The Chabahar angle to Iran sanctions

Sanjay Kapoor | Updated on July 09, 2019

A file picture of the Shahid Behesthi port in Chabahar in Iran

The port project in Iran is buffeted by competing geopolitical interests. India may have to rebalance its priorities in the region

Perhaps the first announcement that India had acquiesced to US pressure to reduce oil purchases from Iran by May 2 to zero — when the six-month US waiver to India came to an end — was unusually not made by the Petroleum Ministry in Delhi, but by Indian Ambassador to Washington Harsh Shringla.

Later, US Secretary of State Mike Pompeo, in his recent trip to New Delhi, announced how an “assertive” India had stopped buying oil from Iran. In Parliament, though, the government has made contrary noises — and for a reason.

Over the past few years now, India’s relations with Iran were not just limited to purchase of oil. Its financial and diplomatic investments in the Iran’s Oceanic port, Chabahar, allow it to sidestep a recalcitrant Pakistan that does not allow overland access to Afghanistan. More recently, the port also serves as the fulcrum of India’s new Central Asian policy, which is evolving gradually with its membership of Shanghai Cooperation (SCO). Much of India’s ambitions to reclaim the legacy of British Empire, geographically denied for 70 years by the creation of Pakistan, could come to a naught if it succumbs to US policy on Iran — leavened by the interests of Saudi Arabia and Israel.

Complex dynamics

Ever since Prime Minister Narendra Modi travelled to Tehran in 2016 to sign the connectivity agreement between India, Iran and Afghanistan with Chabahar as its hub, the pace of development has been glacial. When this writer visited the Iranian port — 70 km from the China-funded port of Gwadar in Pakistan — a few years ago, one found ample publicity on India’s takeover of Chabahar in Iran, but little work on the ground.

Since then Shahid Behesti port at Chabahar was handed over to India in 2018 and there were expectations that New Delhi will make the most of the 10-year lease of the port. Though more cargo ships have been visiting this port as it lies from a safe distance from the volatile Strait of Hormuz, but India’s ambivalence aggravated by US withdrawal from JCPOA and, especially after India specific waiver ended in May, is hurting India’s Chabahar foray.

India Ports Global, an Indian joint venture mandated to execute the Chabahar project, has failed to pay the European company for supplying hardware. It has also cancelled its search for an agency to manage the port. India’s weakening resolve towards managing the Chabahar port in the short term is also visible in the diminishing budgetary allocation for 2019-20, which has been pruned from ₹150 crore to ₹50 crore.

New Delhi succumbing to US pressures has saddened a hard-pressed Tehran. It was expecting India to exercise strategic autonomy and stand its ground, but New Delhi chose not to antagonise either the US or the countries that want the West Asian nation to be punished for its nuclear ambitions — Israel and Saudi Arabia.

Perceived by Saudi Arabia as harmful to its strategic interests, Riyadh thinks that India is unnecessarily giving precedence to what they call as “imagined interest” (Iran) over what is their real interest (Saudi and the Gulf countries) — where hundreds and thousands of Indians live, work and send back their remittances back home. The question that Saudi Arabians usually ask is — How many Indians live in Iran? The truth is that only a few, but that is not the reason why the Indian government chose to embark on investing in this port located in Sistan-Balochistan province.

Saudi Arabia has openly expressed its unease towards the Chabahar project. Saudi position is well articulated in a 2016 paper titled “Chabahar and Gwadar Agreements, and Rivalry among Competitors in Baluchistan Region”.

Cognizant of the enormous economic potential and foreign policy implications of having India as a partner in the Chabahar port project and ignoring competing suggestions from China or Russia, Iran preyed on New Delhi’s ambitions to side step Pakistan and reach out to Afghanistan and Central Asia through a land route. Iran calculated that India would also get support from the US for this enterprise, as it would help reduce Afghanistan’s dependence on Pakistan’s Karachi port. So in the event of US re-imposing sanctions or Strait of Hormuz going up in flames, Chabahar could provide Iran a free and unencumbered port to trade with the world.

India’s membership of Shanghai Cooperation (SCO) and BRICS allowed New Delhi to forge close ties with Russia and other member countries to lend strength to its Central Asian odyssey. There is also a promise of increasing its trade from $2 billion to a lot more once the connectivity was restored through Iran.

Challenge to BRI

China provides a benchmark of Central Asian capacity for trade. Its total volume being with them is $50 billion and growing due to Belt and Road Initiative (BRI) and with Russia it is about $100 billion. All the land locked countries of Central Asia were enthused by the possibility of a new oceanic port in Chabahar. Once this port is fully operational, without being tripped by payment issues stemming from US sanctions on Iran, it could introduce new routes built by India and Japan to challenge China’s belt and road initiative.

When Chabahar was exempted from sanctions by US government in November 2018, ostensibly to help Afghanistan reconstruction, it was also believed that Washington wanted to use the port due to its military presence in Afghanistan. Some diplomatic sources allege that the first consignment that India sent to Afghanistan through Chabahar also carried military supplies for US troops.

Though this southern Iranian port remains exempted from sanctions, companies doing business complain that transferring funds for their project through swift system is next to impossible. The US government has not really specified how the exemption really works for companies doing business in the port’s free zone where more than 160 Afghan companies are also registered.

The Iranian government sources are not convinced by the excuses that Indian and other nations may be giving. When Chinese private companies were shutting their shop in Gwadar due to violence or uncertainty then Chinese government in an attempt to honour national commitment to the port, decided to get the public sector to replace them. India has not shown such resolve.

India will hope it can delay its decision on deepening its ties with Iran till the US elects a new President in 2020. If President Trump returns to office then it would have to decide either ways: to go with US or with the emerging compact of Russia and China that would allow it do business with Iran. The days of multi-alignment or sailing on two boats may have come to an end.

The writer is Editor, Hardnews magazine

Published on July 09, 2019

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