Iran opened a $1 billion extension of its Chabahar port, located on the Gulf of Oman, on December 3. The extension more than triples the capacity of the port, which can now accommodate up to 8.5 million tons of cargo per year. The port is the main transit point for a new trade route into Afghanistan and Central Asia through Iran, bypassing a port in neighboring Pakistan. India invested $235 million in the Chabahar port, since it prevents Pakistan from strategically blocking Indian access to Afghanistan. Furthermore, the port creates further opportunities for Indian trade in Eurasia once the International North-South Transport Corridor (NSTC) linking Iran, Russia, and Central Asia by rail opens in early 2018.
Iran and India began developing a pact for expanding the Chabahar port in 2003, but little progress was made because the West imposed sanctions on Iran. However, as Western countries and Iran held talks over the 2015 nuclear deal and as China started investing in Pakistani ports, India explored the idea further. In 2016, a few months after the nuclear deal was signed, Indian Prime Minister Narendra Modi visited Iran and announced his intention to open a $500 million line of credit “to develop the port.” This $500 million was to go towards road and rail systems around the port in addition to its expansion. After sanctions were lifted from Iran, India was able to enter into negotiations with the country, and Iran was able to purchase the necessary equipment to begin expanding the port.
The Chabahar port is the latest development of the NSTC, a network that grants India cheaper and easier access to Afghanistan, Central Asia, and Russia. India’s heavy investment in the port and rail system is part of its geopolitical rivalry with China and Pakistan; China invests heavily in the China-Pakistan Economic Corridor that ends at the Gwadar port in Pakistan, located less than 60 miles away from Chabahar. India’s access to Afghanistan through Iran, rather than through Pakistan, avoids security concerns; additionally, the Sistan-Baluchestan Ports and Maritime Bureau stated that the Iran route is $1,000 cheaper for each 20-foot container. Moreover, Pakistan intermittently blocks Indian exports through its territory to Afghanistan.
India’s investment in Chabahar serves a purpose besides economic rivalry with Pakistan and China. India worries that China will develop the Gwadar port into a military port. On the other hand, Pakistan has concerns that its goods will be devalued in Central Asia once India increases its presence there. Iranian President Hassan Rouhani reassured Pakistan in a public announcement that the purpose of the development of the Chabahar port is not to rival Gwadar.
In late November 2017, India completed the third grain delivery in its plan to transport 1.1 million tons of grain through Chabahar and then by truck to Afghanistan. Iran plans to increase the operating capacity of Chabahar up to 80 million tons from its current 8.5 million, and full operation of the NSTC is projected to boost Indian-Eurasian trade to $170 billion.