India risks losing its grip over Chabahar terminal

Amid rising geopolitical tension between India and Iran, shipping sector experts fear that India may risk losing its grip over Iran’s Chabahar port, a strategic transit point to access Afghanistan, Central Asia, Russia and Africa. This follows China’s growing influence in Iran.

The last few days have been abuzz with reports of China’s growing influence in Iran, coinciding with signals from the latter that it could curtail India’s strategic ambition to fund and build a rail link between Chabahar and Zahedan (Afghanistan border). Two business leaders BusinessLine spoke to admitted that the industry is rattled about the emerging geopolitical uncertainty between the two countries as well as China’s increasing sway in Iran, and expect the government to clear the air on India’s continued operations at the Chabahar port.

There is a lurking fear among businesses that China’s increasing influence in Iran might make it unviable for India to operate the Chabahar port if China were to flex its muscles, said an industry watcher.

“We have got feedback from exporters as well as bankers that they are unwilling to send products to or through Iran as companies fear losing their business in the US, which is a bigger market than Iran,” TS Ahluwalia, President, North India Shippers Association, told BusinessLine .

China has reportedly committed to invest $400 billion over several years to build infrastructure including rail links, ports and telecommunication.

Waiting for response

This coincided with Iran stating that it would build the rail link — which India had been eyeing — on its own. This rail link was a long-pending project that India’s Ircon International was planning to build with funding from the Indian government. India’s External Affairs Ministry on Thursday stated that it has been waiting to hear from Iran on technical and financial issues for several months now.

Officially, India has maintained that the use of a terminal at Chabahar Port, operated by Indian Ports Global Private Ltd, has improved. Transit of export consignment from Afghanistan through Chabahar, which started in February 2019, has now shown a healthy upward trend, the Shipping Ministry stated on July 6. Port operations have steadily scaled up with Chabahar port, echoed External Affairs Ministry on Thursday, adding that in the last 12 months, the port has handled 52 vessels with bulk and container cargo.

Shipping sector sources maintain a regular container liner service between India and Iran, and Iran and Africa can lure more businesses to use Chabahar as a transit port. Also, shipping companies from India point out that by using Chabahar, the transportation cost of Indian products exported to other countries can drop sharply.

Many note that despite the US sanctions on Iran, which were aimed to prevent countries from trading with Iran, the US has not created barriers for India to use Iran as a transit hub.

But India’s relationship with Iran have strained – in terms of trade – ever since it chose to align with the US. India used to depend on Iran for low-cost crude till about a few years ago. “However, today (given the global crude prices), India can get cheaper oil from other countries, not just Iran,” said another industry source. But, for India, the US is a larger market than Iran.