her. Iran’s recent refusal to accept the proposal by ONGC Videsh to develop Iran’s Farzad-B oilfield at a cost of $10 billion doesn’t bode well. This agreement was to be signed in October 2016. The 12.8 trillion cubic feet of gas reserves named Farzad-B was discovered by a consortium of OVL, Oil India Ltd and Indian Oil Corporation in 2008. Though India is still hopeful of pulling off the deal by February 2017, Iran’s action may have been influenced by China.
In 2011, Beijing and Tehran signed a deal giving China exclusive rights to multiple several Iranian oil and gas fields through 2024, including rights to build necessary infrastructures. In return, China promised to treat any foreign attack against these regions as attacks against its own sovereign territory, and defend them as such. China needs no prior permission from the Iranian government to maintain and increase its military presence in Iran and will control the movement of Iranians in and out of these territories. According to Green Experts of Iran, this agreement was the basis for PLA’s General Zhang Zhaozhong stating, "China will not hesitate to protect Iran even with a third World War." China and Iran aim to increase bilateral trade to $600 billion within the next decade, even though economists feel it is not attainable.
Prior to the Indo-Iranian agreement on Chabahar, Iran had offered the same project to China and Pakistan also in addition to India, with China, Pakistan not responding. But lately Iranians at international forums have been conveying: India agreed to develop Chabahar in 2003 but despite the US being amenable to India doing so, India remained complacent. There are no plans to link Chabahar and Gwadar by road or rail, and China and Pakistan are now evincing interest in developing Chabahar. The implication of this should be very clear. There may be multiple reasons why India refrained from developing Chabahar after agreeing to do so in 2003, but it did emerge in 2015 that there were problems in clearing backlog payments for imported Iranian oil even through European banks because of the sanctions.
The US House of Representatives has now voted to renew the Iran Sanctions Act for an additional 10 years. The act is scheduled to expire by year end, barring its renewal. As of now, there is no word on when the US Senate intends to vote on the extension. However, Iran maintains that even non-nuclear sanctions, particularly the prohibition on Iranian access to the American financial system and use of the dollar discourage foreign companies from investing in Iran, subverts the economic rewards it expected from the nuclear agreement. When India physically commenced developing Chabahar and how much has been completed is not known, but there is clearly need for speed, in addition to quality.
Early leveraging the Indo-Japanese partnership into the project and ironing out problems of fiscal investment, if any, on account of continuing sanctions (of whatever form) is the need of the hour. Considering that the development work by India was to be completed in 18 months, we should actually aim to deliver it by September 2017.
The author is veteran Lieutenant General of the Indian Army.
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Updated Date: Nov 19, 2016 15:54:26 IST