Recently India and Iran signed a memorandum of understanding to develop Chabahar Port in Iran. Critically discuss the significance of this MoU for both the countries.

Where is Chabahar port?

It is located on the Makran coast, Chabahar in southeastern Iran. Its location lies in the Gulf of Oman. This coast is a relatively underdeveloped free trade and industrial zone, especially when compared to the sprawling port of Bandar Abbas further west. Also, it is the only Iranian port with direct access to the ocean.

Why this port is of interest to India?

• India believes the port is critical to its interests and wants to develop it as a counter to Pakistan’s Gwadar port which was built with Chinese assistance
• The port will allow India to bypass Pakistan to transport goods to Afghanistan and Central Asia using a sea-land route
• Chabahar Port lies in the Persian Gulf in Iran and will help India in expanding its maritime commerce in the region
• It also provides opportunities to Indian companies to penetrate and enhance their footprint in the region
• It is located 76 nautical miles (less than 150km) west of the Pakistani port of Gwadar, being developed by China. This makes it ideal for keeping track of Chinese or Pakistani military activity based out of Gwadar
• The port will cut transport costs/time for Indian goods by a third
• From Chabahar, the existing Iranian road network can link up to Zaranj in Afghanistan, about 883 kms from the port. The Zaranj-Delaram road constructed by India in 2009 can give access to Afghanistan’s Garland Highway, setting up road access to four major cities in Afghanistan — Herat, Kandahar, Kabul and Mazar-e-Sharif

• Russia Europe central Asia. It can significantly boost import of iron ore, sugar and rice to India from Afghanistan. It can also help to reduce import cost of oil to India.

Trilateral Agreement:

• India, Iran and Afghanistan sign three-way land transit agreement on Iran’s strategic southern port of Chabahar.
• Under the agreement, India will invest up to 500 million dollars in a deal to develop a strategic port in Iran.
• It can spur unhindered flow of commerce throughout the region and its economic fruits will expand trade, attract investment, build infrastructure, develop industry and create jobs.
• India will get sea-land access route to Afghanistan bypassing Pakistan which will open opportunities for Indian companies to explore Afghanistan’s mineral wealth.

India’s perspective:

1. Geo-strategic -Being located on the convergence of Indian ocean and Oman sea will help India counter efforts made by China to exert influence in the region by tying up with Pakistan to operate the Gwadar port.Chabahar port being in the vicinity will be a vantage point for India.
2. Bolster trade and economic ties by gaining access to Afghanistan, South Asia, Central Asia and West Asia. The trade route reduces India dependence on Pakistan, a volatile neighbour, for trade with Afghanistan.
3. This port will be used by India to ship crude oil and urea which will cut transport cost and freight time for India to Central Asia and the gulf by about a third. Proximity to the Strait of Hormuz will boost oil trade.

Benefit to Iran

1. As India is Iran’s largest customer hence the memorandum will help to increase economic growth and investment.
2. It will provide regional growth and prosperity by employment generation and gdp growth.

Due to the significance of the project to both countries, it has to be implemented decisively and quickly

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