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India looks to continue Chabahar port development; industry awaits more clarity

On Sunday, India handed over two cranes to be used for handling cargo at the strategic Shahid Beheshti port at Chabahar in Iran. Photo: AFPPremium
On Sunday, India handed over two cranes to be used for handling cargo at the strategic Shahid Beheshti port at Chabahar in Iran. Photo: AFP

  • In its budget for 2021-22 unveiled on Monday, the Indian government has set aside 100 crores for the development of the port against the backdrop of the Trump administration giving way to the Biden administration.

NEW DELHI : With new administration taking over in the US, India may have signalled its intent to continue with the development of Iran’s Chabahar port after it formally handed over two mobile cranes to Tehran last week. However, Indian industry representatives say they are wary of making any commitments to the port development or sending cargo through Chabahar.

Industry representatives added that they will wait for clear signs that US President Joe Biden’s administration is ready to re-engage Iran and removes all sanctions on entities doing business with Tehran. The lifting of embargos by Washington on oil trade, they say, is the litmus test that will indicate a restoration of predictability in US-Iran ties.

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On Sunday, India handed over two cranes to be used for handling cargo at the strategic Shahid Beheshti port at Chabahar in Iran, that New Delhi is developing as a counter to the China-built Gwadar port in Pakistan. The handover of the equipment took place during a visit to Iran by a senior Indian foreign ministry official J.P. Singh, in charge of the Pakistan-Afghanistan-Iran desk in New Delhi. Another two cranes are expected to reach Chabahar port in a couple of months.

In its budget for 2021-22 unveiled on Monday, the Indian government has set aside 100 crores for the development of the port against the backdrop of the Trump administration giving way to the Biden administration. Former US president Donald Trump had adopted a “maximum pressure policy" against Tehran in its bid to re-negotiate the 2015 Iran nuclear pact. With the US targeting oil exports from Iran, India’s bilateral trade with Tehran during 2019-20 fell to $4.77 billion from $17.03 billion 2018-19, a contraction of 71.99%.

Chabahar is the only Iranian port with direct access to the Indian Ocean. India views Chabahar as gateway to access landlocked Central Asia and Afghanistan.

To make the port a success, New Delhi needs the private sector to pitch in with investments i.e. for building infrastructure at the port besides make the port viable by using it to send and receive cargo. The port can support ships with draughts of up to 16 metres, according to Indian officials, which means large container vessels can berth easily. The alternative land route to the region is through Pakistan with which India has hostile relations. Sending cargo by air is unviable due to the prohibitive costs involved.

Indian firms have been reluctant to engage in construction or commerce vis a vis Chabahar given the high degree of unpredictability associated with the Trump administration, said one industry representative, who did not want to be named. “There was no saying what sanction Trump would announce and when," said the industry representative.

“In our interactions with our government, we were told that Chabahar was out of the ambit of US sanctions. But we were not sure about this because we found it very difficult to understand the fine print. The wording of the sanctions, the different clauses were always open to interpretation. We discussed it with some of our partners in Europe and they too did not have any clarity on some of the issues we raised about insurance for sea cargo," said the person cited above. “Now there is interest from freight forwarding companies and some others. But till we hear that the oil sanctions are lifted, we would prefer caution. That will be the indicator that life is returning to normal," the person said.

So far, the uncertainty was still high, a second Indian industry representative said, given that the US and Iran were insisting that the other take the first step to come back to 2015 Iran nuclear deal that the Trump administration pulled out of. “Let us see how things develop," the second industry representative cited above said. “But we have started getting calls from the Iranian side, seeking contacts and appointments with our industry partners. There is interest on both sides to re-engage," the person said.

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