Emil Avdaliani：India Aims at the Heart of Eurasia

【明報文章】India and Iran inked a ten-year contract on May 13, 2024, to build and run Iran’s strategically important Chabahar port’s Shahid Beheshti terminal. The agreement was signed between India Port Global limited (IPGL) and Iran’s Ports and Maritime Organization (PMO).

The deal comes after an earlier pledge from India in 2016 to invest up to $500 million and follows many setbacks such as building two terminals and five berths at the Chabahar port.

Ever since however, the project was hurdled by often unfavorable geopolitical circumstances such as Iran’s exacerbating rivalry with the U.S. and especially the latter’s strict sanctions regime imposed on Iran. The May deal aims at improving it and involves $120 million investment pledge and $250 million credit from the Indian side for the implementation of the project. If realized, Chabahar has a potential of reducing transportation time from India to Europe by some 40 percent and thus be shorter than the overcrowded Suez Canal.

To be sure, India has already been operating the port since 2018. For instance, in 2023 the country exported 20 000 tons of wheat to Afghanistan. Overall, 2.5 million tonnes of wheat and 2,000 tonnes of pulses were sent to the war-torn country. In 2023 4,2 million tons of goods were processed in the India-operated port, which has only been around 2,2 percent of the Islamic Republic’s total external commerce.

The numbers however betray a rather limited use of the port by India. Though a more active exploitation of the port by India has not yet taken place, the recent developments in Eurasia indicate that there could be increasing opportunities. Indeed, one of them is the exacerbating rivalry between the collective West and Russia. Amid the sanctions, Moscow reorients its trade and economic attention toward Asia. The process has started after the invasion of Ukraine but has fully crystallized only now as Russia’s trade relations with the Middle East and Asian powers have generally increased.

India therefore wants to tap into the Russian market. For New Delhi the Chabahar agreement is a big deal as, ideally, it would allow the country to be better positioned in linking to Afghanistan and Central Asia via the Iran’s territory. More importantly, the deal would also connect India with the expanding International North-South Transport Corridor (INSTC) which runs from Russia’s hinterland and major ports on the Caspian and Baltic seas to Iran’s own ports in the Persian Gulf and the Gulf of Oman. India could do through both western and eastern shores of the Caspian Sea.

For instance, on July 19 Iran, Russia, Kazakhstan, Turkmenistan agreed on developing the eastern branch of the INSTC. India also looks at potential connectivity with the Black Sea region. Given its close ties with Armenia and the latter’s own warm relations with the Islamic Republic the geographic bridge would make sense to reach up to the Black Sea via Georgia. No surprise that New Delhi has announced on a number of times that it would be opening its brand new embassy in Tbilisi.

For India, therefore, Iran is a connecting point and the two countries have also been closely linked economically. For instance, bilateral trade during the financial year 2022-2023 stood at $2.33 billion, which was more by 21.76 percent in comparison with the previous year. To this should be tied to the soaring trade numbers between Russia and India – up to $50 billion in 2022-2023 financial year. Moreover, Russia’s trade with iran too has increased further highlighting the growing potential behind the INSTC.

Pan-Eurasian Phenomenon

The progress on Chabahar comes at the time of heightened competition around connectivity across Eurasia. Over the past decade from the birth of the massive Chinese Belt and Road Initiative (BRI) to various initiatives of the past year such as, the Middle Corridor, the India-Middle East-Europe (IMEC), the Development Road or the above mentioned INSTC, the race for shaping new connectivity is intiricately linked to wider geopolitical competition between the U.S. and China with numerous middle powers striving to enhance their posture in their respective regions.

Geopolitical circumstances now seem more favorable to the implementation of the Chabahar project. The security crisis in the Red Sea caused by Houthis, a highly militarized group in Yemen, pushed the countries and major shipping companies to seek new and more secure routes.

Moreover, with the election of Iran’s new president, Masoud Pezeshkian, and his seeming efforts to re-invigorate ties with the West, there is now an additional incentive for India to seek completion of the project. Tehran is expected to engage the U.S. to reach a mini-deal which would loosen constrains on the Islamic Republic’s economy and in turn allowing freer investments by India. Indeed, Iran eventually expects a massive $1 billion investment into Iran.

Most of all, the India-Chabahar-Central Asia-Russia routes have a concrete historical precedent. While IMEC has none from the past, what India and Iran are proposing is based on trade routes in ancient and medieval periods when the Persian Gulf was closely linked to the eastern shores of the Indian subcontinent. Russian merchants from 15th century were travelling to Iran and India. From 17th century Indian merchants were establishing massive diasporas in Iran and eastern parts of the Caucasus up to Russia’s Astrakhan or Central Asia. The geography of these commercial connections is quite telling and follows the INSTC and the Chabahar-Central Asia routes.

As much as New Delhi looks at the Chabahar port as a connectivity tool to link to the heart of Eurasia, the project is also about competing with China and its massive investments in Pakistan and other neighboring countries (Sri Lanka, Bangladesh, Myanmar) creating a veritable string of pearls which potentially, New Delhi fears, could limit its projection of maritime power.

There is thus a mixture of narrow economic and purely geopolitical reasons pushing India to re-activate its foreign policy toward Iran. Yet, the wider competition in connectivity serves as the major incentive for New Delhi to connect to Russia and Central Asia/Afghanistan.

Emil Avdaliani is a professor of international relations at European University in Tbilisi, Georgia.

[Emil Avdaliani]