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Navigating the Chabahar Agreement: Pakistan’s Strategic Outlook

On 13 May, 2024, India Ports Global Ltd (IPOGL) and Iran’s Port & Maritime Organisation (PMO) signed a ten-year contract to operate Iran’s Chabahar port. Through this agreement, India would provide $250 million loan for terminal development and invest $370 million on infrastructure. In return, India secured the administrative control of the port’s terminal and automatic renewal of the contract. While for India this may appear to open the gateway to Afghanistan and Central Asia, bypassing Pakistan, the capacity and geographical features of Gwadar Port keeps Pakistan at a strategic advantage. Furthermore, Chinese investments in Iran, completion of China Pakistan Economic Corridor phase-1, and the looming threat of US sanctions could potentially hinder India’s strategic objectives.

Since 2003, India has been aspiring to operationalise International North-South Transport Corridor (INSTC) in cooperation with Iran. However, the dream could not be realised due to US sanctions on Iran, China’s evolving influence in the region, instability in Afghanistan, and lack of investment. In 2020, Iran unilaterally dropped India from Chabahar rail project over India’s absence of financial engagement. Since then, the negotiations between the two countries have taken many shifts and turns. However, India’s persistence to remain engage with Iran over Chabahar indicates its foreign policy goal of maintaining autonomy in the region. Nevertheless, China’s $400 billion partnership deal with Iran is a Gordian knot for India to achieve this goal.

In 2020, China signed a historic deal with Iran to establish a direct shipping line to Chabahar, encompassing the Shahid Beheshti and Shahid Kalantari ports. While India’s investments are confined to Shahid Bheshti port, China’s extensive investment in Iran positions Chabahar as a potential asset in the Belt and Road Initiative (BRI). China has reiterated on different occasions that it does not see Chabahar as a competition to CPEC but they complement each other as it would boost the overall regional connectivity and infrastructure.  Additionally, China’s diplomatic clout in Iran has been strengthened after it acted as a mediator between Iran and Saudia Arabia.

Under CPEC, more than 50 projects worth $25 billion have been completed. The first phase of the Gawadar Free Zone covering 60 acres is finished with Phase-2 in progress. In contrast, India’s efforts to enhance trade ties with Russia via Iran, through the Chabahar-Zahedan and Rasht-Astara railway lines, have been stalled for over two decades due to lack of investment. It indicates that CPEC infrastructure projects are nearing completion while Chabahar is still years away from being fully operationalised and being opted as an alternate route to CPEC.

Additionally, Gawadar Port possesses significant advantages over Chabahar Port due to its geographical characteristics and operational efficiency. Gawadar has the capability to accommodate super tankers weighing up to 200,000 tons compared to Chabahar that is limited to the vessels of 20,000 tons. Additionally, the annual capacity of Gwadar is about 300 to 400 million tons of cargo, whereas, the capacity of Chabahar is only 10 to 12 million tons of cargo. Gawadar being naturally deep sea port also entails relatively less maintenance cost. Therefore, Gawadar port is at a strategically superior position that overshadows the regional importance of Chabahar port.

The threat of US sanctions is another major obstacle for India to capture foreign investment for the development of Chabahar port. The US government has expressed concerns and issued warnings about potential sanctions related to the new Iran-India Chabahar deal. In 2015, the Trump administration waivered Chabahar port development from its sanctions list to support development in Afghanistan. However, after its withdrawal, the strategic valuation of the region has changed. Therefore, it has become more challenging for India to navigate Chabahar port, keeping in view the US threat of sanctions.

Parallel to these developments, Pakistan has adopted a pragmatic approach towards regional development. It emphasises cooperation over competition in connectivity initiatives. While Chabahar’s advancement may alter regional dynamics, Pakistan’s primary focus remains on CPEC to drive economic growth, improve infrastructure, and strengthen regional partnerships. Therefore, to combat the security challenges triggered by US withdrawal from Afghanistan, operation Azm-e-Istehkam has been initiated. Additionally, Pakistan is diplomatically engaging with Afghanistan to resolve cross-border tension, facilitating the connection of CPEC with Central Asia.

In conclusion, the dynamics surrounding the India-Iran Chabahar agreement reveal a complex interplay of strategic interests in South Asia. India’s pursuit of Chabahar as a gateway to Central Asia highlights its commitment to diversify trade routes and emerge as a regional key player. However, this initiative faces significant challenges due to US-Iran tensions and China’s formidable presence through infrastructure investments in Iran. Pakistan’s unwavering focus on CPEC and the geographical superiority of Gawadar Port provide Pakistan with a strategic edge. Although India has secured an automatic renewal deal with Iran and taken administrative control of one terminal at Chabahar, the full operationalisation of this agreement will require time, considering the history of suspensions and delays in India-Iran relations.