India’s Chabahar debacle

India had already realized that its boosting of the Chabahar port in Iran did not make economic sense. And how could it? It was motivated by a desire to do down Pakistan’s Gwadar port, which was only 76 nautical miles to the east, along the same Makran Coast. Apart from its traditional dislike of Pakistan, it also wanted to strike at China, which sees Gwadar as one terminus of the China-Pakistan Economic Corridor. The USA would like to harm China, but it also wants to block Chahbahar’s development. However, now it has ponied up $120 million to Iran to wind up its commitments on the port, which it had through the state-owned Indian Ports Global Limited. This was done to avoid the 25 percent tariff the USA has announced for all countries which had any dealings with Iran. India already labours under a 50 percent tariff imposed last year, so the cumulative tariff would have reached 75 percent. India already has had the highest tariffs slapped on it in the entire region. It also has experienced heightened tariffs from the USA because it was buying Russian oil. Put starkly, the loss to its exports from the higher tariff far outweighed the entire trade with Iran, and there was no point in worsening an already rocky relationship with the USA.

Actually, the Chabahar and Gwadar ports are complementary rather than rivals. Chabahar is not a deep-dea port, and large vessels (over 100,000 tons) cannot berth there. They can berth at Gawadar, and then unload onto smaller vessels, make the short trip to Chahbahar, and unload there; much as is already being done between Bandar Abbas and Dubai. Both are aimed at traffic from Afghanistan and Central Asia. Chahbahar was also intended to help Indian exports to Afghanistan bypass Pakistan, by transiting through Iran.

It should be remembered that these links would still operate, for the Indian withdrawal has not closed down the port. However, there is still considerable development work to be done. It remains to be seen whether Russia or China take up the slack,or whether Iran decides to postpone development to a more conducive time. It should not be forgotten that India’s decision to withdraw must be influenced by the current unrest in the country, which has opened the possibility of a regime change. Until that matter is decided, the fate of Chahbahar cannot.