Apr 14 - 20, 2008

India is developing Iran's Chahbahar port as a competitor to Chinese-built Arabian Sea port of Gwadar on the southwest coast of Pakistan. While Pakistan with China's assistance is trying to develop Gwadar in its Balochistan province as a gateway port to Central Asian Republics (CARs), Afghanistan and West China, India is developing the infrastructure in and around the Iranian port of Chabahar to frustrate Pakistan's efforts to turn Gwadar into a regional hub for international trade. The idea of its encirclement by China continuously haunts India, which sees China's heavy investment in Gwadar after Myanmar and Bangladesh as a threat to its strategic interests in Indian Ocean. India's stake in Chabahar port is aimed at gaining access to land-locked Afghanistan and CARs and bypassing Pakistan in transit trade with Iran and other countries.

Chabahar in southwestern Iran is the nearest Iranian port to the Indian Ocean providing direct access to Turkmenistan and other Central Asian countries and to the oil-rich Middle East. The port is considered as the economic gateway to world due to its location on the Oman Sea shore outside the Strait of Hormuz. With advanced facilities and equipment, the Chahbahar port complex is among the leading ports of Iran.

Geographically, India faces a challenge to her access to the Central Asia. This is why, India has been working with Iran to develop a north-south trade corridor, from Central Asia to Afghanistan through Iran to Chahbahar port, from where goods could be shipped by sea to India. Through the corridor, India hopes to strengthen its relations with Central Asia and tap its energy reserves without using the Afghanistan-Pakistan route. North-South Corridor Agreement signed among Russia, Iran and India in September 2000, was actually the Indian move to reduce Pakistan's role in Central Asia. This route will also link India to Central Asia and Russia via Iran and the Caspian Sea. Iran's Ambassador to India Siavosh Yaqoubi in August 2004 disclosed that a deal had been signed with India for the development of the Chahbahar port in southern Iran, and the two sides were also involved in talks on a $700-million project to construct the Chahbahar-Bam railroad, which would connect the southernmost part of the country to central Iran. The both sides expected the project would change the regional geopolitics as it would enable countries like Japan and India to export their goods to Europe and the Commonwealth of Independent States (CIS) via the Chahbahar port.

The transit of goods via Iran through the region can be considered within the context of land and sea routes linking Iran's northern neighbors to the Persian Gulf littoral States, the Middle East, Europe, and the Far East. Under the Chahbahar agreement with Iran, India is committed to upgrade the 200km track between Zeranj to Delaran, which will connect with the Garland road network in Afghanistan that connects its major towns. It will then go onwards into the CARs. Under the deal, the Iranians will improve facilities at the port and offer drastically reduced tariffs for Indian goods in transit, and will also upgrade the road from Chahbahar to Zeranj.

Iran has taken major steps to facilitate the cross-border movements of goods. The steps include the upgrading and construction of new transportation facilities such as ports, marine containerized terminals, road, rail and air links, free trade zones and the implementation of effective legislation. For boosting its trade ties with energy rich Central Asia, India is actively participating in building trans-Afghanistan road and rail links between Uzbekistan's Termez to Iran's Chahbahar port in the Gulf. Under the new transit agreement, this route will connect Iran's Chahbahar port to Zeranj at the Afghanistan border and then to Delaran. Construction of a strategic road linking Kabul to the Iranian port city of Chahbahar is likely to depreciate Pakistan's value as a sole transit route to the land-locked Afghanistan.

On the other hand, Gwadar port has not yet seen significant development on infrastructure side and still without road and rail links with the rest of the country. All mega infrastructure projects are still in planning stage. Though the first ship arrived at the port last month, the port's connectivity with main roads and rail links are still required.

Though India expects Chahbahar port to play a major role for its trade with Iran, CARs and Afghanistan, yet its trade through Chahbahar would be costlier than trade through Gwadar. Despite relatively higher financial costs, Chahbahar provides India a competitive alternative to Gwadar and poses a challenge to Pakistan in diverting the trade through Chahbahar to Gwadar port.

By virtue of its geo-strategic location, Gwadar has an easier access than Chabahar for both Afghanistan and CARs. Gwadar, having naturally sheltered port conditions on two sides, is the most viable for trade and commerce as compared to Chahbahar. The port is located outside the potential war zone. It can have a land access to the whole of Asia and it has also easy sea access to the Gulf ports.

Gwadar has the most advantageous location for an alternative port in the region, which could handle mother ships and large oil tankers and capture the transit trade of the CARs as well as the trans-shipment trade of the region, according to Ports Master Plan studies of Asian Development Bank. Local experts argue that Central Asia cannot be commercially served, as most of the ports in the Gulf are located on the wrong side of the Gulf. Gwadar port becomes a viable proposition for being located in the vicinity of both the Gulf States and Iran.

Local experts are of the view that India cannot take the advantage of Chabahar for a long period, as the cost of doing trade through this port is much higher than possible trade through Gwadar with Central Asia and Afghanistan. The experts argue that all the regional seaports at present are located inside the potential war zone and thus may become vulnerable in the current tension-ridden political environment of the region. The Iran-Iraq war, the Gulf war in the beginning of 1990s, the US war on Iraq in 2003 and the inter-state problems and the subsequent political crises as a result of these wars and conflicts, have turned the whole Gulf region into a potential flash point. They however warn that Indian efforts in the region could harm Pakistan's business interests.