Washington, DC – In recent years, Iran has suffered economically on account of its status as a pariah in the eyes of Western countries led by the USA and the accompanying plethora of sanctions imposed upon it. One silver lining that has emerged recently is the Chabahar seaport project. Chabahar is Iran’s southernmost city and is situated on the coast of the Gulf of Oman. Chabahar is Iran’s principal oceanic port and enjoys an extremely favorable location.
The main points of attraction in the Chabahar Port lie in its direct ocean access and geographic proximity to Afghanistan, Dubai, India, and Pakistan. The positioning of Chabahar on the international North-South transport corridor gives it the potential to develop into a commercial hub. Crucially, since 2018, the Chabahar Port has been exempted from sanctions imposed by the USA, a crucial factor in its development. In making this exemption, the Trump administration cited the need to bolster Afghanistan’s potential for trade.
Iran has been making a concerted effort to develop the eastern part of the country and create land-based trading routes centering on Chabahar. Chabahar’s location in the Sistan-Baluchistan Province bordering Pakistan and Afghanistan is crucial. Afghanistan’s economic development is currently severely restricted because the vast majority of its trade has to be conducted on land routes through Pakistan. This is both geographically constricting and fraught, considering that diplomatic relations between Afghanistan and Pakistan have remained frosty due to unresolved border issues and Islamabad’s bullying attitude towards Kabul.
These tense relations have led to a dramatic reduction in trade volume between Pakistan and Afghanistan. At its peak between 2014 and 2015, the trade volume was $2.7 billion annually, but overly stringent regulations and punitive red tape have caused this trade to be reduced to less than a quarter of this volume. The prospect of an alternate trade outlet could spur considerable economic growth in Afghanistan by allowing critical trade with India, which is currently impossible owing to the refusal of the Pakistan government to allow overland trade access to India.
Most of Afghanistan’s trade is routed through the Bandar Abbas port, which does not enjoy direct access to the Indian Ocean. This requires trade to be routed either through sea lanes controlled by the United Arab Emirates or through transshipment via one of the UAE Ports. Besides adding to transport costs and logistics complications, this is a geopolitical sticking point for Shia Iran, given its perennially tense relationship with neighboring Sunni-dominated states in the Gulf. In this context, accelerating the development of the Chabahar Port and creating a multi-modal system is critical. Even with rail and highway systems connecting Chabahar with the Iran-Afghanistan border, the routes still provide an essential boost to the efficiency of trade with a reduction of shipping costs of around 50 percent and shipment times between India and Central Asia also being reduced by 50 percent.
Presently, the primary challenge facing Iran and the Chabahar Port remains the unpredictability of US policy and the potential for sanctions at any point, owing to the domestic polarization in American politics. Further, the willingness of investors to commit to Chabahar would remain contingent on clarity and assurances regarding the potential re-imposition of sanctions.
Nonetheless, the strategic advantages of the Chabahar Port and the unique opportunities they provide ensure that it must emerge as a regional trade hub in the long term. To this end, India and Iran have entered into several MOUs, and India has also been pushing working groups on the Chabahar Port with the Central Asian countries. A joint working group formed between India, Kazakhstan, Uzbekistan, and Turkmenistan endorsed the need to move towards connectivity initiatives and, in a subtle rebuke to China’s Belt and Road Initiative, agreed that connectivity initiatives should be based on transparency, financial sustainability, and respect for sovereignty.
Once fully developed, the potential exists for the Chabahar Port and associated development projects to generate trade breakthroughs for Afghanistan and India and provide vital links for trade with Central Asia and connectivity for Indian trade with Europe and the Commonwealth of Independent States (CIS) countries. The potential of the Chabahar Port is nothing short of transformational, and notwithstanding sporadic challenges, the commercial logic and trade imperatives of the various countries that are impacted render its eventual progress and development inevitable.